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Tue, Nov 30, 2004 - Page 12 News List

US mobile phone operators mull branded handsets

MOBILE MARKET Some companies are considering offering more cellphones bearing their name in a bid to leverage brand loyalty amid a saturated market

NY TIMES NEWS SERVICE , NEW YORK

US cellphone operators, hoping to bolster their brands, are flirting with selling handsets that feature their names exclusively.

The effort, which follows a trend in Asia and Europe, means the companies may eventually sell more models that do not include the names of popular manufacturers. Last month, T-Mobile released a device, the Sidekick, that sends and receives e-mail messages and is made by Sharp but it features only the T-Mobile brand. In August, Sprint started selling a mobile phone built by Pantech, a Korean company, without the maker's name.

More of these handsets are likely to come, analysts say, because US cellphone carriers want to better manage and tailor features and services on the phones. And by working directly with "no name" manufacturers in Taiwan, South Korea and elsewhere, they might also gain leverage over phone makers and potentially reduce their costs.

The operators "are looking to control the hearts and minds of the end user," said John Jackson, an analyst with the Yankee Group, a market research firm. "It's an exercise taking place worldwide as operators look to build consumer affinity."

Still, the strategy could threaten the long and fruitful, but in some ways fragile, relationship of phone operators and makers. The five largest US carriers buy about US$12 billion a year in handsets from the manufacturers, Jackson said, and the two sides have an interest in keeping each other alive.

Consumers know the manufacturers' brands, and studies show they choose a phone based partly on who makes it. The biggest makers, like Motorola, Nokia and Kyocera, spend heavily to market their phones. They also develop features for their phones that the operators would be hard pressed to replicate.

While Asian carriers in particular have eliminated the brand names of phone makers and use low-cost manufacturers, similar efforts in the US are only starting. With the American market reaching saturation, competition to retain customers has intensified so operators are trying to build brand loyalty.

About a year and a half ago, Cingular Wireless, the largest US cellular phone company, began internal discussions about whether to produce its own branded phone, said a spokesman, Clay Owen. The company, he said, wanted to create lower-cost phones using off-brand manufacturers and make Cingular's name more prominent.

"If you've got any brand loyalty you can leverage, that's a factor in creating phones with exclusive brands," he said.

In the end, Cingular's research showed that consumers continued to buy phones based on the reputation of the manufacturer, Owen said, though he added that Cingular continues to consider building phones featuring its brand exclusively.

Sprint generally sells phones that share the brand with manufacturers like Samsung and Sanyo. However, last August, the company began selling a phone made by Audiovox that bears only the Sprint brand.

John Garcia, Sprint's vice president for sales and distribution, said the handset was an aberration, not a sign of things to come.

"That one must have slipped out," he said. Sprint, he said, likes to keep two brand names on the phone, to appeal to consumers who like a specific brand and to give the manufacturer an incentive to built the best phone.

Still, he said, the dynamics have shifted considerably between operators and makers. Until a few years ago, he said, phone operators accepted more generic models. But as carriers have grown and defined their strategies more, they are now dictating more terms.

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