06 July 2009

Creation of an investor brand


Businesses depend on customers. Hence, it is important to have a corporate name that synchronises with a consumer brand to make the company recognisable both as a product and a business. For instance, listed company Proton Holdings Bhd carries the same brand identity as its products.

On the other hand, some companies do not have the same corporate brand as the products it carries. Take Axiata Group Bhd, formerly known as TM International Bhd. It is currently undergoing a major rebranding exercise to profile itself as a growth company and thus, different from its former entity as part of Telekom Malaysia Bhd. The new Axiata brand does not represent any product that the group supplies.

Axiata has stakes in a number of operating companies in 10 different countries. Each company has a number of brands for the various products and services it offers. Although fragmented, there is a substantial measure of brand equity under different brand names held by the various companies, manifested in the 90 million customers the group has.

The question then arises: is it worthwhile for an investment holding company to promote its own corporate brand, which is not identifiable with any of its consumer products?

Some may argue that, rather than create a new brand for the holding company, it would make more sense to develop the consumer brands under the operating companies, as the latter is where customers can subscribe for services or buy products. After all, the holding company does not have any direct customers.

However, if the holding company is a public-listed company, like Axiata, it does have “customers” of a different kind. They are the members of the investment and financial community comprising shareholders, retail investors, research analysts, portfolio managers, private equity managers, institutional fund managers, bond market investors and intermediaries, and bankers. In addition, there are the financial media, ratings agencies and market commentators, operating locally or internationally.

In such cases, there is merit in an investment holding company choosing to develop an investor brand targeted at the investment and financial community, as opposed to a consumer brand.

A strong investor brand increases the options that a listed holding company has and its success rate in raising funds through equity or debt. The capital obtained can be channeled to the operating companies to support the specific expansion strategies and growth plans in the various consumer markets. The holding company will be able to optimise its capital base to support the group’s total operations.

The operating companies themselves may raise funds, supported by a strong parent company. In Axiata's case, a few of its operating companies are listed on the stock exchanges of their respective countries.

Axiata has already undergone a massive fundraising exercise with its recent RM5.25 billion rights issue. Although it may seem that its rebranding is directly linked to the rights issue, this was not the case as the rights issue exercise was initiated before the new corporate identity was unveiled. The rights issue was completed successfully due largely to the strong support given by Axiata’s major shareholders.

Fundraising is only one of a number of reasons for Axiata’s rebranding. What it is looking at are the long-term benefits of positioning itself as an innovator and leader in mobile telecommunications, focusing specifically on the burgeoning Asia market.

Much of the group’s business is in high-growth emerging markets covering a substantial geographical footprint, where there is relatively low penetration of mobile telecommunications subscription. Therefore, there are tremendous opportunities that can be exploited through the collective strengths and synergies within the group.

Although there may be inherent volatility in the mobile telecommunications industry and specific challenges in the operating environment in the different countries, Axiata’s investor brand aims to communicate the group’s long-term prospects to the investment and financial community. However, for the investors to better understand the investment merits of the group, the rebranding exercise will have to be accompanied by heightened levels of corporate disclosure, management guidance and investor engagement. The investor brand has to go beyond the visual, psychological and symbolic aspects of the corporate brand.

Axiata’s efforts in communicating its investor brand may not yield immediate results, but in time, market participants will come to understand the investment value proposition that the new brand stands for. One of its desired goals is to see that, in the long run, there will be a higher level of confidence and acceptance of Axiata among investors inside and outside of Malaysia. Also, its long-term objective is to form a broader base of shareholders, command a premium on its share price and have access to lower cost funding in the future.

As it is, the operating companies are retaining their own brands, but they have begun adopting the Axiata icon in their own logos. It is possible that a strong corporate brand may eventually become a consumer brand, which will be entrenched in the minds of both investors and consumers as representing a certain quality and aspiration. Meanwhile, Axiata’s corporate rebranding exercise is a purposeful endeavour and the first step in the right direction towards creating a compelling investor brand.

This article was published in The Edge Malaysia on 7 July 2009.

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