Telcos are losing the battle of the brands

Brand Finance has released it rankings of the top 500 brands worldwide, and while the future is looking rosy for the technology industry it is a bit more gloomy for the telcos.

According to the rankings, the internet giants are the biggest, baddest and best around. Amazon, Apple, Google, Samsung and Facebook complete the top five, showing some extraordinary climbs in brand value across the year. Amazon sits at the top of the table with a brand value of $150 billion (a 42% jump from last year), but the story is not as favourable for telcos.

AT&T and Verizon are still sitting in the top 10, but Brand Finance states the value of their brands has decreased 5% each across the year to $82 billion and $62 billion respectively. While this does not necessarily indicate the current performance of the business, it takes into account several factors which ultimately give a measure of how important that business is to the world and what the future could hold.

Some of the areas taken into consideration when calculating the value of the brand is enterprise value (the total value of the business), brand contribution (the uplift a business gets from having branded as opposed to generic products), brand value (value of the trade mark) and brand strength (customer loyalty, perception, financial performance etc.). There are other factors, but these are the important ones. They paint a picture of how any brand might fit into the economic hierarchy.

Unfortunately, the trends are not looking good for the telcos. Verizon and AT&T slumped in the top 10, Vodafone’s brand value declined 14% to $18.5 billion, DT’s brand increased in value but it slipped down four places, BT dipped to 133rd position from 117th, while Sky dropped as did O2, Telenor, KT and Telia. There were some positive moves though. Orange increased its brand value by 3% and its position from 52 to 51, while China Unicom just 14 places to 134 and China Telecom saw its brand shoot up 36% to almost $24 billion in 47th position.

This is of course a sign of greater trends worldwide. The telcos are slowly being relegated to utility as the OTTs and technology firms reap the benefits of services innovation and more customer facing services. Telcos are seemingly being viewed as dumb pipes to facilitate the transfer of information while the value add services, and the lion’s share of profits, are being absorbed by the internet and technology brands at the top of the supply chain.

The telcos are keen to resist this trend as utility is seemingly being viewed as a dirty word, despite them actually helping reinforce this perception with the data pricing race to the bottom. While it is a different model, we can’t see what is wrong with being a utility. It isn’t as ‘sexy’ as the telcos previous lofty position, but there is a profitable business to be made in the utilities market, where risky and expensive consumer advertising efforts are removed. The whole model is about efficiency and making more money; that doesn’t seem too bad.

To be considered in the big leagues with the internet players, the telcos need to do something innovative and get ahead of consumer trends. They were caught napping when it came to the OTT messaging trend, voice calls, video consumption and smart home, with the initiative being seized by someone else. The traditional telco model is very risk-adverse, so simply repeated what made them successful in years gone is not going to work in the fast moving digital economy. Unfortunately that is all they seem to be doing.

There are a few companies who are doing things differently, and this seems to be recognised by Brand Finance. Orange is doing a great job at differentiation, and despite falling in the rankings, DT is making itself known as a major IoT player across Europe and a good content aggregator in its domestic market. How AT&T performs once it has (assuming it ever does) absorb Time Warner will also be an interesting one. These are telcos trying something different, maybe they will be the last to be branded the dreaded tag of utility.