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Vodafone: Becoming a valuable and recognizable brand ML00001-089/Published 03/2012

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MarketLine Case Study�

Vodafone: Becoming a valuable and recognizable brand�Reference Code: ML00001-089

Publication Date: March 2012

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OVERVIEW Catalyst As early as 2004, Vodafone stated its aim was to be in the top five most valuable brands in the world. By 2011, the telecom giant had achieved this goal through an aggressive sponsorship campaign, a strategy of non-controlled interests

to increase its presence across the globe, and increasing investment in less developed markets.

Summary • Vodafone has emphasized its presence as a major brand through heavy investment in advertising and

sponsorship ventures and being associated with major sporting institutions.

• Vodafone has had a presence in many markets across the world through a strategy of non-controlling interests.

• Vodafone is seeking to consolidate its position as a world-leading brand through market expansion in India and Africa.



TABLE OF CONTENTS Overview ............................................................................................................................................................................. 2�

Catalyst ............................................................................................................................................................................ 2�

Summary ......................................................................................................................................................................... 2�

Analysis ............................................................................................................................................................................... 5�

Key findings ..................................................................................................................................................................... 5�

Superbrand Sponsorship..................................................................................................................................................... 6�

Vodafone has a very visible presence as a result of its sponsorship ventures ................................................................ 6�

Vodafone has been extremely visible through its major sponsorship tie-ups ............................................................... 6�

Vodafone has targeted major sports institutions to enhance its image as a superbrand.............................................. 7�

Vodafone has also been associated with two major Formula 1 teams ......................................................................... 7�

Vodafone’s branding tactic has delivered in terms of greatly expanding the company’s customer base ..................... 8�

Non-Controlled Interests ..................................................................................................................................................... 9�

As well as its visible presence, Vodafone has had success through its non-controlled interests around the world ......... 9�

Non-controlled interests account for 40% of Vodafone’s asset value and has helped the company significantly in its

rise in becoming one of the world’s most valuable brands ........................................................................................... 9�

Verizon impacts heavily on Vodafone’s operating profits ............................................................................................. 9�

Vodafone is moving away from its model of non-controlled interests ......................................................................... 10�

Expansion Markets ............................................................................................................................................................ 11�

Vodafone is seeking to consolidate its position as a world-leading brand through market expansion in India and Africa

...................................................................................................................................................................................... 11�

Vodafone is the second largest mobile network operator in India .............................................................................. 11�

Vodafone has a major presence in Africa via the continent's leading network ........................................................... 12�

Vodafone’s other major venture in Africa is in Egypt, where the company has approximately 31.8 million customers

................................................................................................................................................................................... 12�

Conclusions ....................................................................................................................................................................... 14�

Superbrand sponsorship has been directly responsible for Vodafone’s status as Britain’s most valuable brand .......... 14�

The cost-cutting venture has led to Vodafone abandoning its widespread non-controlled interests .............................. 14�

Despite Vodafone’s continued success outside of Europe and the US, the company still has much potential for growth

...................................................................................................................................................................................... 14�

Appendix ........................................................................................................................................................................... 16�

Sources ......................................................................................................................................................................... 16�

Further Reading ............................................................................................................................................................. 16�

Ask the analyst .............................................................................................................................................................. 17�

About MarketLine .......................................................................................................................................................... 17�



Disclaimer ...................................................................................................................................................................... 17�



TABLE OF FIGURES

Figure 1: Vodafone’s superbrand sponsorships .................................................................................................................. 6�

Figure 3: Verizon Wireless total contribution to Vodafone operating profit .......................................................................... 9�

Figure 4: Vodacom’s changing presence as a result of Vodafone’s increase holding ....................................................... 10�

Figure 5: Market share for mobile phone networks in India ............................................................................................... 11�

Figure 6: Total mobile phone market penetration .............................................................................................................. 15�



ANALYSIS Key findings As early as 2004, Vodafone stated its aim was to be in the top five most valuable brands in the world. By 2011, the telecom giant had achieved this goal through an aggressive sponsorship campaign, a strategy of non-controlled interests

to increase its presence across the globe, and increasing investment in less developed markets.

In 2010 Vodafone replaced HSBC as the most valuable brand in Britain in terms of value. In 2011, the telecoms giant

solidified its position as the leading UK brand and was also the leading telecoms brand in the worldwide. More importantly, Vodafone was named as the fifth most valuable brand in the world. Its brand value has jumped from

£17.03bn in 2010 to £17.93bn in 2011. It is estimated that its brand value contributes 16% of the company’s total value.

Vodafone's standing as an attractive proposition for investors has been well documented in the uncertain economic climate as it offers attractive dividends for shareholders.



SUPERBRAND SPONSORSHIP

Vodafone has a very visible presence as a result of its sponsorship ventures

Vodafone has been extremely visible through its major sponsorship tie-ups One of the major reasons for the success of Vodafone has been its very visible advertising campaigns. The telecoms

giant has been a major sponsor of several major institutions over the last decade, which has increased its profile. Sponsorship of leading institutions has been a very important part of Vodafone's corporate and marketing strategies, which are designed to make the company one of the world's best-known brands.

Figure 1: Vodafone’s superbrand sponsorships

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Vodafone has targeted major sports institutions to enhance its image as a superbrand Vodafone’s first major tie-up came in 1996 when it joined forces with the England and Wales Cricket Board (ECB) to become the main sponsor of the England cricket team. This deal lasted a total of 14 years, with the Vodafone logo visible

on the England training and playing kits. Vodafone’s sponsorship coincided with a very successful period for the England cricket team on the field and the surge in popularity that accompanied England’s successful Ashes series in 2005, which

gained much publicity. Vodafone also offered exclusive 3G coverage of England cricket matches, allowing customers to watch video highlights of England’s home matches on their mobile phones. With the increasing popularity of the England

cricket team as a result of their success, this opened up a potentially new market for the telecoms giant. In 2010, Vodafone pulled out of its agreement with the ECB due to a commitment to cut marketing costs in the wake of the post-recession economic climate.

In 2000, Vodafone became the major sponsor of the world’s most recognizable soccer team, Manchester United. The terms of the sponsorship saw the Vodafone logo visible on the playing kit. It was widely acknowledged that from a brand

awareness point of view, there was nobody better for Vodafone to be sponsoring.

The sponsorship comprised a £30m, four-year deal, and offered Vodafone access to Manchester United's broad fan

base, both domestically and overseas, especially in the Far East where Vodafone sought to expand. Such dual branding, particularly with a renowned sporting team, exposes the Vodafone name in countries where it may not have been previously known.

Manchester United supporters were promised special deals on mobile phone and wireless internet services, and access to club news "anywhere, anytime". The deal continued until 2006 when Vodafone decided to abandon the relationship in

order to become the telecommunications partner of the Champions League soccer tournament, which allowed the telecoms giant to widen its brand image across Europe. The partnership also allowed Vodafone (as an official partner

and the official network of the Champions League) to provide services such as exclusive goal alerts and video highlights packages to customers. This was a clear indication of Vodafone’s aim of reaching more potential customers. With the Champions League hosting many of the world’s major football clubs with huge fan bases, Vodafone had a massive

potential market at its disposal.

Vodafone's partnership with the Champions League came to an end after the 2008-09 season, beyond which point, rival

broadcasters could offer similar deals, enabling other mobile operators to become involved and associate their brands with the Champions League.

Vodafone has also been associated with two major Formula 1 teams In addition to its partnerships in soccer, Vodafone has had a very visible presence in the premier motor racing event in the world, Formula 1. Vodafone’s association with Ferrari coincided with a dominant period for the team in the Formula 1

competition, before it switched from Ferrari to its rival McLaren Mercedes. This gave Vodafone an even greater presence, as the team subsequently became known as Vodafone McLaren Mercedes.

Vodafone's sponsorship of Ferrari and Mercedes gave the company unprecedented media coverage. The high profile exposure of Formula 1, which attracts an audience of 360 million people worldwide, is priceless for Vodafone.



Peter Bamford, Vodafone's chief marketing officer, said: "As title sponsor of the Vodafone McLaren Mercedes team, it raises our association with Formula 1 to the ultimate level."

He added: "The new agreement delivers a fantastic marketing platform: the associative rights we acquire as a result of this new sponsorship provide us with additional opportunities to continue to raise brand awareness, build brand

preference, and drive revenue."

Vodafone’s branding tactic has delivered in terms of greatly expanding the company’s customer base As Error! Reference source not found. shows, the aggressive sponsorship tactic that Vodafone has pursued has

contributed a massive increase in the number of Vodafone customers. Between 2004 and 2011, Vodafone managed to expand its customer base by a massive 237.5% to reach 370.9 million mobile phone customers as of March 2011.

Figure 2: Vodafone’s global customer base (millions) 2004-2011

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NON-CONTROLLED INTERESTS

As well as its visible presence, Vodafone has had success through its non-controlled interests around the world

Non-controlled interests account for 40% of Vodafone’s asset value and has helped the company significantly in its rise in becoming one of the world’s most valuable brands At the forefront of this is Verizon Wireless, in which Vodafone has a 45% equity interest. Verizon is the market leader in the US and has produced positive results, recording a service revenue growth of 5.8% in 2011. Vodafone’s investment

into Verizon is also beginning to produce dividends for the telecoms giant’s shareholders, as in 2011 it received its first dividend from the American company since 2005. This had been a major sticking point for Vodafone, as Verizon decided to suspend the dividend from 2005 to focus on paying down debt, a move that had been seen as a pressurizing tactic by

Verizon to force Vodafone out of the company. Verizon's decision to pay Vodafone a $10bn dividend in 2011 is a step in the right direction for the relationship and adds to Vodafone’s value as a brand to invest in.

Verizon impacts heavily on Vodafone’s operating profits The importance of Verizon to Vodafone on a global scale cannot be underestimated, as in 2011 the American telecoms giant accounted for 39% of Vodafone’s total operating profit, up from 36% in 2010. As Figure 2 shows, since 2004, when

Vodafone launched its aim of becoming a world leading brand, Verizon has contributed a greater percentage of operating profit each year for the company.

Figure 2: Verizon Wireless total contribution to Vodafone operating profit

� �� Vodafone Annual Reports 2004-2011 ��



As Vodafone’s domestic market of the UK has reached maturity, the company has had to branch out internationally to achieve greater market share and attract more customers. Vodafone has done this particularly well, not only in the US

through Verizon but also in the emerging consumer markets of Africa and India, where the company has operated its dual ownership that has been so successful in the US.

Vodafone is moving away from its model of non-controlled interests The model of non-controlled interests has served Vodafone well, as it has allowed the telecoms giant to have a presence

in many markets across the globe. Recent indications suggest that Vodafone is moving away from this model through either increasing its share to a controlling interest or by selling its stakes in various ventures.

Among these has been Bharti Airtel in India, which as the market leader is currently Vodafone’s premier competitor within

the country. Vodafone had sold its 5.8% stake in Bharti Airtel, retaining a 4.4% indirect interest. Further to this, in September 2010 Vodafone sold its 3.2% interest in China Mobile Limited for £4.3bn. This was followed in April 2011 with

the announcement that Vodafone was to sell its 44% interest in SFR, the second largest mobile operator in France, for £6.8bn.

In June 2011, Vodafone agreed to sell its entire 24.4% interest in Polkomtel which is the second leading telecommunications operator in Poland to Spartan Capital Holdings, an investment vehicle controlled by a Polish businessman. The sale is expected to raise £815m for Vodafone.

At the other end of the spectrum, Vodafone has increased its holding in various operations, which has also taken it from having a non-controlled interest to having a majority holding, and therefore a controlling interest. This can be seen most

visibly in India and Africa, where Vodafone's presence has become more visible and in-line with the parent company, both through its holding and graphically.

.

Figure 3: Vodacom’s changing presence as a result of Vodafone’s increase holding

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EXPANSION MARKETS

Vodafone is seeking to consolidate its position as a world-leading brand through market expansion in India and Africa

Vodafone is the second largest mobile network operator in India

In the rapidly expanding consumer market of India, Vodafone India is the second largest mobile network operator after Bharti Airtel in terms of customer numbers. Vodafone has performed well in the highly competitive Indian market where it has 14 different competitors. Vodafone’s reputation as a valuable brand is also embedded within the country, as a brand

trust report ranked the company as the 16th most trusted within India. Vodafone has continued to invest heavily in India in recent times, the most visible example of which came in July 2011 when Vodafone Group agreed terms for the buy-out of

its partner Essar from its Indian mobile phone business. Vodafone paid $5.46bn to buy Essar out of its 33% stake in the Indian subsidiary. Vodafone now owns 74% of the Indian business, while the other 26% is owned by Indian investors, in

compliance with Indian law. The buyout has seen Vodafone expand its customer base to 148.6 million. This gives Vodafone a market share of 22.93% of the total 648 million Indian mobile phone subscribers.

Figure 4: Market share for mobile phone networks in India

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In 2011, Vodafone India also launched 3G services in the country, and the company has drawn up a plan to invest up to

$500m within two years on its 3G networks in India.



Vodafone has a major presence in Africa via the continent's leading network

Vodafone is heavily involved in the African telecoms market, mainly through its holding in the pan-African

telecommunications company Vodacom. Vodacom was the first cellular network in South Africa and as such is somewhat of a trendsetter. This has been seen through technological innovations, as Vodacom was the first telecoms provider to

deploy a 3G or UMTS network in South Africa, and is currently offering HSPA+ 21.1 Mbit/s and HSUPA (2100 MHz). Vodafone has adopted a similar model of dual ownership in Africa by entering into a 50:50 partnership with the South

African telecommunication giant Telekom. In 2008, Vodafone increased its holding in Vodacom to 65%, with the remaining 35% listed by Telekom on the Johannesburg stock exchange. At present, Vodafone’s holding in the company stands at 66%. Vodacom is the leading cellular network in South Africa with an estimated market share of almost 60%.

The company has expanded its reach outside of South Africa by providing GSM service customers in Tanzania, Lesotho, Mozambique, and the Democratic Republic of the Congo.

Table 1: Vodacom customers throughout Africa

Total Customers

South Africa 26.5

Tanzania 8.9

Democratic Republic of Congo 4.2

Mozambique 3.1

Lesotho 0.8

� �� Vodafone Annual Report 2011 ��

Vodacom has taken after its parent company by launching a major sponsorship campaign for brand recognition within South Africa.

Vodacom’s presence is seen across various South African sports, including provincial rugby union where the company sponsors the Pretoria-based Vodacom Blue Bulls. In soccer, it sponsors two clubs in the Premier Soccer League –

Kaizer Chiefs and Orlando Pirates – and is also the principal sponsor of the South African Football Association and the national teams, known as Bafana Bafana (men) and Amajita (under 20s). Vodacom also owns the naming rights to several stadiums, among them Vodacom Park in Bloemfontein and Loftus Versfeld in Pretoria.

Vodafone’s other major venture in Africa is in Egypt, where the company has approximately 31.8 million customers

Vodafone entered the Egyptian market in 1998 under the banner of ClickGSM. In 2006, the company announced a major deal with Telecom Egypt which increased its holding in the now-named Vodafone Egypt to 54%. At present, Vodafone Egypt Telecommunications is 54% owned by Vodafone Plc and is the largest mobile network operator in Egypt. In a

highly concentrated market, Vodafone is only one of three players. Again, sponsorship is a tactic employed in Egypt, where Vodafone sponsors the country’s most popular sports institution the Al Ahly Club, named by the Confederation of

African Football in 2000 as the African Club of the Century.



Although Vodafone’s position in Egypt may seem to be secure, it remains to be seen how the company will fare in the aftermath of the Egyptian Revolution, where the company was accused of promoting a pro-government message. It is

possible that Vodafone may be part of the collateral damage in post-Mubarak Egypt.

Vodafone’s abandoning of its non-controlled interests can be seen as a consolidating venture, as it has used the funds

raised to pay down debt and to also buy back shares. With its aim of becoming a world-leading brand achieved, the telecoms giant is now fortifying its financial position in an uncertain economic world.



CONCLUSIONS

Superbrand sponsorship has been directly responsible for Vodafone’s status as Britain’s most valuable brand Vodafone has attributed its tactic of dual sponsorship, which currently comprises of Formula 1 and London Fashion Week, as a tactic to ensure positive brand perceptions and a means of attracting and retaining customers.

Vodafone’s sponsorship has not simply been a case of increasing its visible presence. The telecoms giant has established tangible links between the products it offers and the organizations its sponsors. For example, McLaren

Mercedes fans can subscribe to MMS news services and chat forums, download games, ringtones, wallpapers and other images, and play in quiz competitions. Similarly, the Vodafone Race Track racing simulator allows customers to compete

in a racing simulator. The company explains these partnerships with the expression "It's no good having the toys if you don't invest in the batteries to make them work."

Through its present sponsorship tie-ups with Formula 1 and London Fashion Week, Vodafone has deliberately attempted

to perceive its brand as high end. With London Fashion Week seen as the pinnacle in fashion and Formula 1 likewise in technology, Vodafone’s sponsorship of these events places it in rarefied company, and gives a perception of the

company being a trendsetter among its competitors. This has been done in a culture where, like utilities, mobile phone networks are quickly becoming commoditized. The general perception is that Vodafone’s sponsorship of these flagship

events and brands is positive. Vodafone believes that its sponsees act as ambassadors for the Vodafone brand, as the company is fond of stating "This brand is all about being dependable, empathetic, innovative, can-do, and full of vitality and life."

It remains to be seen how Vodafone adapts its strategy in line with the massive cost-cutting venture announced at the turn of the recession. This cost-cutting has also been aimed at the company’s marketing operations, with job cuts of

around 10%. The challenge for Vodafone is to retain high brand value on a much tighter budget.

The cost-cutting venture has led to Vodafone abandoning its widespread non-controlled interests Vodafone’s abandonment of its non-controlled interests can be seen as a consolidating venture, as it has used the funds raised to pay down debt and to also buy back shares. With its aim of becoming a world-leading recognized brand

achieved, the telecoms giant is now fortifying its financial position in an uncertain economic world.

Despite Vodafone’s continued success outside of Europe and the US, the company still has much potential for growth As Figure 5 shows, the mobile phone markets of Africa, India, and other Asia Pacific markets, although expanding rapidly still lag behind those of the advanced economies of the West. This provides Vodafone with the opportunity for expansion

within these markets; an opportunity that it will need to take advantage of if it wants to continue expanding and to maintain its status as one of the world’s most valuable brands.



Figure 5: Total mobile phone market penetration

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APPENDIX Sources Vodafone Annual Reports 2000–11

Further reading Company Profile: Vodafone Group Public Limited, February 10, 2012

Industry Profile: Fixed Lines Telecoms in the United Kingdom, 0183-2233-2012



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