AT&T’s Branding Gamble

If you really want to work at the frontier of branding, it would be a mistake to focus on communications, measurement or even brand strategy. The place where all the big brand decisions are now being made is brand architecture. Which brands do we want to keep? Which can we afford to lose? How do we transition from one to the other? These are the questions that are keeping senior marketers awake at night.

Most major companies have too many brands at their disposal and, in direct contrast with the 90s, when most looked to expand their brand portfolios, consolidation is now the big topic. Thanks to global expansion, merger and acquisition, and the spiraling costs of building brand equity, major organizations are learning first-hand about the inherent risks and rewards of killing off some brands to benefit others.

Take AT&T – through the acquisition of BellSouth in 2006, the company gained ownership of the leading mobile network brand in the US, Cingular. AT&T does not have its own mobile network brand, having sold the AT&T Wireless brand to, of all people, Cingular in 2004 for $41bn. A year later, Cingular retired the AT&T Wireless brand and transferred its customers across.

Barely three years later, AT&T purchased Cingular as part of the $86bn acquisition of BellSouth. It retired the Cingular brand and transferred all the customers across to… you guessed it…AT&T. In the history of marketing has there ever been a more expensive set of swings and roundabouts?

At first glance, killing off Cingular seemed brand lunacy. It was only six years old, but had already invested more than $6bn in building its own brand equity. In the first nine months of 2006 it spent more than $1bn on media advertising alone.

Not surprisingly, Cingular had strong associations as a modern, dynamic mobile network that appealed to younger demographics. It was the ninth-biggest mobile brand in the world and Millward Brown Optimor calculated its brand to be worth $6.6bn.

For AT&T, however, the advantages of consolidating Cingular into its corporate brand outweighed the benefits of retaining it as an independent brand. AT&T’s chief executive Edward E Whitacre Jr, declared ‘AT&T, BellSouth and Cingular are now one company, and going to market with our services under one brand is the right thing to do’. Fair point, but Whitacre needs to find $6.6bn-worth of reasons to back up his claim.

He could start with the marketing savings. Mobile telecoms is a $1bn-a-year branding business and a single brand can soon stack up big cost savings versus maintaining two distinct entities.

Then there is the added strategic advantage of focusing all the resources, staff and leadership on a single brand. Most big corporations struggle to build a single strong global brand – just look at Vodafone – so the challenge of managing multiple brands in this sector is almost inconceivable.

AT&T also believed it could update its own stodgy, conservative and increasingly irrelevant brand equity by associating itself with Cingular over an extended phase-out period. During 2007 the AT&T and Cingular brands were co-branded in stores, in advertising, and across all other touchpoints.

AT&T is betting it can have the best of both worlds: a single AT&T brand that retains all the attractive associations from the Cingular transition. Has it retained them?

As Cingular completely fades into the archives of business history one final chapter is still being written – did the $6bn plus gamble pay off?

30 SECONDS ON… AT&T

– On 1 January 1984 AT&T was forced by the US Department of Justice to divest itself of its regional phone companies.

– It was broken up into BellSouth, AT&T Long Distance, Southwestern Bell, Pacific Telesis, American Information Technologies, Bell Atlantic, NYNEX and US West.

– Of these, the majority had sub-brands of their own. American Information Technologies (AIT), for example, comprised Michigan Bell, Ohio Bell, Indiana Bell, Wisconsin Bell and Illinois Bell.

– In 1993, AIT subsumed those divisions to become Ameritech.

– On 5 March 2006 it was announced that AT&T was to acquire BellSouth for $86bn. The deal was executed on 29 December 2006.

– Of the 22 Bell operating companies that AT&T owned prior to its 1984 divestment, 10 are now part of AT&T following its acquisition of BellSouth.

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