EE’s £12.5 billion “brand-led transformation”
The acquisition of the EE mobile network business by BT got the green light from competition authorities last week. Below I explore how the creation and development of the EE brand played a key role in making this £12.5 billion deal happen, in what I call "brand-led transformation".
Phase 1 (2012): the creation of EE
Deutsche Telekom and France Telecom merged their UK mobile ventures in 2010, bringing together their respective brands, T-Mobile and Orange, under a holding company with the snappy name "Everything Everywhere". When EE was created as a third consumer-facing brand two years later, I initially expressed concerns. Firstly, I questioned using a new 4G super fast network to launch EE, instead of revitalising the once great Orange brand. Second, it felt like creating a third brand meant even more complexity for consumers in an already overcrowded market. We now had EE stores selling EE and Orange and T-Mobile. Huh? Finally, there was a risk of fragmenting money and talent over three brands, with EE likely to "cannibalise" Orange and T-Mobile, leading to limited net revenue growth.
Phase 2 (2013 to 2014): Pro-Active cannibalisation
As the EE launch entered its second year, the company seemed to be actually encouraging the cannibalisation of Orange and T-Mobile. For example, Orange consumers signing up for 4G services had to move to the EE brand. The cannibalisation of Orange and T-Mobile picked up in early 2014 as EE began to remove them from the website and retail stores.
By this point EE's true intentions started to become clearer. "The branding strategy may be nothing to do with customer needs at all, but rather to do with the company's joint investors, France Telecom and Deutsche Telekom," I posted here in 2013. Reports started emerging of plans to float EE in London, or sell it to a private equity company.
Phase 3 (2015 to 2016): Ready for sale
The sell-off of EE was confirmed early in 2015, with BT buying the business for £12.5 billion, subject to regulatory approval. Following this announcement, EE began the final phase-out of Orange and T-Mobile in the UK, with new connections and upgrades available only on EE.
Today, my best estimate is that EE's c. 33% market share less than the combined share of T-Mobile and Orange was prior to the brand launch (according to data from 2010, 2013 and 2015). But the big prize is that replacing Orange and T-Mobile with EE created a far more "sell-able" business. Who would have wanted to buy an Everything Everywhere business made up of two brands owned by not one but two other massive companies (D Telekom and France Telecom)? Probably no-one.
So, in the end EE has followed a similar strategy to that used by France Telecom in France a decade or so ago, where its three mobile brands were replaced with … Orange (are you still following)?. But rather than immediately re-branding Orange and T-Mobile as EE in the UK, and risking pissing off some customers, the brand-led transformation in the UK took place gradually over three years. By reducing marketing and innovation support for Orange and T-Mobile and investing in EE, the latter gradually became more attractive over time.
In conclusion, my prediction from 2012 seems to have come true: "If Everything Everywhere is successfully floated at a good price, the Orange brand may have lost out, but there will be a happy bunch of investors who love the EE brand." EE's new owners, BT, also seem to like the brand, announcing plans to maintain it alongside the BT consumer brand. At least for now….