POWER 50: AS TELCOS SPREAD WEBS, AD DOLLARS CAN ONLY GO UP: TELECOMMUNICATIONS: MAJOR BENEFITS FROM 'TRANSITIONAL KITTY' EXPECTED AS SERVICES EXPAND

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The mergers, acquisitions and management shake-ups created by the deregulation of the $100 billion telecommunications industry are causing industrywide shifts in marketing and advertising strategies.

The megamergers and the increased competition now that long distance, local telephone and cable companies are preparing to enter each other's markets has provided plenty of agency churn.

But the good news for the ad industry is that spending will climb as telcos change from complacent monopolies to aggressive competitors.

CLEAR WINNER

"The clear winner [in this shift] is going to be the advertising industry as agencies try to get this 'transitional kitty,' if you will," says Jerry Gramaglia, Sprint Corp. VP-Marketing.

Long-distance giants AT&T Corp., MCI Communications Corp. and Sprint Corp. are used to stealing market share from each other. But now they face new competition from emerging long-distance players like the Baby Bells.

The Big 3 also are beginning to compete with non-telco marketers in offering local, Internet and other kinds of communication services.

WORLDCOM BID

WorldCom's recent proposal to wrest MCI from British Telecom, which is trying to buy the 20% of MCI it doesn't already own, could create another tangle where MCI plays marketing teacher to a less sophisticated parent. Although a merged MCI/WorldCom would be huge, it could be slowed by the learning curve and by sheer size.

John Donoghue, MCI senior VP of consumer marketing, says MCI focused on several core changes this year-eliminating the sign-up bonuses that lure customers to switch service; saving the best deals for existing customers; integrating service offerings as a brand and investing aggressively in opportunities like collect calling and 10-321, a number anyone can dial to connect into MCI's services.

MCI has also changed the tone of its messages, he says, talking about the benefits of MCI instead of the deficits of the competition.

"For more than a year . . . we haven't talked about AT&T," he says.

Customer sign-up bonuses were stopped in January, Mr. Donoghue says, because "we found short-term offers give you short-term customers. Instead we took the money we saved and put into customer retention programs like MCI 5-cent Sunday."

MORE CHANGES

Other telco ad and marketing power players echoed the change in focus away from the competition and a renewed emphasis on customer retention.

Marilyn Laurie, AT&T exec VP-brand strategy and marketing communications, says, "After a period of neglect, we are making sure we are putting enough advertising dollars into the brand itself."

However, the corporate ads are not the big, one-happy-company ads of the past. The focus is on communications products.

"It brings the corporate brand closer than ever before to the product brand," maintains Ms. Laurie, "and helps the customer, rather than knocks the competition."

MINE CUSTOMER BASE

Mr. Gramaglia says Sprint is looking to its own customers to buy more services, rather than adding new customers who may buy less services. "We can't win playing the cents per minute game in the future," he says.

The biggest Baby Bells, the merged SBC Communications (Southwestern Bell and Pactel) and Bell Atlantic (a Nynex-Bell Atlantic combo), and the biggest independent telco, GTE Corp., have excellent brand recognition for local services, but lack national brand recognition.

Their daunting task is to create a brand for new national services like long distance. Introducing such service first to existing customers is the first of a stair-step approach planned by Bell Atlantic, according to Janet Keeler, Bell Atlantic VP-brand management and marketing communication.

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