AT&T And T-Mobile: Combined Entity To Diminish Ad Spending – But Perhaps Not Much

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March 22, 2011 – 12:25 am

Media Revenue ImpactAs regulators prepare to chew over AT&T's $39 billion bid for rival telco T-Mobile USA, there's one group who should be against the deal: media companies who depend on major advertisers. As the WSJ's Shira Ovide writes, when companies of this magnitude merge, there will ultimately be one less big advertiser that broadcasters can rely on for a steady stream of ad revenue. But things could be different this time around.

Along with automotives and pharmaceuticals, telecom is a prime driver of ad spending. As Kantar Media stats show, AT&T and T-Mobile spent a collective $2.7 billion on ads last year. Given that most of that -- $2.1 billion, to be exact and much of it on TV -- from AT&T. Given the disparity between the amount each company spends independently, even if AT&T were to erase every marketing dollar from T-Mobile, it wouldn't mean much to media outlets.

In fact, given the competition for the wireless market, AT&T could wind up spending more.

Still, that hasn't been the case in the past.

UBS analyst John Janedis is pessimistic about the ad haul for media companies, projecting an annual ad spending decline of $300 million or more if the deal goes through. AT&T has said the deal could lead to $10 billion in savings, partly from cutting advertising.

Looking back, Janedis pointed to the merger of AT&T Wireless and Cingular. That 2006 deal resulted in 48 percent fewer ad pages in the New York Times in the year following the transaction.

Still, that could also mean that the marketing dollars shifted elsewhere. After all, the combined entity did embark on a major ad campaign to remind Cingular consumers that they now belonged to AT&T. The same should happen in this case, assuming it passes regulatory muster.

By James Bailey

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March 22, 2011 – 12:25 am

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