TOP 50 BRANDS

of all but the top three operators; it is also the only other company in the ranking apart from Vodafone to have a AAA+ rating. And the draw of the Apple brand is

intensifying. In late January the company revealed it sold 37.04 million iPhones in the 14 weeks to the end of December, more than double the number it sold in the year-earlier quarter, while iPad unit sales grew to 15.43 million from 7.3 million. But where Apple has succeeded, others

are struggling. Nokia in particular has seen its brand value nosedive; it lost the top spot in the table this year, sliding to number three behind Apple and Samsung. Similarly, Nokia sold 19.5 million smart- phones in the third quarter of 2011, pushing it into second place in the market behind Samsung, according to Gartner, which tracks device sales to end users. Nonetheless, the company has confi-

dence in the strength of the Nokia brand as it seeks to turn its fortunes around. In May 2011 it abandoned its mobile services brand Ovi in favour of bringing those services under the Nokia umbrella. “By centralising our services identity under one brand, not two, we will reinforce the powerful master brand of Nokia and unify our brand architecture,” said Jerri DeVard, Nokia’s chief marketing officer, at the time. Another struggler Sony Ericsson has

slipped from number seven to eighth in the table, its 2011 brand value and enter- prise value having been restated to correct an over-valuation in 2011. The company is also taking steps to boost its market position, and brand will be key. The part- nership between Sony and Ericsson is in the process of being dissolved, the former having agreed to buy out its partner for €1.05 billion in cash and a cross-licensing deal in October. At the time the compa- nies intimated that the Sony Ericsson brand would be replaced, possibly with something completely new,

but at the

Consumer Electronics Show in Las Vegas in January, Sony unveiled its first handset in more than a decade under its own brand: the Sony Xperia ion. Next in the table comes China’s Huawei,

entering at number seven, while local rival ZTE stands at number 10. Both companies are keen to establish

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themselves as household names in the mobile devices market, having previously focused on selling white label devices. ZTE saw the brand value of its handsets

business more than double to $1.22 billion in 2012 and is making a concerted effort to build its brand in Western Europe in particular. It became the world’s fourth largest handset maker in terms of unit shipments in the third quarter of last year with a 4.7% share, according to Strategy Analytics. It now aims to build up its own brand off the back of that scale. “[We’re working hard to] get the ZTE

brand out there,” said Chris Edwards, European marketing and business devel- opment director at ZTE, speaking at the UK launch of the Microsoft-powered ZTE Tania smartphone last month. “We’ve got the scale, we’ve got the cred- ibility, the industry knows what we’re about,” Edwards said; “[now we need to] get the consumer.” ZTE has also made it clear that it is

willing to invest in building up that brand profile. Late last year it agreed to sponsor the ongoing tour of emerging British rapper Professor Green in order to push the ZTE brand to the youth market in the UK.

The big players in the hardware space

may not have same consumer recognition as the handset makers, but their brands certainly have some pulling power. There was little change in brand value for the top four, Cisco taking the lead with a brand worth $12.87 billion. But fifth- placed Nokia Siemens Networks, whose brand was worth more than that of major rival Alcatel-Lucent in 2011, saw its brand value fall by $1.4 billion. The vendor in November announced

its intention to focus solely on the mobile broadband space, shedding various non- core business units and 17,000 jobs. “The fall in Nokia Siemens’ brand value

relates a drop in revenues and a reduction in brand strength following poor performance,” says Bird. “The JV is preparing for an IPO and any spin-off may well require the new company to require its own brand in the long run,” he says. Although it had a negative impact on

Nokia Siemens’ brand, the decision to focus on one particular area of the indus- try may well have found favour with our friend Aesop. “Please all, and you will please none,” he warned in the 6th century BC. n

EXPLANATION OF METHODOLOGY

The methodology employed in the Brand Finance Telecoms 500 uses a discounted cash flow (DCF) technique to discount estimated future royalties, at an appropriate discount rate, to arrive at a net present value (NPV) of the trademark and associated intellectual property: the brand value. The steps are: 1. Obtain brand-specific financial and revenue data. 2. Model the market to identify market demand and the position of individual brands in the context of all other market competitors. Three forecast periods were used:

l Historical financial results up to 2011. Where 2011 results are not available consensus forecasts are used. l A five-year forecast period (2012-2016), based on three data sources (consensus forecasts, historic growth and GDP growth). l Perpetuity growth, based on a combination of growth expectations (GDP and consensus forecasts). 3. Establish the royalty rate for each brand. This is done by: l Calculating brand strength – on a scale of 0 to 100, according to a number of attributes across three main categories: financial, risk and security, and brand equity. l Use brand strength to determine ßrandßeta® Index score l Apply ßrandßeta® Index score to the royalty rate range to determine the royalty rate for the brand. The royalty rate is determined by a combination of the sector of operation, historic royalties paid in that sector and profitability of the company. 4. Calculate future royalty income stream. 5. Calculate the discount rate specific to each brand, taking account of its size, geographical presence, reputation, gearing and brand rating (see below). 6. Discount future royalty stream (explicit forecast and perpetuity periods) to a net present value – ie: the brand value. Royalty Relief Approach Brand Finance uses the royalty relief methodology that determines the value of the brand in relation to the royalty rate that would be payable for its use were it owned by a third party. The royalty rate is applied to future revenue to determine an earnings stream that is attributable to the brand. The brand earnings stream is then discounted back to a net present value. The royalty relief approach is used for three reasons: it is favoured by tax authorities and the courts because it calculates brand values by reference to documented third-party transactions; it can be done based on publicly available financial information and it is compliant to the requirement under the International Valuation Standards Committee (IVSC) to determine Fair Market Value of brands. Brand Ratings These are calculated using Brand Finance’s ßrandßeta® analysis, which benchmarks the strength, risk and future potential of a brand relative to its competitors on a scale ranging from AAA to D. It is conceptually similar to a credit rating.

The data used to calculate the ratings comes from various sources including Bloomberg, annual reports and Brand Finance research. Valuation Date

All brand values in the report are for the end of the year, 31 December 2011. www.totaltele.com February 2012