Cost of changing a mobile identity

Despite the collapse in telecom shares, Europe’s mobile phone companies are set to spend millions on rebranding and consolidation. Which brands will survive and which are likely to be subsumed?

Mobile networks are drawing up battle plans as they rebrand their businesses in a race to be among the top players in the world.

In the UK two of the four existing networks will be renamed next year – BT Cellnet will become O2 and the Deutsche Telekom-owned One 2 One will be rebranded as T-Mobile. Vodafone and France Telecom-owned Orange will remain unchanged in the UK.

Hutchison 3G, in which Hutchison Whampoa has a 69 per cent stake, will also unveil a new brand when it launches its third generation mobile network in the UK next year. The same brand will be introduced into the other markets in which Hutchison Whampoa has a majority stake in a 3G licence holder.

Triggered by consolidation, the award of 3G licences – and, in the case of BT Cellnet, the planned demerger of BT Wireless from BT – mobile networks are striving to roll out their chosen brands across all markets in which they operate.

Vodafone is introducing its brand in markets such as Germany and Italy in a two-phase approach, adding its name to that of the indigenous operating company, which will later be dropped to leave Vodafone.

France Telecom has taken a different approach: having bought Orange last year, it has introduced the brand in one step in France and Denmark.

It remains to be seen how Deutsche Telekom, which operates the T-Mobile brand in Germany, proposes to introduce the name in the UK and its other markets, which include the US and Austria.

West LB Panmure telecoms analyst Mark Davis says: “It’s important that, now companies have spent so much money on consolidation and licences, they show that one company owns the operators, with one focus and one name.”

He claims that the expense of rebranding pales into insignificance alongside the cost of building 3G infrastructure, which could cost individual operators &£2bn to &£3bn for each market.

With millions of pounds being spent on rebranding and consolidation, only a few network names are likely to survive.

Once the telecoms companies have recovered from their last shopping spree, spent acquiring 3G licences and other operators, they will start buying up the remaining networks.

Davis says: “I think that there will be only four or five major operators in Europe by 2010. They will include Vodafone, T-Mobile and Orange.”

But Wolff Olins senior consultant Dan Bobby, who has worked for both Hutchison 3G and Orange, says: “Ten years is being quite kind. Eventually there will be just two significant operators in Europe, one being Orange and the other Vodafone. They not only have the most robust business models, they also have the strongest brands.”

Both Davis and Bobby believe that BT Wireless’ network will be snapped up after the demerger planned for November, when the company will become known as mmO2. Spain’s Telefonica is the hot favourite to buy up the demerged company.

Hutchison Whampoa, the Hong Kong conglomerate, is also expected to make an exit from the market, just as it did when it sold Orange to Mannesmann, having developed a strong brand.

Bobby says: “Operators are trying to build brands to make then attractive for acquisition.”

BT Wireless’ rebranding operation has so far cost less than &£1m. Assuming that the rebranding goes through before BT Wireless/mmO2 is bought, then the introduction of O2 in the UK and in BT Wireless’ other markets, including Germany and the Netherlands, will cost many more millions of pounds. Add to that the amount of money that has been spent marketing the Genie brand, now to be axed in favour of O2.

But BT Wireless vice-president of marketing Will Harris refuses to say how much money will be spent on rebranding.

One agency insider makes the point that BT Wireless will also get a lot of free publicity – as a consequence of the demerger – before O2 is formally introduced.

But the rebranding, scheduled for next spring, has already encountered problems. The owners of a shopping mall in North London claim the rights to the O2 name, but BT Wireless says that this is not an issue as it has registered the brand for a different business use. Others have pointed out that, while the scientific symbol for oxygen is the same worldwide, pronunciations vary.

In addition, there is already a German network called D2, although fortunately for BT it is being rebranded by Vodafone.

This is all before BT Wireless has set about imbuing its new brand with a philosophy and character which will become apparent next spring.

JP Morgan telecoms analyst John Jensen says: “The strength of the brand will very much depend on how it is positioned and the kind of attributes the company wants to associate with itself.”

Brands have not always delivered on their advertising and philosophy. Arguably One 2 One, which has been dogged by coverage and capacity issues in the past, is one of those. Developments such as the Deutsche Telekom-BT network sharing agreement and the rebranding to T-Mobile could help the UK operator shake off the “One 2 One with no one” joke. Deutsche Telekom’s decision to rebrand One 2 One has less to do with local issues than with an ambition to establish a global brand like Orange or Vodafone.

Even so, operators must have weighed up the pros and cons of rebranding and the manner in which to implement it.

Industry experts claim that Vodafone is adopting a “cautious” approach because it does not wish to alienate those networks which it does not own outright, or to undermine loyalty to what are strong regional brands.

Jensen says that because France Telecom is introducing a whole philosophy, rather than just a name change, it has little choice but to rebrand in one go.

Orange UK head of brand Liz Cope says branding is not just about a name: “It’s the promise that the brand makes, and ours is about best customer service.”

The business in which the networks are operating is also changing, hence BT Cellnet’s move to the more general O2 – a name which can be applied to a range of services including mobile Internet products. Hutchison is also likely to adopt a name – as it did with Orange – not directly linked to the mobile phone. Some industry experts believe that the different approach to branding taken by Vodafone and Deutsche Telekom could be limiting. Both already have separate brands for their mobile portals in Vizzavi and T-Motion.

Now the fight is on to get brand recognition and, most important of all, brand loyalty.

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