Could Combined Data From AT&T, T-Mobile Be Powerful Ad Tool?

On the surface, AT&T’s $39 billion acquisition of rival T-Mobile would not seem to have huge implications for the fledgling but fast-growing mobile advertising space—unless the two companies decide to leverage all that customer data to run more targeted mobile ad campaigns, say industry experts.


Currently, while AT&T does maintain its own in-house mobile ad network (AT&T Advanced Ad Solutions), neither it nor T-Mobile is a major ad seller. A few years ago, media companies and advertisers embarking on mobile campaigns had little choice but to vie for space on each carriers’ "decks," i.e., their walled garden-like portals. But the importance of such positioning has waned. “On deck [advertising] is no longer a force,” said Eric Bader, chief strategy officer at Initiative and former president of the mobile marketing firm BrandinHand.

That’s because with the emergence of smartphones like the iPhone, mobile users surf the Web just as they would on PCs and don’t need their hands held by the wireless carriers the way they might on basic "feature" cell phones. And smartphone users surf the Web way more than feature phone users do.

“Mobile advertising wasn’t really taken seriously until the advent of smartphones,” said Sarah Baehr as svp, director of digital publishing solutions at MediaVest. Now, big media companies with popular mobile extensions, such as ESPN.com, as well as a handful of mobile ad networks, have emerged to take a large share of the estimated $1.2 billion mobile ad market (per eMarketer), including Google’s AdMob and Millennial Media.

In addition, there are companies like appssavvy, which help brands advertise in mobile apps. And there is Apple’s iAds initiative. “Some paid media dollars are going to buy mobile ad network display, but more money is starting to flow into mobile social, in-app, branded apps, deals and shopping,” added Bader. “That's where the center of gravity is moving to.”

That’s not to say that the AT&T and T-Mobile deal doesn’t matter to the digital ad industry. For one, among T-Mobile’s 35 million subscribers, “some will get iPhones,” said eMarketer analyst Noah Elkin. “That gives Apple renewed momentum,” while driving more mobile Web and app consumption.


But an even bigger potential ramification of the deal is data—mobile’s “golden nugget” as Baehr put it. Assuming AT&T wants to go there. “In the past, carriers were dead set against it,” said Phuc Truong, managing director U.S., of the mobile marketing firm Mobext. “Lately they’ve listened more.”

Traditionally, carriers have stayed far away from using their customers' data to better target advertising for fear of fanning privacy fears among consumers or regulators. But Truong theorized that given AT&T’s now massive data footprint—with T-Mobile, it claims more than 130 million subscribers—the company could launch some sort of ad product that would use its customers' data to target ads based on geography, household size and spending habits.

Or AT&T could sell that data to another player, such as a mobile ad network or individual publishers. “They’d have to do it in a way that avoids using [consumers’ actual names]. But that’s the really interesting part of this deal. The carriers definitely don’t want to become just dumb pipes like the ISPs,” said Truong.

AT&T Bids $39 Billion for T-Mobile to Take Lead in U.S. Wireless

AT&T Inc. (T) agreed to buy T-Mobile USA from Deutsche Telekom AG (DTE) for about $39 billion in cash and stock to create America’s largest mobile-phone company, trumping Sprint Nextel Corp. (S)’s effort to acquire the business.


The deal would allow AT&T, now the second-largest U.S. wireless operator, to add about 34 million customers and surpass Verizon Wireless. The acquisition, the largest in the wireless industry since 2004, may face government scrutiny because it combines the second- and fourth-largest wireless providers, reducing consumer choice. Regulatory approval may take a year, Dallas-based AT&T said.

“This is a long process from the regulatory perspective and nothing is guaranteed,” said Chris Larsen, a Piper Jaffray & Co. analyst, in an interview. “For these carriers, there’s going to be bigger savings on their networks by joining up.”

Sprint had held talks with Deutsche Telekom about acquiring T-Mobile, people with knowledge of the matter said this month. The companies hadn’t been able to agree on the valuation of T- Mobile, the people said.

AT&T said that it would expand the rollout of its high- speed wireless technology, called Long-Term Evolution, or LTE, under the T-Mobile agreement. AT&T will offer the service to an additional 46.5 million people as part of the deal, helping achieve the Federal Communications Commission goal of making broadband available more widely, the company said.

‘Very Confident’

“We studied this thing extensively over the last few months and we’re very confident it will be approved,” Randall Stephenson, AT&T chairman and chief executive officer, said in an interview. “Most local markets have a choice between five carriers, so the space will remain fiercely competitive.”

The agreement has been approved by the boards of both companies, Deutsche Telekom said in a statement.

The deal is the largest for AT&T since the acquisition of BellSouth Corp. in 2006 for about $83 billion, according to data compiled by Bloomberg. It’s the largest takeover to be announced in the wireless industry worldwide since 2004, when Sprint agreed to merge with Nextel Communications Inc., and the sixth- largest mobile-phone deal of all time.

Since taking over as CEO in 2007, Stephenson has focused on growth through wireless services, rather than the multi-billion- dollar acquisitions common under his predecessor, Ed Whitacre. AT&T began selling Apple Inc. (AAPL)’s iPhone in June 2007, and wireless data has since become one of its fastest-growing offerings, with revenue up 27 percent in the fourth quarter.

IPhone Exclusivity

AT&T lost its exclusive hold on the iPhone in the U.S. this year, as Verizon Wireless began selling the device to its customers in February. Analysts estimate Verizon Wireless may sell 11 million iPhones this year, the company said that month.

The T-Mobile deal may give AT&T a way to boost earnings because of the money the companies would save by combining their operations. The companies’ estimate that they could have $40 billion in synergies is a realistic assessment, said Jonathan Chaplin, an analyst with Credit Suisse Group AG.

“Phenomenal deal if it happens,” Chaplin wrote in a research note yesterday. “Huge upside for AT&T; DT getting a great price; however, we believe regulatory risk is enormous.”

In the last five years, the median deal price for a telecommunications company has been 4.5 times earnings before interest taxes depreciation and amortization, according to Bloomberg data. Deutsche Telekom said the purchase price is multiple of 7.1 times 2010 adjusted EBITDA.

Regulatory Issues

The deal drew criticism for its potential to reduce the number of wireless competitors.

“It’s difficult to come up with any justification or benefits from letting AT&T swallow up one of its few major competitors,” Parul P. Desai, policy counsel for Consumers Union, said in an e-mailed statement. “AT&T is already a giant in the wireless marketplace, where customers routinely complain about hidden charges and other anti-consumer practices.”

There were 296.3 million wireless subscribers in the U.S. at the end of 2010, according to estimates from researcher eMarketer. Adding AT&T and T-Mobile would give the combined companies 39 percent of the total, according to data from eMarketer and ComScore Inc., while Verizon Wireless has 31 percent.

To get the deal through, regulators might require that T- Mobile and AT&T divest some operations or agree to certain conditions, such as promising to build out their network in certain, underserved markets, said Roger Entner, an analyst at Recon Analytics in Boston.

AT&T Financing

Still, the combination would help alleviate some of the spectrum crunch that regulators have been struggling with, he said. The two companies would be able to share airwaves, which may help persuade the FCC and the Department of Justice to approve the deal, Entner said.

Robert Kenny, a spokesman for the FCC, which is to review the deal alongside antitrust authorities, declined to comment.

AT&T anticipates U.S. regulators will require it to divest wireless spectrum and subscribers as a condition for approval, according to a person with knowledge of the situation. The person declined to be identified because the matter is private.

T-Mobile, which accounts for about a quarter of Deutsche Telekom’s revenue, has reported declining earnings as it missed out on the iPhone and it lagged behind competitors in building out a higher-speed wireless network.

Cash and Stock

The purchase price will include $25 billion in cash and the balance in AT&T stock, subject to adjustment, according to a statement yesterday. The deal may give Deutsche Telekom an 8 percent stake in AT&T, which will add a Deutsche Telekom executive to its board of directors.

AT&T said the cash part of the purchase price will be financed from the holdings on AT&T’s balance sheet and new debt. AT&T has an 18-month commitment for a $20 billion unsecured bridge loan from JPMorgan Chase & Co. (JPM) The company is not assuming any debt from T-Mobile or Deutsche Telekom.

AT&T has the right to increase the $25 billion cash portion of the purchase price by up to $4.2 billion, offset by a reduction in stock, as long as Deutsche Telekom receives at least 5 percent equity interest in AT&T, the company said. The number of AT&T shares issued will be based on a 30-day average prior to closing, subject to a 7.5 percent collar.

AT&T agreed to a breakup fee of $3 billion and some spectrum if the deal fails to close, said two people with knowledge of the matter.

AT&T rose 20 cents to $27.94 in New York Stock Exchange composite trading on March 18. The stock had declined 4.9 percent this year. Deutsche Telekom, little changed this year, fell 1.3 percent to 9.59 euros in Frankfurt trading.

AT&T was advised by JPMorgan, Greenhill & Co. and Evercore Partners on the deal. Morgan Stanley, Deutsche Bank AG, and Credit Suisse Group AG advised Deutsche Telekom.

Study: Standing by Tiger Helped Nike's Bottom Line

Marketer Lost Customers, but Losses Would Have Been Worse if It Had Abandoned Golfer

CHICAGO (AdAge.com) -- Nike's decision to stick with Tiger Woods through his messy sex scandal may have paid off -- at least in terms of golf-ball sales, university researchers have concluded.

Nike lost 105,000 golf-ball customers in the six months after the golfer's philandering went public. But the losses would have been even greater had they ditched him and would have cost the company $1.6 million in profits, according to the study released Thursday by Carnegie Mellon University's Tepper School of Business.

The scandal hurt Wood's ability to attract customers, but "it wasn't so bad it eroded all his endorsement effect," said Timothy Derdenger, assistant professor of economics and strategy and a study co-author.

"So they did make the correct decision to stand by Tiger," he said.

But the study also illuminates how the downfall of one endorser can drag down an entire industry. Some people simply stopped playing golf in reaction to the scandal, leading to a loss of $7.5 million in profits for all golf-ball companies, researchers concluded.

The study -- which used advance techniques to isolate Tiger's endorsement effect on consumer behavior -- found that Nike gained 4.5 million golf ball customers and $60 million in profit since 2000, when Woods first endorsed the golf balls. Researchers did not look at Nike's other Tiger-endorsed products, but concluded that if Nike got similar returns across product lines, the company has more than recouped the estimated $200 million in endorsement fees it has paid the golfer in the past 10 years.

Still, golf ball sales trends -- used partly because data was readily available -- are not necessarily a good measuring stick for the Wood's many endorsement deals, many of which ended in the wake of the scandal.

Woods brought value to golf equipment because his game is highly respected, even post scandal -- although his on-course struggles of late might dampen even that effect.

By contrast, other non-golf brands were "using the goodwill of association and positive image associated with Tiger to sell products that Tiger really had no role in developing," said Marc Ganis, president of SportsCorp, a Chicago-based sports business consulting firm.

That goodwill, of course, faded after Tiger's affairs came to light, and endorsers were "better off [moving on to] positive-imaged athletes," Mr. Ganis said.

The companies dropping Woods include Gatorade, AT&T and Accenture, costing the golfer an estimated $22 million.

THE COOL HUNTER FEATURED IN AT&T AD

People seem to talk negatively about blogging. But just like anything else, if done properly it can create an abundance of opportunities. Popular lifestyle blog http://www.thecoolhunter.net was recently seemlessly integrated in an AT&T commercial for the all new Blackberry Torch, Congrats to TCH

AT&T DELIVERS WITH THIS COMMERICAL

In a world where more and more people rely on social media to keep them updated on current events, sports and world issues; mobile phone carriers have become aware of this and in turn are creating more and more devices that makes Social Media platforms easily accessible. AT&T delivers the perfect programming for the Motorola Backflip phone where fiction news anchor Logan Crawford reports late breaking news directly from the people to the people.