WIRELESS IS EXPECTED to be the heart of the newly merged AT&T Inc. and BellSouth Corp., bundling multiple services with cellular and allowing advertisers to reach multiple media platforms through one company. And that wireless heart will be the nation’s largest carrier, Cingular Wireless L.L.C., under the AT&T brand.
The change effectively makes the U.S. telecom industry a duopoly, noted Mercator Capital in a research note.
The new AT&T will be in a unique position to provide quadruple play services of voice, video, Internet access and wireless, said Michael Myshrall, managing director of Mercator’s communications technology practice. But when the new company talks about wireless, he said, “I don’t think it means wireless so much as it means mobility. It’s all about having access to the content and applications that you
can have at home, when you’re away from home.”
With the potential to give customers bundled packages and services such as remote digital video recording capabilities, and a unified communications interface for multiple devices, Myshrall said, “wireless is just the delivery mechanism that they’re going to use” for advanced services.
The change is also supposed to help cellular giant Cingular become more nimble, with a single parent company instead of two. According to AT&T spokesman Brad Mays, the merger will “allow for easier and faster integration of wireless and wireline networks and services, with both Cingular’s wireless and AT&T’s wireline networks moving to IP-based technologies.”
“We think that the simplicity and efficiency of a single ownership, as opposed to a joint venture, is going to make decision-making faster and make it even easier to get the innovations into the marketplace and into the hands of consumers,” said Cingular spokesman Mark Siegel.
End to Jack
The new AT&T eventually will mean the demise of the successful Cingular brand. The re-branding of Cingular will begin shortly, according to AT&T, and will take place over a period of months. AT&T offered few details about the transition, but indicated that it will do a co-branded campaign that is scheduled to start early this year and use the phrase “Cingular is now AT&T.” The company noted that it has already begun extensive new advertising that will transition the BellSouth brand name to AT&T.
Siegel said that the re-branding would begin shortly and that the “gradual transition” would take place in phases.
“We’re going to make sure that all of that is clear and understandable to customers,” Siegel said.
The change is likely to have a substantial impact on media spending, since four of the top five big-spending brands in 2006 were telecom companies, according to RCR Wireless News’ sister publication Advertising Age-and two of those companies are now going to be under the same brand. Verizon held the top spot as the loftiest spender in a year when telecom advertising spend was up 9 percent, pushed by a jump of almost 30 percent in the first half of 2006. Cingular was the runner-up at $628.6 million; the then-new AT&T, which launched a reintroduction campaign early last year following SBC Communic-ations Inc.’s acquisition of AT&T Corp., was the fourth biggest spender at $511.5 million, and Sprint Nextel Corp. came in at No. 5 with $496 million.
At the same time, AT&T has said that making multiple media platforms available to advertisers will be a key component of the new strategy. Myshrall said that that aspect of the newly merged company wasn’t anticipated, but that the company may also explore physical assets such as towers and vehicles for ad space, as well as various Internet and media placement.
Despite all the changes ahead, Cingular steadfastly insists that it is continuing with its everyday operations.
“It really is business as usual,” said Siegel. “That’s not to say there won’t be some changes, but we still have to deliver on the commitments we’ve made for 2007 and beyond, and that’s not changed.”
Wireless to drive growth
AT&T expects that wireless will be the combined company’s biggest growth driver over the next three to five years, and contribute to one-third of AT&T’s revenues. The merger is supposed to strengthen AT&T’s position in providing converged services for businesses, and the company said that it expects more than 72 percent of its revenues to come from “a combination of wireless and sales of network services to business customers.”
That might be making competitors at Sprint Nextel Corp.-itself still struggling with the aftershocks of a major merger-and Verizon Communications Inc. nervous.
Myshrall said that although it might seem that AT&T and Verizon have the same technical capabilities (wireless subsidiaries, fiber-to-the-home initiatives and traditional wireline services), the new AT&T “may be in a better position to execute than Verizon.” He cited several reasons: the AT&T brand name and associated loyalty, and the IPTV technology that AT&T chose for its fiber deployment. Also, Verizon and Verizon Wireless are “still perceived, externally and internally, as two separate companies. . They need to do a better job of merging those together.”
Myshrall said that Sprint Nextel might find success in returning to Nextel Communications Inc.’s roots and focusing its energy on the business customer.