Wireless phone business may be heating up


One strong ad category for broadcasters that tends to come in waves of intensity may be heating up again – wireless telephony. New money is jumping into the sector and an existing big player has reason to increase its marketing efforts.

TPC Capital and GS Capital Partners (the GS is Goldman Sachs) have announced an agreement to buy out public shareholders of Alltel for 71.50 per share, a total of 27.5 billion. Alltel CEO Scott Ford will remain in his role as the company goes private, with a shareholder vote on the buyout expected later this year.

Meanwhile, AT&T has accelerated its rebranding of the former Cingular wireless service to AT&T. The AT&T brand has now replaced the orange "Jack" character and the Cingular name on all in-store signage, store kiosks and point-of-sale materials at all 1,800 company-owned wireless retail stores. It will take a little longer to change all of the outside signage, but AT&T saw to it that new signs were put up outside at key stores in major markets. Exteriors of most company-owned retail locations are expected to be branded as AT&T by September, with branding of agent-owned retail stores expected to be completed by January 2008. AT&T says the store makeovers are critical to prepare for the late-June launch of the Apple iPhone, for which AT&T will be the exclusive wireless provider in the US.

In terms of advertising, TV, radio and outdoor ads now incorporate transitional elements related to the AT&T and the Cingular brands, but AT&T is featured much more prominently. The transitional phrase, "Wireless from AT&T, formerly Cingular," has begun replacing the phrase, "Cingular is now the new AT&T," but the color orange will continue to be associated with wireless services from AT&T. The "Jack" mark will be used in a less prominent way in advertising and customer collateral.

RBR observation: With private equity taking over the #5 wireless phone company, look for increased marketing as Alltel tries to increase its market share. We doubt that the new owners will be content with that fifth place standing and will want to build on the current subscriber base of 12 million. After all, they paid a 23% premium over the recent stock price to buy out the public shareholders.

As for AT&T, it figures synergies from combining BellSouth and Cingular under AT&T will produce 2.8 billion in value. But to realize that value, they are going to have to keep customers of all three happy – and add new customers. That means advertising now, plus a big kickoff for the apple iPhone. And if both AT&T and Alltel step up their advertising to try to increase their wireless phone market share, any competitor who doesn't respond with their own advertising ramp-up is going to be left in the dust.