Can Goodby Rescue Struggling Sprint?

As Brand Value Tumbles, Telecom Can't Keep Up With AT&T, Verizon

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Can Sprint be saved? Not only is the third-largest telecom losing ground to strong rivals gaining subscribers far faster, it's also losing brand value --
all issues that will need to be addressed by Goodby Silverstein & Partners, the new agency on the $1.2 billion account. And while there's a lot of debate as to exactly what's ailing Sprint, some experts are convinced it's suffering a post-merger hangover because it didn't dump the Nextel name.

"AT&T made some very hard decisions" to jettison brand names including Cingular Wireless, said Karl Barnhart, managing director, CoreBrand. "They bit the bullet and they're doing it." Sprint, in holding onto the two brands, is trying to have its cake and eat it too. He advises: "Call it Sprint and call it a day."

Lagging behind competitors
CoreBrand, which measures brand value based on percentage of market capitalization, found that AT&T's brand jumped in value from the first quarter of 2006 through the end of the year, to $19 billion from $15 billion, placing it with Coke, Johnson & Johnson, FedEx and Harley Davidson in the brand stratosphere. Verizon also saw a jump to $16 billion from $14 billion, while Sprint Nextel's value dropped to $6 billion from $8.8 billion.

But its problems lie deeper than its name. SprintNextel is the nation's third-largest carrier, with 53.1 million subscribers. AT&T has 61 million, and Verizon Wireless has 59 million, according to company reports from 2006's fourth quarter. While Cingular added 2.3 million subscribers, and Verizon Wireless about the same number, Sprint added only 1.1 million, about half as many as the other two.

"They are performing at half the level of Verizon and AT&T -- very, very poor on a key metric," said Mark Winther, group VP-telecommunications, IDC. Sprint "may lose more ground because AT&T and Verizon Wireless are very aggressive and keen on stealing business from Sprint," he added. Sprint lost some 306,000 customers, most of them the more desirable post-paid customers with contracts.

Source: CoreBrand


Showing off backbone
As part of its strategy, Sprint has decided to emphasize its wholesale business -- that is, providing the backbone for other wireless companies to run on its network. Those brands include Virgin Mobile, Qwest and Pivot, a brand from a venture of Sprint and cable companies including Comcast Corp., Time Warner Cable, Cox Communications and Advance/Newhouse Communications. How well those offerings will do in the marketplace is another question. "Who knows?" said Mr. Winther. "It's a jump ball."

Still, Sprint and Nextel have solid assets, with Nextel's average revenue per user, another key telecom metric, in the low $70s, compared with $44 for Verizon Wireless. Sprint also has been a leader in data applications, providing services such as TV and internet access.

Perhaps those assets will boost a brand Ben Bajarin, analyst and strategist with Creative Strategies, Campbell, Calif., said is "not in the top three of any high-school or college kid," according to his research. Sprint is trying to do battle with the coming Apple iPhone via Samsung Upstage, a two-sided device that is a phone on one side and a music player on the other.

"It's the vision of [Sprint Chairman-CEO Gary] Forsee to be an entertainment company," said Roger Entner, senior VP-communications sector, IAG Research. To do so, Sprint has decided to jump to WiFi while competing carriers largely are one step behind. "If Forsee is allowed to continue, they could be driving the train," said Robert Rosenberg, president, Insight Research Corp., a Boonton, N.J., telecommunication-analysis firm.

Hands-on with marketing
Meanwhile, Mr. Forsee, who attended final presentations in the process of selecting Goodby, presumably will help craft the agency's marketing strategy.

The win represents one of Goodby's biggest accounts, and one of the biggest marketing challenges the agency renowned for its creative has ever faced. While details of the creative are in development, the work is likely to be uplifting. Mr. Entner said he expects "Power Up" will disappear and Nextel's yellow logo may be eliminated. At a time when both major competitors are going for a reliable network message, Mr. Entner said an ad message "saying Sprint having the best network won't resonate with many people." Instead, he said, advertising should "show how this makes a difference in my life."

Jeff Kagan, an independent telecom analyst, said he is confident Sprint will come around. "It's an easy fix if they can come up with the right message," he said.
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