Vodafone dials Three to reconnect growth

The last decade has seen significant erosion in Vodafone’s brand value, and the proposed merger is an opportunity to arrest that slide in the UK. Vodafone was the first global mobile brand and began when they transitioned brands inherited from the AirTouch and Mannesmann acquisitions. Since then, Vodafone has moved from being the most valuable telecom brand with a value of over $30 billion in 2011, to being 10th and has been overtaken by Verizon, T (Deutsche Telekom), AT&T, and China mobile amongst others.

Brand Finance research suggests both brands are largely undifferentiated, but with the advantage of size for Vodafone and its higher customer equity, there is a 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, Vodafone will likely pursue the stance of ‘more choice for customers’, as well as more value, so they may well maintain both the brands for quite some while.

Consolidating the two brands will effectively create a combined brand value close to £4 billion and would make it the most valuable telecom 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 perceptions of ‘Network’ – always one of the key drivers of consumer consideration.

Every year, brand valuation consultancy Brand Finance puts 5,000 of the biggest brands to the test, and publishes over 100 reports, ranking brands across all sectors and countries. Earlier this year, Brand Finance conducted a valuation of the brands of both Vodafone and Three.

Lorenzo Coruzzi, Associate Director of Brand Finance and global telecoms industry expert, commented: “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. 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.”