In 2003, the nine giant telecom companies splashed out more than $7.6 billion on marketing services, according to Advertising Age estimates, with more than 70% of it spent on measured media. Now, four seismic deals-the now-completed purchase of AT&T Wireless by Cingular; the proposed SBC Communications purchase of AT&T; Verizon's still-pending attempt to buy MCI; and Sprint's proposed merger with Nextel-will put the $2.5 billion spent by the acquired companies in jeopardy.
Marketing investment is seen as one potential saving in such mega mergers, and it is likely the merged entities will want to spend considerably less than the total current outlay by their constituent companies.
Independent telecom analyst Jeff Kagan believes media spending will continue at high levels for about five years, but thereafter, "you are going to have fewer companies spending fewer dollars."
Already, there is some indication that telecom media spending may be tapering. Advertising Age estimates for the first 11 months of 2004 (based in part on TNS Media Intelligence data), show spending down from the $7.6 billion of 2003 to around $6.5 billion. (However, this could be attributed to the absence of December '04 data, and the reduced spending of MCI following its filing for bankruptcy).
The wild card, however, is how much will be spent to position the new Big Four as full-service communications-service providers beyond telephones to TV and other programming. In the new battleground, the onetime Baby Bells are staring into the face of competition from cable and satellite companies, and even perhaps one day from the electric utility or Microsoft.
"A deal like this pushes SBC and Verizon out of their boundaries and local footprints," said Charles White, VP at TNS Telecom, a market-research company.
Telecoms are beginning to realign their lieutenants in anticipation of the next front, and the agencies are jockeying for pole position. Sprint's shop, Publicis Groupe's Publicis & Hal Riney, will duke it out with Nextel's shop, Omnicom Group's TBWA/Chiat/Day. SBC's primary shop, Omnicom's GSD&M, will do battle with AT&T's shop, WPP Group's Y&R and, potentially, with Omnicom's BBDO, which handles SBC's Cingular. McGarry Bowen, which works for Verizon Corp. will face off with Interpublic Group of Cos.' McCann Erickson, which handles Verizon Wireless, a joint venture with Vodafone.
There will be big winners, but overall for the $250 billion marketing services business, it looks likely that telecom merger mania will be chalked up in the losses column.