Brand Health Check: T-Mobile

Marketing 25-May-05, 14:32

The international network has lost its way as a brand in the UK, and short-term cost-cutting measures won't be enough to return it to health, says Ben Carter. So what must it do?

The UK mobile phone industry is in the midst of an aggressive price war, which could well become a battle for survival. There are currently four mobile phone networks, but analysts predict that there will soon be consolidation and only the ones with the strongest brand and offer will survive.

Just three years after its multimillion-pound rebrand from One2One, the T-Mobile network is struggling. Last week it announced an 11% sales slump and the number of new connections it is signing up each month is falling.

Much of its growth is being driven by third-party brands using its network, such as Virgin Mobile, which now has more than 5m customers.

When Mercury One2One launched, it revolutionised the mobile market by offering free weekend calls to new customers, causing thousands to sign up. While the sheer numbers nearly crashed the network, it was an instant success.

The company was acquired by T-Mobile's parent, Deutsche Telekom, in 1999 for £8.4bn and was rebranded in April 2002. While there is no doubt that T-Mobile is one of the biggest international networks, in the UK it has begun to lose its way as a brand, despite having more than 15m customers (including Virgin Mobile subscribers) on its books.

T-Mobile has blamed its sales slump on the price war and having to spend more to acquire customers. It is trying to cut costs by increasing its direct sales focus and cutting nearly 1000 jobs, but these are short-term measures. Longer term it has pledged to stop subsidising pre-pay handsets, used by the majority of its customer base, and has launched U-Fix, a hybrid pre-pay/contract model where consumers set the amount they spend. It is still too early to tell whether this has been a success.

What should T-Mobile do to restore its brand momentum and inspire customer growth? We asked Will Harris, former marketing chief at O2 and now chief executive of full-service agency The Bank, and Adrian Coleman, founding partner of Vallance Carruthers Coleman Priest, the agency behind O2's current advertising.

VITAL SIGNS - SUBSCRIBER NUMBERS BY OPERATOR (000s)

Connections Vodafone O2 T-Mobile* Orange

during

period

Q3 2003 1377 1220 1189 896

Q4 2003 1801 1532 1674 1248

Q1 2004 1235 1254 1244 1141

Q2 2004 1667 1382 1267 1064

Q3 2004 1410 1518 1277 976

Source: Ofcom, individual operators.

*T-Mobile's subscriber numbers are reported on the basis of a threshold

period for inactive subscribers that is different to that of Vodafone,

O2 and Orange. This means that T-Mobile's figures are likely to be

greater than had they been prepared on the same basis as the other

operators.

DIAGNOSIS 1 - ADRIAN COLEMAN Founding partner, Vallance Carruthers Coleman Priest

Since rebranding from One2One just three years ago, T-Mobile seems to have declined from a relatively strong market position to the most under threat - on brand strength, certainly. It relaunched at the same time as O2, but their progress since has been vastly different.

The brand has become creatively weak. Its marketing smacks of bland European advertising with little local relevance. It seems to play follow-the-leader, struggling to find an identity of its own in tone, style or content.

Recently we have seen a shift in ad style and a proposition in U-Fix that tries to step away from category norms. Although the posters and press ads are fairly convoluted, the TV work is better.

T-Mobile has said it intends to focus more on its direct channels, but this could prove problematic. Its retail experience is unimaginative, with no overt brand personality.

Over the past two years , these factors have combined to take T-Mobile down in the market to the second rung of mobile brands, under threat from Virgin and 3.

REMEDY

- Do something memorable, either in terms of brand communication or proposition. In fact, do anything memorable.

- Create a stronger brand identity that can carry a plethora of messages.

- Create your own space and do not play 'follow-the-leader'.

- Focus on a clear target segment, rather than trying to appeal to everyone.

- Decide whether you are going to be a brand or simply a carrier.

DIAGNOSIS 2 - WILL HARRIS Chief executive, The Bank

Peter Erskine decided to rebrand BT Cellnet to O2 in 2002. At the same time, I remember hearing his opposite number at T-Mobile talk about the benefits of renaming his business.

Three years later, one brand is flying, one is struggling. The culprit, I feel, is the person responsible for designing the European brand identity and laying out all the constraints for the marketers around the T-Mobile world.

From that point on, it has faced an uphill struggle, not made any easier by the hugely annoying jingle at the end of every piece of communication.

The greater problem facing T-Mobile is that as handset makers finally get their acts together and become strong brands in their own right, the virtual mobile operators limber up on the sidelines and content brands assume a greater role, T-Mobile faces a bleak future as a commoditised bit-carrier.

T-Mobile's brand has lost meaning and resonance with consumers. In the short term it may be in a profitable position, but its prospects for growth appear limited.

REMEDY

- Define whether you want to win UK customers as a brand or as a carrier.

- If the former, get over to T-Mobile's headquarters and throw yourself on their mercy.

- If the latter, learn some lessons from BT, which has mastered the vanilla carrier role in the broadband arena - and has done so very profitably.

- Demand a rethink on the brand positioning, colours and sonic mnemonic.