Could a Sprint T-Mobile Merger Mean More Wireless Ad Spending?

New Unit Would Become Strong Third-Place Contender to Verizon, AT&T -- and Would Need a Budget to Keep Pace

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Move over Walmart: If Sprint buys T-Mobile, wireless will likely dominate the list of most advertised brands in America. And if past telecom merger history is any clue, media companies could see an uptick in ad spending from the new unit.

Deutsche Telekom is in talks to sell its T-Mobile unit to Sprint Nextel Corp. if it retains a majority stake in the new entity, Bloomberg reported today.

The merger would definitely mean stiffer competition for U.S. wireless leaders Verizon and AT&T. A deal would turn the two substantially smaller wireless operators into a formidable third-place competitor -- together, Sprint T-Mobile would have 83.6 million U.S. customers to Verizon's 102.2 million and AT&T's 95.5 million.

But, for adland, it could also mean shifts in domestic ad spending.

Verizon was the most advertised brand name in 2009, with more than $2.2 billion in U.S. media spending, according to Ad Age DataCenter's Megabrands report. AT&T was second with more than $1.9 billion in spending. If combined, No. 4 Sprint and No. 12 T-Mobile, would usurp Walmart for third place, with more than $1.6 billion in ad spending. (While this analysis is simple addition, Sprint and T-Mobile's combined brand spending could indeed be closer to Verizon and AT&T's wireless-only budgets -- Megabrand figures also include spending for landline and long-distance advertising; however, the bulk has traditionally gone to wireless.)

Media companies could enjoy at least a temporary increase in spending following a Sprint and T-Mobile merger, considering the entity will need to get the word out to consumers. To phase out the Cingular name, AT&T launched costly campaigns in 2007, when it became sole owner of the company.

But once the companies are integrated, don't expect to see both ad budgets combined. The new entity would eventually look for increased media-buying efficiencies, and media companies could see less U.S. wireless spending over time, with fewer players in the field. However, keeping up with Verizon and AT&T -- the Nos. 2 and 3 biggest ad spenders -- will require sizable ad coffers.

If the deal does go through, agencies handling Sprint and T-Mobile ad accounts could also fall victim. Goodby Silverstein & Partners is Sprint's creative agency, while Mindshare handles media. For T-Mobile, Publicis handles creative and Optimedia is the media agency. Looking back to 2007, AT&T moved lead creative from GSD&M's Idea City to BBDO, which was formerly Cingular's agency, and also consolidated media duties.

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