Orange, one of the world’s most recognised brands, was born in the UK 16 years ago but will disappear there following the merger with the local branch of T-Mobile. Sharon Wheeler looks at what the new company will have to do in terms of branding to back its promise of better value, expanded coverage, better quality and improved customer service. Below, John Pheasant, Suzanne Rab and Merit Olthoff look at the business and legal background







The future’s bright, the future’s Orange: the brand was
announced with this TV ad in 1994 by Hutchison Orange
when it launched services in the UK





Orange became part of France Telecom in 2000 and the
brand is used by the group worldwide, including at this
shop in the Champs-Elyssées in Paris




UK shops of both Orange and T-Mobile will be rebranded
by the merged company in 2011





Sharon Wheeler: the new brand will have to set out a
visionary appeal and will have to motivate staff
and customers




Deutsche Telekom’s T-Mobile and France Telecom’s Orange are merging their UK businesses to create a mobile phone giant with 28.4 million customers and 37% market share making it the number one player in the market.
The promise of the management is “better value, promised expanded network coverage, better network quality and improved customer services”.
Reports say it will offer major customer benefits, including enhanced network quality for 2G and 3G services, providing the platform for unparalleled mobile broadband offers as well as better customer proximity through a larger network of own shops and improved customer services. Sounds great. So what does that mean in branding terms and what “substantial benefits to UK customers” can we expect?
Years ago, I worked on the pitch and launch of O2. At the time, Orange was seen as benchmark for branding excellence in the communications arena.
Times, technology, behaviours of customers and brands have changed a lot since then. It feels like Orange has somehow lost its way in recent years — with the exception of its brilliant and quirky association with film, the network brand somehow feels a little tired, left behind by the massive impact and notable absence of a smart phone.
Now that the merger has been given the green light by EU legislators, both brands have agreed to remain separate for the first 18 months. But they will then drop both existing brand names in favour of a totally new one. Despite this, Orange will need think about how to re-energise its offering as well as the rest of the joint venture in order to compete with the incumbent leader O2.


Unique opportunity

This thinking time will no doubt be spent wisely as mergers present businesses with a unique opportunity to re-present themselves to existing customers, present themselves to prospective customers, re-motivate staff — those left — and create more value for shareholders.
The problem with most mergers from a brand perspective is that they work from the inside; they are concerned with internal issues rather than presenting a new face to their customers.
The important principles this brand should be:
• putting the customer first;
• addressing any issues of the two previous brands that limited their customer appeal;
• re-launching with something bold enough and big enough to get the brand talked about and noticed;
• ensuring that a solid plan exists to support the proposition and deliver against it — not necessarily on day one but it will be vital to manage the expectations of the customer.
Creating a new, combined, brand is more than usually important because this is the opportunity to find out what values and approaches the companies share and an opportunity to define them for the new company.
The solution will set out a visionary appeal but will have to feel true to the merged company. It will have to be properly motivating to the staff.
After such an uncertain, stressful period, people need a flag to rally around; they need something that they can be proud of.
The new brand will also, of course, have to be properly motivating to the customers, existing and prospective. They are not interested in the merger, and won’t notice until told.
And it will be more than usually difficult because there are two sets of people and two sets of cultures that have to find common, motivating ground between them. Each company comes to the table with its own ambitions and values — not to mention communication ideas — which it may find difficult to share, change or compromise.
Moreover, the existing brand architectures may not, of course, represent the future architecture of the company.
Mergers are a very odd time in the life of a company, and of its managers, because they are devoted to pleasing potential partners and financial investors, rather than customers. It’s not unusual in these situations to reach a brand architecture that’s hugely motivating to those inside the merged company, only to realise that you’ve forgotten about the actual users of the product.
Either way, this is a unique opportunity to reframe the business — and therefore the market — and one that cannot be compromised or watered down because of internal sensitivities.
In branding terms, a merger must be treated as a start-up; this is the one chance that the new company has to set a bold and motivating vision that will inspire both customers and staff. They will have one chance to get it right.
There’s a fundamental question to be asked here though: what business is the company in? What does it actually provide to customers? Is it innovation? Entertainment? Is it connectivity, the ability to talk? Is it the future?
In a complex market like this, where there are multiple products, services and devices and a network bundled together, it’s understandably difficult to narrow things down.
But it’s the branding team’s job to do so, and to do it with a real resonance for the customer. GTB

Sharon Wheeler is CEO of Turquoise Brand Consultants

Why UK and European regulators approved the merger. Lawyers John Pheasant, Suzanne Rab and Merit Olthoff look at the business and legal background

The European Commission approved the merger subject to the modification of T-Mobile’s sharing agreement with 3UK and the divestment of spectrum of the merging parties in the 1,800 megahertz band.
The merger takes the form of a combination into a new 50:50 joint venture company. The total combined 28.4 million subscribers served through the new entity will range from business customers to pre-paid and post-paid consumers, as well as wholesale customers.
The future of T-Mobile UK had been in doubt for some time. After Deutsche Telekom took an impairment write-down of €1.8 billion of its UK subsidiary in the first quarter of 2009, the company was under pressure from its two main shareholders, the German government and the private equity group Blackstone.
The merging parties expect that the potential for substantial cost savings will enable them to compete more effectively in the UK, which is regarded as one of the most competitive mobile markets in the EU.
The European Commission raised concerns in relation to a network sharing agreement that T-Mobile had in place with 3, whose viability it considered might be jeopardised. The parties committed to conclude a revised agreement with 3 in order to address these concerns.
The Commission’s investigation also revealed that the combined amount of contiguous spectrum held by the parties in the 1800 megahertz band would be larger than the amount of spectrum held by competitors in the market. In order to avoid any harm to competition as a result, the parties committed to divest 15 megahertz of their spectrum in the band.
The UK mobile market is regarded as one of the most competitive in Europe. The removal of a significant independent competitor meant that the transaction was unlikely to pass through the merger control process unscathed.
Before the merger there were five independent operators: O2, T-Mobile, Orange UK, Vodafone and 3. The combined entity would be the UK’s largest, with an estimated 30-35 % of the retail market. O2, owned by Spain’s Telefónica, had a 25-30% share, followed by Vodafone at 25-30%. Together, the top three would command close to a 90% share of the retail market.
But many European mobile markets are considered competitive where one player holds more than a third of the market. With five full-service operators, the UK is arguably one of Europe’s most populated mobile markets. Italy and Germany each have four, while France had three until the regulator Arcep granted a 3G mobile licence to broadband operator Free in January 2010.
The transaction might be expected to affect mobile virtual network operators such as Virgin Mobile and Tesco Mobile, which provide an important source of competition but depend on wholesale operators to provide them with network access. Their negotiating clout might be blunted in the face of the merged group.
The transaction raised an important question as to how the combined entity would hold a majority of spectrum in the 1800 megahertz band, which is particularly important for mobile internet services based on 4G wireless technology. The transaction effectively reopened the Government’s spectrum arrangements with the UK operators, which were predicated on there being five networks rather than four. The UK’s Office of Fair Trading voiced concerns that the transaction potentially had significant implications for the future of the adoption of LTE technology.
Standing back from the EU merger control process and looking ahead, the transaction can certainly be expected to shake up the UK mobile market.
The mobile phone markets may be considered a classic case of an oligopoly with just a few significant operators. However, as the T-Mobile UK/Orange UK clearance decision suggests there does not always need to be a large number of operators to create effective competition.
A balance needs to be struck between economic efficiency and consumer welfare. Competition usually keeps prices down for consumers but businesses must be able to finance investment and generate a sufficient return for their shareholders. GTB


John Pheasant, Suzanne Rab and Merit Olthoff are with law firm Hogan & Hartson