Telecom

Leaders expand scale and emotional appeal

Prepare for opportunities in home automation

Acquisition and consolidation accelerated in mature markets as telecom providers attempted to build scale, add content and strengthen the emotional appeal of brands built around functionality.

Faster 4G LTE connections continued to proliferate, even in developing markets like China and India, where the availability of low-priced devices expanded smartphone use and increased data transmission.

The major telecom providers also advanced their fiber-optic programs to gain competitive advantage in speed and quality, and to create infrastructure to benefit from the next major opportunities: home automation and the Internet of Things.

Meanwhile, the telecom brands faced challenges from a broad set of competitors, including cable companies, local niche telecoms, Google and over-the-top Internet providers that enabled customers to obtain voice for free.

Based on strong financial results in its home market and in Asia, the Australian telecom provider Telstra appeared for the first time in the BrandZ™ Telecom Provider Top 10.

China Mobile remained the world's largest Internet provider with over 800 million subscribers, and for the first time, more Chinese people used mobile devices rather than PCs to access the Internet.

Verizon completed its purchase of the 45 percent of Verizon Wireless owned by UK-based Vodafone. The transaction lifted Verizon's share price and lowered Vodafone's market value, although it also left Vodafone well-funded for expansion or acquisition.

Acquisition and consolidation

The consolidation trend was most evident in the UK, as BT agreed to acquire EE, the nation's largest mobile operator, itself the product of a prior joint venture of T-Mobile, owned by Deutsche Telekom, and Orange.

The transaction establishes BT among UK telecom providers offering a quad play bundle of landline, mobile, Internet and TV. Investors rewarded the move with a rise in share price. Sky, the UK-based TV channel, announced plans to create a quad play offering through an agreement with O2, which is owned by Spain's Telefónica. Meanwhile, Hutchinson Whampoa, owner of Three Mobile network in the UK, agreed to terms with Telefónica to purchase O2.

Quad plays are a strategic effort to create a more emotional customer connection to the brand, differentiate with exclusive content and raise revenue from higher data use. Quad plays also enable premium-priced products, especially important as voice becomes commoditized by free over-the-top options like Skype, Viber or WhatsApp.

TalkTalk Group and Virgin Media already offer quad plays in the UK, and European telecom providers offer quad plays throughout the continent. Whether customers prefer bundled services, and if bundling will lower customer churn, remain open questions.

Fighting for share

In the US, AT&T and Verizon continued to battle for share, trying to maximize income from existing customers and minimize churn after challengers Sprint and T-Mobile disrupted the market by offering contract-free arrangements.

AT&T and Verizon responded with more transparent plans, including options without long-term contracts and unbundling that separated the cost of the device from the cost of service. AT&T acquired the Cricket brand to serve price-sensitive customers with no-contract, pre-paid rates.

The pricing changes were part of the larger effort to build brands around service rather than devices. At a time when retailers closed or downsized their physical locations and strengthened their online presence, telecom providers added stores as a way to differentiate with brand experience and deepen customer relationships by simplifying a complicated transaction. The launch of iPhone 6 late in 2014 drove traffic.

In an effort to diversify beyond its traditional business, AT&T partnered with Uber, preinstalling the car-sharing service's app on all AT&T android phones, and providing a wireless service to many Uber drivers. The brand also planned to link its home automation service, "Digital Life" and its connected car service, "Drive". AT&T added 800,000 connected cars in the fourth quarter of 2014.

Top 10 Chart

Facing the future

Along with their wireless services, both AT&T and Verizon offered high-speed the fiber-optic wiring that provides landline, Internet and TV. Along with offering similar benefits to the quad play, fiber-optic wire enables telecoms to offer the speed and resolution clarity required to compete more effectively with cable companies for content delivery.

Fiber-optic wiring in millions of homes positions telecom providers for the connected home phenomenon, which foresees a time when mobile devices become the command units controlling household energy use, appliances and cars.

Japan's NTT DoCoMo introduced fiber-optic service and bundled discounts. Google announced plans to expand its Google Fiber service beyond its original rollout in Kansas City, Provo, Utah and Austin, Texas to more mid-sized US cities.

And in a move that could eventually disrupt the telecom providers category, Google launched a Google-branded wireless service, buying network capacity from Sprint and T-Mobile. The service, which will work only on Google's Nexus phone, is initially a learning experience for Google and a laboratory for innovation.

Meanwhile, the US Federal Communication Commission ruled on the contentious issue of net neutrality. The commission decided to regulate the Internet like a utility and prevent the telecoms from adjusting customer pricing according to bandwidth consumed.

High speed expands globally

By early 2015, 4G LTE networks were available in 124 countries, according to the Global Mobile Suppliers Association. While there was no single global telecom provider, some brands created regional networks. Mexico's América Móvil and KPN of the Netherlands increased cooperation following a failed attempt to hook up several years ago.

Drawn by the growth of Mexico's middle class and the possibility of building one network to serve North America, AT&T purchased Lusacell, a wireless brand owned by Mexico's Grupo Salinas. AT&T also planned to buy the Nextel brand in Mexico and combine it with Lusacell.

Orange and Vodafone were among the international telecom brands competing in Africa with local brands such as MTN, as the increased availability of affordable devices expanded the market.

With a smartphone penetration rate of over 70 percent, Korea remained one of the most advanced telecom markets, where functional benefits are played down and telecoms are seen as lifestyle brands.

Brand Building Action Points

1.

Choose a strong position. It could be about reliability; reliability can demand a premium. Or a positioning can stress innovation or local provenance. Whatever the position, support it.

2.

Make it simple for the customer. Brands may claim they're simple, but the claim loses credibility when the customer tries to understand the monthly statement.

3.

Consistently deliver a great retail brand experience, and not just in the flagship stores. Make the retail experience help customers move easily through what can be a complex transaction.

4.

Be prepared for disruptive new players operating with completely different business models. They'll potentially be more of a threat than the strongest of your existing rivals. Make yourself as agile as possible. You'll need to react faster than ever to remain competitive.

10-Year Trends & Analysis

Powerful brands are lacking love

The telecom provider category grew 136 percent in Brand Value over the past 10 years, slightly more than the growth pace of the Top 100 overall. And while Brand Value growth for many categories leveled during the recession, telecom growth continued because consumers cut spending without giving up their mobile phones.

The category outperformed the Top 100 in Brand Power, the BrandZ™ measurement of brand equity that drives market share. The BrandZ™ Telecom Providers Top 10 comprises dominant brands that scored 223 in Brand Power, compared with a score of 170 for the Global Top 100. (An average brand scores 100.)

The eight brands that remained from 2006 – Verizon, AT&T, China Mobile, Orange, Vodafone, NTT DoCoMo, Movistar and Deutsche Telecom – effectively increased their Brand Power from 185 to 218. The two new brands – BT and Telstra – scored well above 200, replacing the brands that dropped out, having scored only 135.

But in spite of commanding dominant market share because of the services they provide, telecom providers are less loved than other brands. Their "uncaring" score increased from 103 to 110, only marginally behind the worst scoring categories of global and regional banks, which scored 114. Consumers also see telecom providers as more arrogant than other brands.

Telecom Providers are powerful brands that dominate

Insights

Telecom brands signify lifestyle in South Korea

South Korea is a classic model for where the telecommunications category is heading. In South Korea you go from connection to connection and entertainment, and ultimately, the functional aspects are played down and the telecoms become lifestyle brands. Leading companies in all markets need more than a connection; they need integrated content. The nature of the content draws the audience and helps differentiate the brand. Whether or not a brand buys or creates its own content is a business decision.

Frank van den Driest
Chief Commercial Officer
Millward Brown Vermeer
Frank.Vandendriest@mbvermeer.com

Home automation is the next big telecom opportunity

Telecommunication companies are already connected to our homes, so they are well positioned for home automation, which is a strategically important brand opportunity. As telecoms already have the pipe into the home and are trying to offer more and more to the consumer, home automation is the natural progression. The telecoms plan is to be key players in connecting the devices and appliances that consumers use, and in collecting the data that helps analyze and predict how people use these products. Telecoms will provide home automation packages the way they provide entertainment bundles today, as we see both large and small players prioritizing development of home automation.

Eric Peerless
Senior Vice President, Client Service
Millward Brown
Eric.Peerless@millwardbrown.com

Future View

  • Functionality, specifically speed, is important for brand building now, but will decrease as a differentiator over time. Fiber-optic will continue to grow in importance.
  • Entertainment will be a key differentiator. Content will be critical to own a position in the market, at least for the major brands. Whether or not to gain the content through ownership or partnership is a secondary question.
  • Trust will be important. Consumers need to trust that brands will deliver with their usual high levels of quality, even as they expand more into content delivery and other services.

Up 17%


Telecom Providers - Top 10 Total Brand Value
$388.2 BILLION


Category Definition
The telecom providers category includes brands that primarily develop, maintain and market hardwire or wireless infrastructure networks for voice and data transmission.


BrandZ Top 100 2015

BrandZ Global 2014 Report Top 100 Report

Top 100 Chart

Top 100 Infographic


Methodology and valuation by Millward Brown

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