OVUM Comment: Carrie Pawsey, senior analyst, telecoms strategy, Ovum

Everything Everywhere - twos company threes a crowd?

(PresseBox) ( London, )
"The long term objective of Everything Everywhere has always been to bring the EE brand to the UK market and therefore the timing is right in that it will be differentiated by being a 4G service. For customers wanting a 4G handset and faster network speeds, this will be only available via the EE brand, not on the other two sub brands. This suggests that the long term viability of the legacy brands is limited and we would expect them to retire T-Mobile and Orange in the medium term. This then begs the question why not do it today? It will be expensive to maintain three brands, even if marketing spend is reduced for Orange and T-Mobile, it seems a costly exercise at a time when most operators are looking to reduce costs. There could be some pressure from the parent companies France Telecom and Deutsche Telekom not to retire the core brands, given that they are more successful in other markets. Customers will quickly become familiar with the EE brand, starting with the signal indicator on handsets changing to EE for all Orange and T-Mobile customers over the coming weeks. We would also expect bills to be co-branded and the announcement included 700 retail stores also being rebranded as EE. Therefore from a strategic and cost position we cannot see this how sustaining three brands is a long term solution and the quicker the two legacy brands are withdrawn, the better for the business.

"Everything Everywhere has also announced that it will be launching fixed fibre broadband services. Orange has previously sold off its fixed assets and pulled back in the UK broadband market and has just 3% market share. This announcement to launch fibre services has two key implications. The first is that it reinforces the premium EE brand as fibre will not be available on the Orange brand. Secondly EE is using fixed fibre services to complement 4G mobile. We think EE will offer attractive bundles for customers wishing to take fixed and mobile broadband services together. No one in the UK has got quad play right, but interestingly one of the most successful operators at selling fixed and mobile services together is Orange France with its Open product that now has in excess of 1 million customers. While Virgin has a quad play offer and Talk Talk is rumoured to be looking to increase its mobile customer base both of them have relatively insignificant mobile market shares. Similarly Vodafone and O2 also sell fixed broadband, but they aren't aggressive enough to take on the fixed players for a significant fixed broadband market share. Yes, the UK telecoms market is highly crowded, but we think there is still an opportunity for a dominant total communications provider that gives users a fantastic experience whether it's on fixed or mobile and that is where we think EE is going to position itself."
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