Agencies Gird For AT&T's $39B Merger With T-Mobile

BBDO Is AT&T Shop; Publicis Created T-Mobile Ad That Slams New Partner's Network

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AT&T has offered to acquire T-Mobile USA from Deutsche Telekom for $39 billion in cash and stock, the companies said today, a move that thrusts Publicis, Seattle, into an awkward position.

The Publicis Groupe agency is behind the No. 3 U.S. wireless carrier's ongoing MyTouch 4G campaign that takes shots at AT&T's iPhone service. In a clear spoof of the "PC vs. Mac" ads, the series of ads finds an attractive woman, who represents T-Mobile's MyTouch, continuously beating out the iPhone, which is dragged down by carrying a man representing AT&T's often-criticized 3G network on his back.

T-Mobile MyTouch 4G 'Piggyback' spot

The merger would allow AT&T to leapfrog Verizon, making it the leading wireless carrier. AT&T had 26.6% market share of U.S. mobile subscribers in December 2010, while T-Mobile had 12.2%, according to ComScore. Verizon had 31.3% of the market. The merger would also substantially boost ad spending at AT&T, already the country's third-largest spender in measured media last year, with $2.11 billion. Combined U.S. measured media spending in 2010 for AT&T and T-Mobile comes out to $2.7 billion, according to Kantar Media.

As is common in most mergers, the carriers' existing agencies will be watching warily. AT&T's major agency is Omnicom Group's BBDO. After the carrier's last major acquisition, Cingular, in 2007, AT&T parted with GSD&M's Idea City and shifted the account to BBDO, which at the time was Cingular's shop. AT&T also consolidated media duties that same year; today, MEC handles media for AT&T and Publicis' Optimedia for T-Mobile.

AT&T said the transaction would increase its total wireless revenue to nearly $80 billion from $58.5 billion. In the announcement, AT&T and Deutsche Telekom said the transaction "is expected to close in approximately 12 months," indicating a targeted closing date around March 2012.

The merger is an opportunity to improve service for both AT&T and T-Mobile customers, the statement said. The transaction also bolsters AT&T's commitment to roll out 4G LTE -- the same high-speed mobile data service Verizon supports. 4G has been the latest front in carrier marketing -- while AT&T and T-Mobile have the same technology, HSPA-plus, Verizon's LTE is considered to enable the fastest speeds. In its latest ads, T-Mobile has been claiming it has the "largest" 4G network, but had no LTE plans.

"This transaction represents a major commitment to strengthen and expand critical infrastructure for our nation's future," Randall Stephenson, AT&T's chairman-CEO, said in a statement. "It will improve network quality, and it will bring advanced LTE capabilities to more than 294 million people."

Both AT&T and T-Mobile up until now have put their super-fast 3G service under the 4G moniker. When T-Mobile launched 4G in 2010, AT&T was highly critical of T-Mobile labeling the technology that they share 4G: "I think that companies need to be careful that they're not misleading customers by labeling HSPA-plus as a 4G technology," AT&T Mobility spokesman Seth Bloom told industry trade "Fierce Wireless." AT&T now says it considers its HSPA-plus network 4G because it also has "backhaul" -- what a spokeswoman told Ad Age in January is an extra lane on the highway. AT&T at the time said it would roll out LTE this summer.

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