Cingular plans upmarket tack

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Beefed up with the $41 billion acquisition of AT&T Wireless, and facing a classic marketing war against Verizon, Cingular Wireless has decided its mid-market strategy no longer fits best.

Cingular plans to position its offerings as "best in class" after the merger makes it the nation's No. 1 carrier, said Cingular Wireless Chief Operating Officer Ralph de la Vega in a recent analysts' meeting. Verizon Wireless did not return calls seeking comment and a Cingular spokeswoman declined to comment.

But a number of analysts believe Cingular will actually do battle at the lower end of the wireless marketplace, fighting low-cost carriers like T-Mobile USA and even prepaid offerings such as Nextel's Boost and Metro PCS. T-Mobile has picked up an impressive 1 million customers in the last quarter on a base of 14 million customers.

"If you look at their actions rather than their words, Cingular has slipped in an offer now that is the same as T-Mobile, 1,000 anytime minutes at $40," said Roger Entner, director-wireless mobile services, the Yankee Group. "And it's a good strategy," he said, with only one reservation. It could cut into Cingular's already dropping average revenue per customer, which has declined to $49.78 in the third quarter of 2004, down from $50 in the same quarter in 2003.

"It's very difficult to make up these revenue losses," he said.

Certainly the newly merged entity is unlikely to want for marketing dollars. According to TNS Media Intelligence/CMR, Cingular and AT&T Wireless spent a combined $1.42 billion in 2003; in the first seven months of 2004 they spent $697 million. Even allowing for the likelihood that Cingular will seek a reduction in total marketing costs across the merged company, it is likely to be able to match the spending of marketing powerhouse Verizon.

Cingular is now in a position to "go after the core Verizon package," directly attacking Verizon on two major fronts, said Weston Henderek, senior analyst for wireless at Current Analysis, a La Jolla, Calif., marketing-strategy firm.

First, Cingular will have more customers than Verizon, making the Cingular free mobile-to-mobile plans more enticing than Verizon's "Join In" plan.

Secondly, he expects Cingular to offer customers an early starting time for free off-peak calling, perhaps by starting evening rates as early as 7 p.m. instead of the standard 9 p.m. Another tactic, he suggested, would involve offering added phones and services at lower rates.

Observers say the "free" marketing tactic will improve Cingular's long-term health. The wireless carriers are making less money on voice calls and need to shift customers to more profitable data-based services, such as sending photos or playing video games, said Rob Lawson, co-founder and general manager for the Americas of Enpocket, a mobile media firm.

"Cingular has an opportunity to upset the market from a pricing strategy perspective," he said. Free trials for new, more expensive services will take away price barriers and teach consumers why the new offerings are interesting.

"Once they start taking pictures and playing games it's hard to give it up. But from the carriers perspective, it's hard to make it happen the first time," he said.

blame the name game

Cingular's marketing challenges begin with inevitable and unenviable consumer confusion over the AT&T Wireless name. AT&T Corp. has licensed its name to AT&T Wireless and wants it back shortly after the merger of the independent AT&T Wireless with Cingular. To further confuse the marketplace, AT&T Corp. has announced plans to resume its own wireless offering, possibly with the AT&T Wireless name.

On the practical side, Cingular will quickly need to rebrand all AT&T Wireless stores and services to reinforce the Cingular name, deciding which to shutter along the way. Cingular must also figure out how to integrate AT&T Wireless' mLife plan as well as a bevy of new AT&T GSM phones and gadgets, such as its Ogo messaging device.

Cingular "is expecting bill glitches and customer service issues," said Mr. Henderek. One issue, which has not been widely promoted or mentioned, relates to so-called "sim" cards inside AT&T Wireless and Cingular phones, which will have to be replaced, perhaps at customer expense.

Cingular plans to drop its tag line of "Fits you best" with the merger, executives familiar with the situation said. Its logo will merge the orange "jack" icon with a blue Cingular logo, combining the colors of the two partners.

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