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O2's Launch in Spain: How Many Sub-brands is Too Many?

by Philip Kendall | Jun 15, 2018

Telefonica’s unveiled details of its O2 brand launch in Spain this week, positioning as a digital-native sub-brand targeting both mobile and converged users. It is an interesting contrast to another recent sub-brand launch, Verizon’s Visible, which is a low-UX proposition fighting against its low-cost unlimited prepaid rivals such as MetroPCS, Cricket, and Boost Mobile (themselves all operator sub-brands). While Visible is matching competitor pricing and differentiating against the Verizon core brand by stripping down the offer (principally a 5Mbps speed limit), O2 is targeting a higher-end customer base with a 20GB mobile data plan and 100Mbps fiber connection. Deliberately omitting a pay TV element, O2 is targeting communications-only customers who demand a high-quality service but do not look to their service provider for content.

The Spanish market is characterized by both a strong prioritization of convergent offers and by operator sub-brands, particularly targeting the youth market (Vodafone Yu, Orange’s Amena, etc.). Telefonica already has its Tuenti sub-brand and the O2 proposition sits at the top end of Tuenti’s tariff range – a solid high-volume mobile data plan though arguably a more basic fiber option that may need higher-speed layers to really tap into the data hungry youth segment.

While Telefonica can economize with ready-made brand collateral, question marks remain over just how many brands a service provider needs. For example, in the Netherlands, KPN has scaled back significantly on its multi-brand strategy. It will be interesting to watch the dynamics between the Movistar, Tuenti, and O2 brands in their core segments and see if it gives Telefonica any greater ability to flex propositions and stay relevant.

There is certainly a gap in Telefonica’s brand propositions today between the converged Movistar and low-cost Tuenti and its ability to better target a connectivity-centric segment should help to improve churn and correct falling margins as the financials at Orange, Vodafone, and MasMovil continue to improve.
 
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