AT&T STRATEGY SHIFT COULD INCLUDE ONE LESS AD AGENCY: FCB, MCCANN, Y&R CURRENTLY SHARE $1 BIL ACCOUNT

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AT&T Corp. has contemplated a cut in its roster from three agencies to two, said executives at two of the shops.

"That's the direction they're headed," said one. "They're not going to get there tomorrow, but that's what some key people there would like to do."

Other executives agreed AT&T is leaning in that direction but expressed doubt the company will ever find a way to actually do it.

'NO PLANS TO CONSOLIDATE'

"We have absolutely no plans to consolidate our three major agencies," said Marilyn Laurie, AT&T's newly installed exec VP-brand strategy and marketing communications. "People always get extremely nervous when there's a major change in strategy of this kind and worry they might lose some business."

Though it had five core agencies as recently as six months ago, AT&T now splits its $1 billion account among New York shops Foote, Cone & Belding (consumer services); McCann-Erickson World-wide (business-to-business and wireless); and Y&R Advertising (branding). Media buying is split between FCB's TN Media and Y&R's Media Edge.

The move to re-evaluate agency structure is being driven by John Walter, AT&T's new president and planned successor to CEO Robert Allen. Mr. Walter recently engineered a reorganization that centralized marketing responsibilities in an effort to send consumers a more cohesive stream of brand messages (AA, March 3). That goal might be easier to accomplish with fewer agencies.

COST-CUTTING MISSION

Mr. Walter also is on a mission to cut costs. With its gigantic ad budget, AT&T probably spends more than $100 million a year on agency fees, so there could be significant cost savings in a consolidation.

Agency executives said there are a number of hurdles blocking the way to a consolidation. The ad accounts are sprawling, consisting of hundreds of separate assignments from dozens of different AT&T groups. And they will only get broader and more complex as AT&T expands into new businesses such as local telephone service.

Plus, each agency has strong relationships with AT&T.

Y&R is AT&T's hot agency of the moment, having just launched a new brand campaign that's pleased the marketer.

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