22 Feb 2014

Telecom's $20m re-brand sparks row

7:00 pm on 22 February 2014

Telecom's chief executive Simon Moutter says spending $20 million in the next six months to ditch one of the most recognised brands in the country will be money well spent.

The company's profits are falling and sales are dropping faster than it can cut costs, mainly by laying off staff.

Telecom's move to change its name to Spark comes after it has just spent $5 million on refreshing the Telecom brand.

Branding specialists are divided over Telecom's decision to drop its name.

Malcom Wright, a professor of marketing at Massey University, says the Telecom brand has a lot of value but the name is outdated, generic, and has some negative associations.

But Auckland University marketing lecturer Mike Lee says Telecom's long brand history is its strength, and changing the name is a big gamble.

Mr Moutter says his company is no longer about the humble phone line and it's time for a name which represents the future, not the past, and Spark better reflects the company's new direction.

He says it is a word that has life and energy, links to the creativity of New Zealanders, the modern technological economy and the company's desire to enable its customers to thrive.

"Spark's a fantastic name, it's a word with life, energy, it's an in-the-moment word," Mr Moutter told Morning Report.

He says the Telecom name was born in 1987 when the company was a copper wires business.

He says the name change has nothing to do with trying to improve Telecom's image and the company will continue to use its current logo.

Telecom's flat first-half net profit of $167 million was achieved through cost-cutting in the face of falling sales.

However, sales at the phone company are falling faster than it can cut costs.

Telecom says sales fell 3 percent in the six months to December, largely because fixed-line rentals dropped 9.2 percent offset by a 5.8 percent increase in mobile sales.

Operating costs fell 2.1 percent largely due to labour cost savings.

That means the underlying profit figures are considerably worse - operating earnings from continuing operations were down 5.8 percent and net earnings from ongoing businesses down 12.5 percent.