Mumbai: The country’s biggest mobile phone company by customers Bharti Airtel Ltd has found a place among the world’s 25 most valuable telecom brands, ranked by the UK-based brand valuation firm Brand Finance Plc. Bharti Airtel ranked 25th in the recently released list, with a brand value of $2.48 billion (Rs9,778 crore then) at the end of 2007. This is the first time an Indian telecom brand broke into the list.
Brand Finance ranked Britain’s Vodafone Group Plc. the world’s most valuable telecom brand, with a value of $26.59 billion, followed by AT&T Inc. at $24.6 billion and Verizon Communications Inc. at $24.38 billion. Bharti Airtel had an AA+ (very strong) rating for brand strength.
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“The key to our success has been our constant focus on service and innovation—be it our unique business model of outsourcing IT (information technology) and networks or revolutionary products such as Hello Tunes and Lifetime Prepaid,” said Manoj Kohli, chief executive officer and joint managing director of Bharti Airtel. “With established presence across all three screens— mobile, PC and TV—Airtel is in the process of transforming itself from a telecom firm to a lifestyle enabler.”
Significantly, none of the other Indian telecom brands—such as Bharat Sanchar Nigam Ltd, or BSNL, Reliance Communications Ltd and Idea Cellular Ltd—has found a place on this list, even though most would feature in a listing of top 25 telecom firms by the number of subscribers.
An earlier Brand Finance report had estimated the brand value of Idea Cellular at $527 million, with a brand strength of A+ (strong), and that of Reliance Communications at $1.89 billion, with a similar brand strength, based on values ending 2007.
Unni Krishnan, managing director of Brand Finance India, reckons Bharti Airtel would have gained by 10-12% in brand value since December.
The Brand Finance valuation methodology is known as “royalty relief” and is based on the notion that a brand holding company owns the brand and licenses it to an operating company. The notional price paid by the operating company to the brand company is expressed as a royalty rate. The net present value of all forecast royalties represents the value of the brand to the business.
While Indian telecom brands may be advancing, they don’t stack up against the global brigade that is going from strength to strength.
“Vodafone’s brand value continues to strengthen as its enterprise value has risen from $158 billion to $185 billion due largely to investors favouring its developing world expansion strategy,” Brand Finance said.
AT&T is narrowing the gap with Vodafone, according to the brand valuation firm. AT&T’s brand value has increased from $10 billion in 2007 to $24.6 billion, and if it expands more aggressively beyond the US, Vodafone will have a run for its money.
France Telecom has chosen to rebrand its entire mobile phone business as Orange—originally created for the British market—rather than use the parent company’s name. Orange continues to increase its mobile and broadband customers through its NexT (new experience in telecommunications) strategy across five continents, making it a strong global player.
David Haigh, chief executive officer of Brand Finance, said that from being one of the least branded sectors, telecom has become the most branded.
This is reflected in the value of intangible assets in mobile phone firms, particularly in the value of their brands. Intangible assets represent 67% of enterprise value in the telecom space, according to the Global Intangible Tracker results for 2007.
“Much of this value lies in spectrum rights and technology, but a large amount sits in brands and other marketing intangibles… The fact that the top 25 telecom brands account for a staggering $208 billion of brand values indicates how things have moved up since the 1970s,” Haigh said.
Why are Indian telecom brands lagging so far behind their Western peers in brand value? After all, in terms of the number of subscribers, India has crossed the 300-million mark—overtaking the US, and second only to China’s 616 million subscribers as of end-August.
And Indian mobile phone firms have created tremendous awareness among consumers in a country where there are more cellular phones than landlines.
Individually, Bharti Airtel had 75 million subscribers at the end of August, Reliance Communications had 55 million and BSNL, 38 million, said Arvind Subramanian, partner and director of Boston Consulting Group.
“The main reason is the structure of the Indian markets is different in terms of the role of the handset operator and handset providers,” he said. “In mature markets, you see bundled offers where the operator provides the handsets and so a Vodafone, AT&T, etc., offer branded sets, even if they are produced by them or not.”
“In India, subscribers first identify with the handset provider brands such as Nokia and Motorola, versus the service providers, be it Airtel, BSNL, etc. This is since we operate on the open distribution model, where the handset brand is sold separately from the service plan in accordance with the economics of this market. As a result, handset brands grew stronger and appropriated brand value from operators.”
Average revenue per subscriber in India is $6 a month, versus $50-60 for Europe and the US. Also, while Indian subscribers speak for 400-500 minutes per month (across incoming and outgoing calls), tariffs are much lower at 60-70 paise per minute. This rate could be multiplied by 10 in some other markets.
Branding is another issue, and Indian telecom brands have no clear differentiation, according to Subramanian.
Advertisements for most brands have brand ambassadors, talk about tariff plans and packages and have a similar positioning of convenience and family values.
Indian telecoms are attempting to advance to the next plane by using stronger emotional connect, says Brand Finance India’s Krishnan, who cites Airtel ads with actors R. Madhavan (who we see paying bills via the mobile phone) and Vidya Balan. Or by using the idea of building bridges to various communities across the country, as seen in the ads for Idea Cellular, with actor Abhishek Bachchan playing the part of an educator—teaching students in a village via mobile phones.
But this could be due to the stage of evolution of the market—which initially takes the umbrella brand approach to make contact with different audience groups, and then adopts a focused niche approach as the market evolves. For example, Virgin is seen as a youth-focused brand.
Krishnan said no major meltdown has been seen yet in telecom brands because they are a systemic necessity and not a luxury.
He cited two major reasons why Indian telecom brands do not appear among the world’s big boys in brand value.
First, none of the Indian telecom firms has a global footprint, which is needed to expand revenue and de-risk the brand. India is a great market to be in, but they have to play on a world stage and become truly global. It is not just about the number of subscribers, it is about value-added services, innovations and brand and the customer experience offered.
Global telecom brands have moved from their home markets to expand across the world. Vodafone has moved from a Europe-centric model to a global one over the past decade, and Orange has evolved from a UK-centric brand to a global brand. In India, international expansion is now clearly on Bharti Airtel’s agenda.
Second, a question that Indian telecoms have to ask is, what breakthrough products and services can they offer the market and the world?
Bharti Airtel is talking about its mobile payment gateway to offer microfinance and micropayment services to millions of Indians. If it can pioneer this for the home market and then take it to other developing markets, it would further enhance brand value.
Meanwhile, Chinese telecom brands are leaping ahead. The Brand Finance report shows that China Mobile has increased its brand value from $11 billion in 2007 to $13.9 billion this year. China Mobile experienced significant growth this year, boosted by its selection as the telecom supplier for the 2008 Beijing Olympics.