After months of speculation about its intentions and likely partners, BT danced down the aisle with EE last week. For a whopping £12.5 billion, BT gets a second chance at mobile love and EE’s owners get to leave a market they had been looking to escape for years. More importantly for us, the huge exercise price of EE is a brilliant example of a brand (and advertising) adding real value to a company.
It’s amazing to think that EE has only been around since October 2012. Saatchi & Saatchi’s Kevin Bacon ads might not have troubled the major awards juries but are, for the most part, fun and memorable. They have also proved very effective. The original ambition was for the company to add a million customers by the end of 2013. It managed to get two million.
EE entered the market as both a new telecoms network offering 4G exclusively and the new brand name for the joint venture between Deutsche Telekom and Orange. EE still had the T-Mobile and Orange brands, too, and much was said about how confusing the proposition was. Not only that, EE wanted customers to pay for 4G in a market dominated by data offers.
EE's agencies should be proud of building a brand worth billions in less than two-and-a-half years
T-Mobile UK was estimated to be worth £3 billion ahead of the merger. Last month, Deutsche Telekom said its shareholders have benefited to the tune of £3.9 billion since then. And the bulk of that has come from the increased value of the company. One would assume that Orange has benefited to a similar amount, although it declined to comment.
Much of that cash represents the value of the EE brand created by its agencies, which also include Poke, MEC, Dare and Publicis Chemistry. What will happen to that value if BT guzzles up EE? When British Airways sold its no-frills airline Go to investors in 2011, it got £100 million. A year later, easyJet bought Go for £374 million. At least some of the credit was due to Go’s agency, HHCL, which had continued to build its distinct brand. Cossette’s deals to buy Dare and MCBD were supposed to be worth up to £45 million. Where did the value of Go and MCBD go when the companies merged?
The BT chief executive, Gavin Patterson, would last week only commit to the EE brand in the short term. But he did point to Plusnet to show how BT already successfully operates multiple brands. Mobile and home telecoms companies haven’t had much luck crossing over to the other side (Orange’s purchase of Wanadoo, anyone?) so he might well decide to keep EE, after all.
If not, EE’s agencies should be proud of building a brand worth billions in less than two-and-a-half years. That thought might not stem the immediate pain of the loss of a key account. But it will be a cracking case study for the next mobile pitch.