Telecoms tighter with purse strings

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The battle among telecommunications companies has been a critical fuel keeping the upfront fires burning, last year alone pumping $1 billion into network TV. But that big network buying spree may be ending as the telecom war evolves, a number of industry experts say.

"It isn't clear how much longer the happy days are here," says a marketing strategist at one agency handling a major telecom player.

Telecommunications companies in 2003 spent $5 billion on advertising, according to TNS Media Intelligence/CMR. That total represents a 16.3% increase from 2002. Wireless companies accounted for about 70% of telecom spending in 2003 with $3.7 billion, says one media analyst.

game is changing

Wireless warfare, however, is changing. The fight for subscribers began with massive branding efforts as the market emerged and carriers tried to differentiate their offerings. Telecom companies bought media at rates increasing by double digits year after year.

Now, as wireless services reach parity in terms of performance and the market nears saturation, the battle has shifted to a more tactical retail focus with pricing offers ruling the day. One media buyer for a major telecom player says the industry's spending has gone from years of 20%-40% growth to a projected growth rate for 2004 of flat to up 2%-8%.

Already, the competitive playing field is shrinking. AT&T Wireless, which last year via Omnicom Group's Goodby, Silverstein & Partners, San Francisco, spent about $125 million on a branding effort-$111.1 million of it on network TV-is about to be folded into Cingular Wireless pending approval from federal regulators. It's uncertain at this point, however, whether Cingular, which spent $89.3 million on network TV via Omnicom's BBDO Worldwide, New York, will spend to retain AT&T customers or whether hungry rivals will try to pick off those consumers.

Executives from Cingular and a number of other telecom marketers declined to be interviewed on their upfront plans. There are a number of major trends, however, that over time could erode their network TV buying.

"Wireless is becoming a commodity. It's difficult to differentiate between services because all providers have leveled the playing field," says telecom analyst Jeff Kagan. As a result, ad dollars are moving from national players such as Cingular or Verizon Wireless to regional players more likely to buy spot TV.

"The next set of battles revolves around a full range of services meeting all consumers' telecommunications needs," says Charles Golvin, principal analyst at Forrester Research.

Telecoms will take a number of vertical products, such as long distance, local service, digital satellite TV service, Internet access via DSL, wireless and even eventually the ability to make phone calls over the Internet, and "wrap a nice little bow around them called discount pricing," Mr. Golvin says. "The battle is shifting in emphasis from products to integrated service, from a network focus to a customer focus."

bundled services

Already, telecoms such as SBC Communications and Qwest Communications are offering customers bundled service in the markets they serve. This spring, Verizon Communications launched an estimated $25 million, six-month campaign based on a sitcom format featuring three families using telecommunications services ranging from cell phones to DSL. The spots, from McGarry Bowen, New York, ran in Verizon markets as well as on targeted multicultural programming.

A turning point may have come with last year's implementation of federal number portability regulations, which made it easier for cell phone customers to switch from one carrier to another because they can take their phone number with them. Number portability "started companies thinking about customers in a more practical way," focusing on loyalty preference and high-value customers, says one media buyer for a major telecom player.

Still, wireless players have enough challenges this year that "I don't anticipate [telecom companies] are going to walk away from the upfront or radically reduce spending on the upfront." this media buyer says.

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