Justice Dept. Gives Approval to AT&T-BellSouth Acquisition

FCC Decision Last Hurdle Before Fate of $3 Billion in Media Spending Is Clear

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SAN FRANCISCO (AdAge.com) -- AT&T's acquisition of BellSouth Corp. -- and with it potentially significant repercussions for more than $3 billion in media spending -- moved one step closer today after the Justice Department approved the deal. Final regulatory approval is expected tomorrow at a Federal Communications Commission meeting.
The Department of Justice concluded that 'this transaction is not likely to harm consumer welfare.'
The Department of Justice concluded that 'this transaction is not likely to harm consumer welfare.'

'No harm to consumers'
In its statement, the Department of Justice, quoting Thomas O. Barnett, assistant attorney general of the Antitrust Division, said, "The presence of other competitors, changing regulatory requirements and the emergence of new technologies in markets for residential local and long-distance service indicate that this transaction is not likely to harm consumer welfare."

AT&T and BellSouth jointly own Cingular Wireless, but the merger will give AT&T total ownership of the wireless company. AT&T already has decided to eliminate the Cingular brand name -- which was supported with $1.3 billion in measured media last year alone -- and bring its wireless services back under the AT&T moniker. (Cingular had previously acquired AT&T Wireless, a troubled brand known for its consumer woes.) Critics have said that the while the AT&T brand means something to an older generation, it has little resonance with today's youth.

There was immediate reaction to the Justice Department's approval from consumer groups, which fought the move, saying it was likely to leave consumers "fewer choices and inflated prices for a host of services."

Multibillion-dollar ad accounts
The merger is also causing uncertainty for agencies that currently hold multibillion-dollar ad accounts. AT&T's agencies include Omnicom Group's GSD&M and Rodgers Townsend, and Omnicom sibling shop BBDO handles Cingular. Grey Worldwide is the agency for BellSouth. Executives at the shops and the telecoms said no information is publicly available on the fate of the merged companies' marketing services.

Executives familiar with the situation, however, said the Cingular name will remain in the marketplace at least through the end of the year, to avoid consumer confusion during the important holiday-selling season, and that may bode well for BBDO keeping the account in the short term.

Wendy Clark, AT&T's VP-advertising, previously has said the merged brand will be relaunched in BellSouth territories with the same GSD&M creative used for last year's merger of SBC and AT&T. Marketing plans for the Cingular name change are still under wraps.

Media spending figures
According to TNS Media Intelligence, AT&T spent $1.7 billion in measured media in 2005, and $1.1 billion for the first six months of this year alone. BellSouth spent $128 million in measured media in 2005, and $76 million for the first six months of this year. Cingular spent $1.3 billion in advertising in 2005 and $631 million in the first six months of this year.

The new world of telecommunications increasingly is pitting the traditional telecoms against cable companies, each offering their own packages of entertainment, voice, internet and wireless services. Already, those two industries have been engaged in a nasty ad war. How that will affect media spending longer term is unclear as cable companies can tout their own products on their own networks.
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