AT&T Deal Signals Spending Falloff

Consolidations Wane, Triggering Slowdown in $4 Billion Ad Category

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SAN FRANCISCO ( -- The freewheeling days of billion-dollar telecom-marketing budgets are coming to an end.

Fast-and-furious mergers have fueled enormous marketing budgets as the category weighed in with some $4 billion in measured spending alone last year. But with consolidation tapping out in the category, once the latest combination -- AT&T and BellSouth -- is consummated, the gush of marketing money is expected to slow.

It's no wonder consumers needed an advertising scorecard to tell who's who in the sector. SBC and BellSouth spent $200 million in 2001 to launch their 60/40 joint venture, Cingular Wireless. Then Cingular acquired AT&T Wireless in 2004 and laid out more than $300 million to eliminate the AT&T moniker. But after the AT&T acquisition of BellSouth wins approval, expected in 2007, the Cingular brand will be laid to rest -- and with yet another ad campaign it will become AT&T Wireless.

AT&T Corp., previously SBC Communications, meanwhile, is in the midst of washing away the SBC name with an ad campaign estimated at $1 billion.

"I pity the telecom consumers of America," said Anthony Shore, creative director, Landor, San Francisco. "They have to keep track of all these brand changes."

But wireless spending is already beginning to slow. Last year, measured telecommunications ad spending for the top seven cellphone carriers in 2005 dropped to $4 billion from $4.7 billion in 2004, or 14.6%, according to Advertising Age and TNS Media Intelligence.

Much of the falloff was the result of last year's merger of Sprint Corp. with Nextel Communications. In 2004, as two separate companies, Sprint and Nextel spent a combined $1.2 billion in measured media. Post-merger in 2004, the combined company laid out much less, $886 million.

Similarly, a number of analysts expect AT&T to save marketing money after the ad budget for BellSouth, $128 million last year, is rolled into the AT&T brand. "The two companies expect to move from three brands currently [AT&T, BellSouth and Cingular] to one brand afterwards," said Lauren Fine, Merrill Lynch analyst. Other analysts were counting on marketing savings of more than $500 million.

Cingular spokesman Mark Siegel said the merger would create "efficiencies" in marketing outlays, but said it was too early to comment on marketing or agency roster changes. "There's a lot we simply don't know," he said. However, in announcing the merger, AT&T said what is Cingular today would remain an independent entity.

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