EE does look like a hungry cannibal out to EEat Orange and T-Mobile

Screen Shot 2013-03-05 at 13.16.34Back in Sep 12, I suggested here that last November's launch of the the new EE brand to launch 4G services in the UK "Could drive some revenue growth for EE. But the cost may be even weaker performance for Everything Everywhere's Orange and T-Mobile brands." I suggested it would have been better to use 4G to rejuvenate the once great Orange brand.

Well, early results are in line with this prediction. New contract users for Everything Everywhere's enlarged brand portfolio were down 35% in Q4 of 2012 vs. year ago, and down 19% vs. previous quarter (see below). This is despite the company being the first and only one to offer new 4G services.

The risk of new brands 

This does show the potential risk of launching a new brand rather than using innovation like 4G to grow the core of your existing brands, although I accept it is still very early days.

First, the cost of new brand launches is significant. Everything Everywhere's operating expenses in 2012 were £76million more than in 2011, some of which "covers its re-brand under the EE name" according to reports here

Second, you risk the new brand "cannibalising" your other brands. In this case, the company actively encouraged this process, by making Orange customers interested in 4G leave the brand and switch to EE.

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Elastic brands 

When considering what branding solution to use for a new service or feature, I suggest you consider the degree of stretch from the existing core brand on two axes:

– Functional stretch: how credible is it for the brand to launch the new service or product? In the case of Orange and 4G, I suggest the stretch is small

– Emotional stretch: what sort of brand personality and emotional values are needed for the new launch, and how far are these from the core brand? Again, I suggest the stretch is small for Orange and 4G. Sure, the brand has lost some of its shine, but is has latent associations with innovation and progress.

In France, 4G has been launched under the Orange brand, is in line with the above analysis of stretch. This is despite the brand having less history there (launc 2001) than in the UK (1994).  

In the UK, the new EE brand was launched, suggesting that the stretch from the core Orange brand was huge, which I struggle to believe is the case.

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EE's real reason to exist?

The launch of EE seems to make little sense from a branding stand-point (unless anyone can share some data to prove otherwise). So, what is Everything Everywhere doing? 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 (owner of Orange) and T-Mobile. The Times reports that "EE is expected to float in London this year or to be sold to private equity". CEO Olaf Swantee commented in the same artilce, "If the company is successful (which I take to mean floats successfully), it needs a UK brand and a UK identity, which is now has with EE". 

In conclusion, I still think an opportunity has been missed to re-launch and revitalise what was once one of Britain' best brands, Orange. However, if Everything Everywhere is successfully floated at a good price in 2012, Orange may have lost out, complexity may have been increased for customers, but there will be a happy bunch of investors who love the EE brand.