The Worlds Most Valuable Telecom Brands

Every year, leading brand valuation and strategy consultancy Brand Finance puts thousands of the world’s top brands to the test. They are evaluated to determine which are the most powerful, and the most valuable. To coincide with the launch of Brand Finance’s list of the world’s most valuable Telecoms brands, Strategy Director Anthony Kendall gives his view on how brands can be used to maximise profits in a time of rapid change.

Consolidation, convergence and partnerships puts spotlight on brands 

After years of comparative inactivity, 2014 saw the telecom sector come alive through the twin forces of consolidation and convergence, with profound implications for brands.

Low subscriber growth and price erosion has forced carriers to seek cost efficiencies and scale, so driving a desire for consolidation. And with the European Commission accepting the acquisition of O2 in Ireland by Hutchison Whampoa and E-Plus in Germany by Telefonica, more consolidation activity seems inevitable.  The resulting mergers and acquisitions will lead to the elimination of some brands, and the need for acquired customers to live with a different brand to the one they bought into.

More positively, consumers have at last embraced the concept of bundled services, resulting in a flurry of convergence activity to deliver triple or quadplay mobile, fixed line, broadband and TV services.  The most successful brands will be those that can stretch into adjacent product areas – consider mobile brands which grew up being ‘anti-fixed’, but now find themselves applied to the very fixed line services they grew up competing against.

Data services growth ushers in brand partnerships

The key growth area is of course data, driven by the insatiable appetite of consumers for apps and video, particularly mobile services.  Whilst welcome, carriers now need to invest heavily in increased capacity and faster networks, in particular the accelerated delivery of fibre optic and 4G-LTE mobile networks.  It has also led to the need for operator brands to co-exist in close ‘co-branded’ partnerships with powerful internet, device and app brands such as Google, Apple and Skype.  Some of the most popular ‘over-the-top’ (OTT) content brands such as Facebook and Netflix have become more attractive than the telco carrier brands which deliver them.  And in some cases the telecom carriers are being completely by-passed as OTT brands establish end-user customer payment relationships and generate their own advertising revenues.

However, these new brand relationships are often symbiotic, with the telecom brands needing the content brand services to retain customers and the content brands needing fast reliable networks to deliver a high quality entertainment experience.  When service standards slip, brands may suffer – witness the public spat in the US where Netflix faces legal action from Verizon for airing on-screen messages blaming the broadband provider when films run slowly or are interrupted in progress.

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By value, brands in the US and China lead the way

Nevertheless, topping the Brand Finance Telecoms table for 2015 is the US-based Verizon brand, which experienced a brand value growth of 12% to US$59.9 billion.  However, second placed AT&T came very close to knocking Verizon from top spot this year, registering an impressive brand value growth of 30% to US$58.8 billion.  Its bumper performance in 2014 may also translate into further growth throughout 2015, as its acquisition of American TV broadcaster DirecTV gives it a much stronger presence in the entertainment industry – good evidence perhaps that quadplay is here to stay.

However, progress of these top two brands was dwarfed by that of Chinese state-owned brand China Mobile.  This year’s biggest riser by value, it increased its brand value by 50% to US$47.9 billion.  Successful negotiations with Apple to sell the iPhone in China and a market-leading 4G rollout programme means China Mobile compares particularly favourably this year with its two main competitors, China Telecom (up 1%) and China Unicom (down 13%).  While Veriz on may have the opportunity to build value by extending its strong brand into other markets, as the successful European operators such as Vodafone, ‘T’ and Orange have done, it will be very difficult for ‘China’ Mobile to expand in that way.  With the easing of Chinese government regulation on joint ventures between Chinese and overseas investors, it will be interesting to see whether competition between the current local telecom brands intensifies, especially given that there are only three brands currently vying for over a billion potential customers.  Maybe we will see non-Chinese telecom brands presenting themselves more to exert more influence?

At last, quadplay really hits the UK

In Europe, the key battleground for 2015 appears to be the UK.  With BT Sport, BT has successfully extended its core fixed-broadband offer brand, a key contributor to a very big increase in brand value last year.  This year, brand value for BT has increased by a more modest 6% but enough to see it enter the Top 10 of global telecom brands at no. 8.  Next year could see another large jump if it rebrands the recent acquisition of EE, which has the most 4G customers in the UK, so creating a quadplay powerhouse.  That could also lead to the disappearance of both the Orange and T-Mobile brands from the UK.

It remains to be seen whether Sky, having just paid hugely to retain Premier League football TV rights up to 2019, can find a way to expand its current triple-play offer into mobile – the Sky brand is strong but also strongly associated with TV.  However, competition in the mobile space for BT may come more from Three, which has just agreed to buy its much larger competitor, O2 – a rebrand of that acquisition would require careful evaluation.  Which leaves the original mobile mega-brand Vodafone as the smallest operator in the UK.  However, after a period of transition, it appears to be using cash from a canny divestment of its stake in Verizon, along with a strong, versatile brand, to build a successful business which is increasingly embracing quadplay services.

Qualcomm fights on

Brand Finance has separately analysed the brand values of the top 10 infrastructure providers and the Huawei brand is the fastest growing of the set. An expanding list of sponsorships including come of Europe’s biggest football clubs such as Atletico Madrid, Arsenal, PSG, AC Milan and Ajax is rapidly building a public profile to match Huawei’s commercial success. Its US$11.6 billion brand value puts it second on the list behind Cisco (US$23.2 billion). Qualcomm’s brand value is up 15% to US$ billion, in part thanks to the unprecedented success of the iPhone 6, for which it supplies chips. Though the recent US$975 million fine from the Chinese government for antitrust violations is significant, it could have been far more punitive. Qualcomm is still well placed to profit from China’s booming smart phone market.

Big future opportunities for brands to drive telco business growth

For telecom brands, this is a crucial moment: can established network brands successfully embrace content and entertainment services to forge stronger bonds with their customers and re-gain momentum against the OTT internet-based players?  For those that succeed, the rewards could be very significant as, after 10 years of telecom operators waiting for the more profitable data services to take off, three sources of growth may now have come along at once: increased take-up of data-hungry ‘Phablet’ devices (smartphones with tablet-like 5-7 inch screens), tapping into a newly-educated over-55 year old smartphone gen eration gap and the upsurge in demand for mobile payments.

As a once-prominent brand in the UK used to say, ‘The future looks bright’… although it could never have imagined it would look quite like it does now.

Worth noting is that it’s not just the brands with the biggest brand value figures which will win – it’s the ones who understand how that value is created and from where in the business (or in potential businesses) value resides.  Brands need to be measured with growth targets set; they need to be not only managed for optimal performance but maximised in terms of being used to grow the business itself; and then of course progress needs to be monitored and course-corrected along the way.  

The opportunities for telcos are huge, but the challenges for the management of their brand assets have never been greater.

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