What Formula 1 tells us about telco aspirations to become global consumer brands
March 21, 2013 Written by Mark Newman
Vodafone’s branding is now familiar
I remember speaking to a senior director at a Middle Eastern telecoms operator five years ago about Formula 1 motor racing and Vodafone. He’d got used to seeing Vodafone’s name plastered all over race tracks as a sponsor of first the Ferrari and then the McLaren teams. But he didn’t know that Vodafone was a telecoms operator (Vodafone did not operate in his country) – he thought it was a sports marketing brand.
As it turns out, the current F1 season, which started on Sunday, will be the last to feature Vodafone as McLaren’s main sponsor. Vodafone announced last week that, following a global review of its branding strategy, it will focus instead on investing in new customer engagement platforms.
The inference from the announcement was that the McLaren sponsorship deal had served its purpose. Vodafone now has in excess of 90 per cent brand recognition in the markets in which it operates.
But when Vodafone’s decision to quit F1 is seen in the broader context of the mobile communications industry’s love of motor racing generally over the last decade, it points to a bigger overall trend. It tells a story of the European telecoms industry’s rise and fall and of mobile operators’ hopes that they could become global consumer brands like soft drinks or tobacco companies.
All four of Europe’s big four telecoms operator groups – Vodafone, Orange, Deutsche Telekom and Telefonica – have dabbled in F1. In 2000, Orange entered into a two-year global sponsorship deal with the Arrows F1 team. Deutsche Telekom sponsored McLaren in 2001 and 2002. Between 2004 and 2006, Telefonica sponsored the Renault F1 team. And BMW announced a partnership with O2 for the new BMW Sauber F1 in 2006.
But in the current 2013 season, Vodafone is the only European operator sponsor that remains. Fierce competition, strong regulation and competition from OTT service providers have combined to depress the market for Europe’s telecoms operators and sponsoring a sport as expensively trivial as F1 is not the kind of message that they would want to send to customers, shareholders or regulators.
If you are Carlos Slim, this is not so much of a problem. The Mexican billionaire, the richest man in the world and owner of Latin American telecoms group America Movil, is a growing force in F1. Telmex, America Movil’s Mexican subsidiary, has sponsored the Sauber team since 2011 and is now rumored to be in the running to replace Vodafone as McLaren’s main sponsor next season (Sergio Perez, who had driven for Sauber, moved to McLaren at the start of this season).
It seems that events in F1 are mirroring shifts in the global balance of power in telecoms. Last year, America Movil attempted to take a controlling stake in Dutch telecoms group KPN. It already has minority stakes in KPN and Telekom Austria.
Scaling back on their global aspirations
The other telecoms operator group still invested in F1 is US telco AT&T. Last year, AT&T ended its sponsorship of the under-performing Williams team. But it stepped back into F1 in the following season in a sponsorship deal with soft drinks firm Red Bull whose lead F1 driver Sebastian Vettel has won the F1 Drivers’ Championship for the last two years.
It is difficult to see precisely how a US-centric telco such as AT&T benefits from sponsoring a sport as global as Formula 1. AT&T is a global player in the business telecoms sector and there could be some brand benefit in supplying technology and communications to the Red Bull team. But perhaps the crucial factor here is that AT&T is doing it just because it can – the US operators AT&T and Verizon are both performing far better financially than their European peers at the moment.
Sponsorship deals in sports like F1 are driven as much by emotional as rational considerations. And European operators are having to behave more rationally and pragmatically now than they have in the past.
Ten years ago Europe’s big four operators had global – or at the very least multi-regional – footprints and aspirations. F1 is arguably the second-best global sponsorship opportunity (after soccer). But these operators are now just as likely (and often more likely) to be looking to dispose of assets rather than acquire new ones. Orange has sold its business in Switzerland and CEO Stephane Richard has acknowledged that he is open to offers for other businesses where Orange is the third or fourth operator.
Considerations about the value of a global branding approach will, undoubtedly, have been a factor in Vodafone’s decision to end its sponsorship deal with McLaren. As Vodafone evolves its brand strategy, we would not be at all surprised to see it reappear in F1. But we would expect it to take more of a market-by-market approach. It is more likely to work with drivers from, or Grand Prix events in, specific countries. In the same way that operators such as O2 have been so successful in extending their brands to music venues and offering, for example, priority-access to tickets, the same could be done in F1.
http://www.telecoms....onsumer-brands/
Hope for a good discussion.
There's a few things to add to the article, like Telefonica was also with Minardi in early 2000s IIRC.
