Telecoms: Less chill-out music, more ideas

that Orange needs to find a new voice in a homogeneous sector.

He will have his work cut out. Over the summer, his predecessor Bernard
Ghillebaert conceded that the UK's third-biggest mobile phone operator
had lost its 'sparkle'. The company that shook up the market a decade
ago with its clever ads and distinctive service-based positioning has
become just another mobile brand. 'Reinvigorating Orange's marketing
will be a top priority,' says James Barford, analyst at telecoms
specialist Enders Analysis.

The lack of a revival so far is not for want of trying. Last year,
Orange launched a range of animal-themed call packages, backed by a
major media campaign. Then, in May, it rolled out a £13m ad
campaign, created by Fallon, that focused on its range of services,
including broadband, with the tagline 'Life, as you like it'. Last week
it unveiled its 'Good things should never end' campaign highlighting its
'unlimited' offerings. It also sponsors Glastonbury and continues with
its long-running Orange Wednesdays cinema promotion.

Orange, which spent £90m on advertising last year, has more than
15m customers and annual sales of £4.1bn, excluding broadband. In
contrast, Vodafone and O2, whose adspend last year was £64m and
£50m respectively, have more than 17m customers each and annual
sales of £5bn and £4bn.

Operating profits slipped by 8.6% in the first six months of this year,
yet Orange claims it is the victim of its own success, with other
networks aping its positioning. Where its marketing once stood out in a
bland, technology- and price-driven sector, it is now almost
indistinguishable from the competition. Almost without exception, all
the UK's mobile operators now target the same audience of 16- to
35-year-olds with similar ads - featuring 'urban hippies' who fall into
this demographic - touting the same range of voice, text, internet and
content services; most also have developed live-music strategies to
promote their download services. The big three - Vodafone, O2 and Orange
- seem to be distinguished principally by colour: red, blue and orange
respectively.

'The mobile network operators are a bit like the main political parties,
which have all converged on the middle ground so that you can scarcely
get a pin between them,' says Jez Frampton, global chief executive of
Interbrand.

Tom Morton, executive planning director at TBWA\London, claims the
failure to find a truly differentiated positioning is undermining the
operators' marketing. 'They all try to be modern, sophisticated and
avant-garde, but in reality they are all bland versions of modernity,
featuring washed-out colours and chill-out music, that don't capture
people's imagination.'

John Penberthy-Smith, marketing director at 3, which earlier this year
ditched ad agency WCRS along with its TV campaign featuring fluffy
bouncing clouds and Japanese cowboys breakdancing around a jellyfish,
admitted recently: 'In the past, we put our energy into the creativity
of our TV ads because we had nothing relevant to offer consumers.' In a
bid to portray 3 phones as useful, rather than quirky, he hired Euro
RSCG to 'bring the brand back down to earth'. The result is an
integrated campaign which takes the brand into the lifestyle territory
occupied by the other leading operators.

Justin Billingsley, who left Nokia to become Orange's director of brand
marketing earlier this year, admits that the mobile sector has lost its
way. 'We have been spending too much time looking at each other, when we
need to be looking outside at the competitors and collaborators of the
future,' he says. Of course, he insists Orange is different. 'Our brand
proposition is about removing the barriers of time, space and boredom
that get in the way of people being able to do the things and see the
people that matter to them,' he adds. His words seem to echo the theme
of Vodafone's mobile internet campaign 'Make the most of now'. Indeed,
Billingsley claims its outdoor ads are often credited to Orange.

In the main, the mobile operators are now differentiated by the service
packages they offer, rather than the tone and appearance of their ads.
Karen Phipson, head of brand communications at T-Mobile, says its
advertising strategy is about 'relations between customers and between
us and customers'. She adds that services such as Flext and U-Fix, which
give users more control over their tariffs, are an attempt to 'disrupt
the market and act as a consumer champion', and that competitors 'try to
emulate our advertising'.

Services from O2 include Fair Deal, which gives existing customers the
same benefits as new ones; Favourite Places, which offers free minutes
to pre-pay customers, 'who often feel like second-class citizens',
according to marketing director Sally Cowdry; and a SIM-only service
offering cheaper line rental to people who rarely upgrade their phone.
Cowdry says paying attention to service is crucial to the brand. 'We try
to focus on service as the cornerstone of our strategy, and the rest is
icing on the cake,' she explains. 'You can't mess around with "halo
marketing messages" if you are ignoring the core experience.'

So why has the mobile market become so bland? While the raft of recent
propositions are more customer-focused than the technology-oriented
positioning of old, the problem for network operators is that they are
essentially selling a commodity. 'They are trying to be all things to
all people but, at the end of the day, it is difficult to have an
emotional relationship with vibrating air,' says Frampton.

Will Orr, managing director of WCRS, which has handled advertising
accounts for Orange, Vodafone and 3, says value in the market is added
by content owners and handset manufacturers 'who can make sexy products
that people want' - Apple's iPhone, for example. In a mature sector,
where operators need to drive up average revenue per user, consumers are
being persuaded to use their phones for far more than making calls and
sending text messages.

However, consumers have been slow to embrace the additional
functionality on their phones, typically using just 15% of their
handset's features. Niek van Veen, an analyst at Forrester Research,
says operators have failed to market extra services effectively. 'The
operators tend to market them through three-month bursts, so if anyone's
interest is captured by an ad, he or she quickly loses interest when the
campaign switches focus to the next thing,' he claims. 'They don't
sustain the message long enough to convert nascent consumer interest
into adoption.'

Pressure from the City is partly responsible for such fractured
communication. 'Investors want the operators to have a stake in every
new technology, such as music and video downloading, despite the lack of
any real demand,' says TBWA's Morton. Rory Sutherland, vice-chair of
Ogilvy Group, criticises analysts' obsession with what he calls 'the
metric du jour'. 'For a long time, Vodafone was marked down (by
analysts) because it had a low rate of (customer) acquisition, despite
the fact that it was concentrating on acquiring valuable business
customers,' he says, adding that this has caused operators to 'squander
any possibility of differentiation'.

Beyond these outside forces, the mobile operators themselves are
contributing to the sector's blandness due to their incestuous nature.
In-house marketing and agency staff hop from one mobile brand to the
next - it is no surprise that Orange hired a former Virgin Mobile chief
- when what is needed is a fresh perspective.

What's more, argues Jonathan Hall, global client managing director of
Added Value, there has traditionally been a separation of brand teams
and product developers from commercial marketers. 'These teams are often
based in different locations, which is symbolic of the distance between
the big brand idea and the reality of the product and service offer,' he
says. It has been claimed that at Orange, there is tension between the
UK business, which has a history of innovative marketing, and parent
company France Telecom.

Hall argues that this separation of teams and conflicting motives
explains the lack of vision in the market generally. 'Most mobile
network operators are quite clear that they don't want to be a
commoditised utility business, like an ISP, but they don't seem to know
what the future looks like or how they will fit into it,' he says.
'Orange tried at the beginning, but lost its way, and though 3G gave the
industry a clear purpose with its promise to deliver fully mobile
content, the technology disappointed in both technical and proposition
terms.'

Orange's apparent indecision around its offering has affected its
marketing strategy, according to Enders Analysis' Barford. He suggests
that the brand needs to focus more on its mobile business, which is its
main source of revenue and profit, and less on its fixed-line broadband
operations. 'Orange is investing heavily in broadband, but customers are
not that interested,' he says. 'Overall, it is growing more slowly than
either Vodafone or O2 and its margins are lower, so it is not using its
marketing money effectively.'

What is needed is the kind of vision that elevated Apple above its bland
computer manufacturer status, suggests Hall. 'Apple's vision evolved
into making all digital devices mobile, and it created a very clear
identity and engaging personality around that,' he says.

Morton believes that in contrast to Apple, the mobile operators' growth
strategies seem to be based on nothing more than 'ubiquity and fear of
being left behind'.

Frampton argues that the operators should move their focus away from
free minutes, customer-friendly tariffs and live-music downloads as
added-value items. He claims consumers would be more interested in being
able to conference call a group of friends at the touch of a button, or
connect their landline and mobile systems so that they automatically
divert calls depending on whether the user is at home or on the move.
'The technology is there to do it,' says Frampton, who predicts that the
imminent introduction of the Apple iPhone in the UK, on the O2 network,
could provide the shake-up that the industry needs.

What Orange, and the other mobile operators, do not yet seem to have
mastered is the ability to create a brand that transcends the actual
service on offer; the sort of branding that helps set apart companies
such as BMW, Apple and First Direct.

As Frampton says: 'The brand is about the way you do business, from your
marketing, PR, retail presence, service delivery and billing to your
management, hiring and training policies. The trick is to create a
highly distinctive and consistent experience for all the brand's
stakeholders at every single touchpoint. At the moment, the mobile
network operators just don't seem to be trying that hard.'

DATA FILE - ORANGE'S COMPETITION

3

Media spend: £26m

UK customers: 4.1m

UK & Ireland annual sales: £1.5bn

Strategy: In a shift away from the high-concept TV ads created for the
brand by WCRS, the integrated campaign 'Fresh on 3' is intended to raise
awareness of 3's services, its expanding UK store network and the value
it delivers to customers. Marketing director John Penberthy-Smith says:
'Too many of our competitors rely on esoteric campaigns that don't have
anything to say. We don't want to be quirky. We want to be useful.'

O2

Media spend: £50m

UK customers: 17.8m

UK annual sales: £4.2bn

Strategy: The operator is aiming to generate loyalty with ads designed
to combat the negative perception of mobile networks' pursuit of new
customers at the expense of existing ones. This year it has launched The
O2 arena in London, won the contract to host iPhone services, and
unveiled a broadband offering. It also sponsors the England rugby union
team and Arsenal FC, and is involved in a range of music events across
the country.

T-MOBILE

Media spend: £42.5m

UK customers: 17m

UK annual sales: £3.1bn

Strategy: Claims to be disrupting the market and acting as consumer
champion by giving customers more control over tariffs and services. The
brand is involved in co-hosting music gigs in unusual places, such as
the Science Museum in London, Brighton Pier and Edinburgh Castle. Head
of brand communications Karen Phipson says: 'We have stayed away from
broadband, which has distracted some of the other operators.'

VIRGIN MOBILE

Media spend: £7.3m

UK customers: 4.5m

UK annual sales: £292m

Strategy: Campaigns featuring Kate Moss, Christina Aguilera and Pamela
Anderson set out to entertain on a budget much smaller than that of
Vodafone and Orange. Now part of Virgin Media, some Virgin Mobile
executions promote the parent brand's range of services, and it sponsors
the V Festival.

Advertising manager Michael Garvey says: 'The major mobile brands and
retailers all talk to 16- to 24-year-olds who spend a disproportionate
amount of income on their phones.'

VODAFONE

Media spend: £64m

UK customers: 17.6m

UK annual sales: £5bn

Strategy: Currently promoting mobile internet for leisure and business
users via the 'Make the most of now' and 'Raining time' campaigns.
Vodafone sponsors the UEFA Champions League, the England cricket team,
McLaren Mercedes Formula One team and the Vodafone Live Music Awards.
Marketing director Dominic Chambers says: 'The market is saturated.
Consumers are bored with, and confused by, network operators talking
about tariffs.'