Vodafone/Three merger offers chance to alter falling brand value

Vodafone/Three merger offers chance to alter falling brand value

Hannover, Lower Saxony, Germany - April 12, 2020: Logo of Vodafo

The potential merger between Vodafone and Three UK will shake up the battle to be Britain’s leading telecoms brand, new analysis from Brand Finance indicates.

The last decade has seen significant erosion in Vodafone’s brand value and the proposed merger presents a viable opportunity to arrest that slide in the UK.

Vodafone was the “truly global mobile brand”, according to the analysis, when they transitioned brands inherited from the AirTouch and Mannesmann acquisitions.

“Vodafone has had a rough time over the last decade, in both the UK and elsewhere. This proposed corporate merger has the potential to resuscitate the brand and maintain its relevance for the future,” said Lorenzo Coruzzi, associate director of Brand and Finance and global telecoms industry expert.

“We expect the Three brand to be retired in the UK, and the combined operation is likely to operate under the stronger Vodafone brand which retains significant familiarity to Brits.”

Since then, Vodafone has moved from being the most valuable telecoms brand with a value of over US$30 billion in 2011 to being 10th and overtaken by the likes of Verizon, AT&T and China Mobile.

Brand Value UK operators.png

The research indicates that both brands are largely undifferentiated, but with the advantage of size for Vodafone and its higher customer equity, there is strong commercial logic that the business will look to extract brand and marketing related synergies by adopting the Vodafone brand at some point in the future.

In the shorter term, though, Vodafone will likely pursue the stance of ‘more choice for customers as well as more value, so they may well maintain both brands for some time.

Consolidating the two brands will create a combined brand value close to £4 billion, making it the most valuable telecoms brand in the UK.

Overall, the logic of combining the brands is compelling because of cost synergy savings, offer integration and a reduction in price competition.

An enlarged brand has the opportunity to be positioned as the European leader in connectivity, which would strengthen the perception of its network.

Revenue growth

While the merger comes as no surprise, the attention will turn to how to grow revenue according to Angus Ward, CEO at Beyond Now.

“This will only be achievable through transforming their business model, stepping up and taking a strategic role in the evolving partner ecosystem and becoming more customer-centric, especially in relation to their B2B customers,” Ward says.

He adds that (communication service providers) CSPs must focus on solving customer problems, engaging more closely with B2B customers and technology specialists to understand industry challenges and how new technologies can be used to advance customer growth and promote business resilience.

Subsequently, this will enable CSPs to expand market reach through its network effect and ultimately accelerate revenue growth.

CSPs need to learn to align themselves with the whole ecosystem to develop alongside B2B solutions that are utilising technologies such as 5G, Edge, IoT and AI.

“Without that change to business models, CSPs will continue to lose out on revenue and mergers will likely continue.”

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