Sprint Talks With T-Mobile Give Chance to Ditch Brand Stigma

Jun 10, 2014 6:02 pm ET

(Updates stock prices in eighth paragraph.)

June 10 (Bloomberg) -- Sprint Corp. and T-Mobile US Inc., through their proposed merger, gain a chance to ditch baggage associated with Sprint’s past stumbles while conveying the message that they’re focused on growth.

It’s all in a name.

Deals are one of the top reasons companies change their monikers, said Tim Calkins, a marketing and branding professor at Northwestern University’s Kellogg School of Management. SBC Communications took AT&T’s more widely recognizable name after acquiring the company in 2005. And in 2000, Bell Atlantic Corp. and Vodafone AirTouch Plc abandoned stodgier corporate brands to christen their wireless venture Verizon -- a word that never existed before.

A combined Sprint and T-Mobile could choose to stick with one of the current brands, mesh them together to make a word like Sprobile or SprinT-Mobile, or start fresh. T-Mobile is the world’s 27th-most-valuable brand, while Sprint doesn’t even make the top 100, according to Millward Brown Optimor, a brand consulting firm owned by WPP Plc. As Sprint has lost millions of customers in the last year, T-Mobile added more subscribers last quarter than larger rivals AT&T Inc. and Verizon Communications Inc. combined.

“The most important thing is to find a name that best competes with AT&T and Verizon,” said Laura Ries, a brand consultant who cofounded marketing strategy firm Ries & Ries in Atlanta. “If I had to choose, I’d go with T-Mobile as the name because it is fresher and it has mobile in the name.”

Nearing Agreement

Parent companies SoftBank Corp. of Tokyo and Germany’s Deutsche Telekom AG are nearing an agreement on the price and capital structure of the deal, yet preparations for scrutiny from skeptical U.S. regulators and details on management still need to be ironed out, people with knowledge of the discussions said last week. So, stamping a brand on the pairing isn’t front- and-center yet, according to a person familiar with the matter who asked not to be identified because the negotiations are private.

Bill White, a Sprint spokesman, and Anne Marshall, a T- Mobile spokeswoman, both declined to comment.

T-Mobile shares closed at $33.34 today, down 2.7 percent since Bloomberg News reported that the companies were coming closer to a deal at almost $40 a share. Sprint has fallen 6 percent.

“Branding will be a huge question if these two firms come together,” Calkins said. “They need to understand what Sprint means to people and what T-Mobile means.”

There isn’t a hard and fast rule on how to do this the right way, said Oscar Yuan, a brand strategist with Millward Brown Optimor.

Losing Users

“The most common method is to mash names together, but that sometimes loses what’s special about each brand,” Yuan said. “In Sprint’s case, they might want to leave some of that heritage behind.”

Sprint, the third-largest U.S. wireless provider, has lagged behind its peers on network upgrades and lost more than 2.5 million customers in the past five quarters.

By contrast, T-Mobile added 1.3 million monthly subscribers just last quarter, compared with AT&T and Verizon signing up 1.16 million combined. T-Mobile, No. 4 in the industry, and its self-styled rebel Chief Executive Officer John Legere have tried to rejuvenate the carrier by dropping the standard two-year contracts, financing phone purchases and offering to reimburse early termination penalties for customers who switch service to join T-Mobile.

‘More International’

Changing the enlarged company’s name could affect sponsorships such as the Nascar Sprint Cup Series, the Sprint Center in Kansas City and T-Mobile’s status as the official wireless sponsor of Major League Baseball.

Interviewed on the street in New York, T-Mobile customer Naresh Biala, 63, said he thinks the combined company should keep the T-Mobile name. While the company that Sprint is negotiating to buy only operates in the U.S., parent Deutsche Telekom also sells the T-Mobile brand in Europe.

“T-Mobile is more international, much more than Sprint,” said Biala, a New York resident and retired investment banker who switched to T-Mobile from AT&T six months ago. After a short stint as an AT&T customer, he said he switched back to T-Mobile for a better plan.

For Sprint customer Alan Leventhal, 76, the choice is simple.

‘Un-Carrier’ Campaign

“T-Mobile has a bad reputation, and Sprint has been very good,” said Leventhal, a New York resident. Leventhal said he thinks that Sprint has the best customer service, which has kept him a loyal subscriber for 14 years. “Calling the company T- Mobile would probably be the worst move.”

While T-Mobile’s brand outranks Sprint’s, it’s still far behind its larger competitors. AT&T is the eighth-most-valuable global brand and Verizon is 11th, according to Millward Brown Optimor’s ranking.

T-Mobile has been the fastest-growing carrier of late, yet the company only started its “un-carrier” marketing initiatives a little more than a year ago when it was still reeling from AT&T’s failed attempt to buy the company.

T-Mobile also has been sacrificing profits to draw in subscribers. T-Mobile has lost money for four straight quarters, while Sprint posted a net loss in 25 of the last 26 quarters.

“T-Mobile and Sprint have a lot of baggage, so creating a new name may be the way to go,” Calkins said.

Mondelez, Allegis

Not all invented names have been winners. In the 1980s, UAL Corp., the parent of United Airlines, dropped its one-year flirtation with the name Allegis Corp. after a rash of jokes by TV talk-show host Johnny Carson.

When Kraft Foods Inc. changed its name in 2012 to Mondelez International Inc. -- derived from expressions for “world” and “delicious” -- brand experts called the moniker confusing. The company has stuck with it.

And not all rebrandings have gone smoothly. Macy’s Inc., then operating as Federated Department Stores, enraged Chicago when it acquired the Marshall Field’s stores in 2005 and renamed the city’s iconic downtown department story Macy’s.

“There can be a real downside on branding decisions,” Calkins said. “You could lose a portion of your consumers as you move from one brand to another. When Macy’s took over Marshall Field’s and abruptly changed the name, there were boycotts in Chicago.”

--With assistance from Matt Townsend and Crayton Harrison in New York.