Say Goodbye to the Girl in the Pink Dress: Winners and Losers in the AT&T/T-Mobile Deal

Last Updated Mar 25, 2011 12:16 AM EDT

There is one piece of the AT&T (T)/T-Mobile (DTEGY) merger that makes a whole lot of sense: Killing off T-Mobile's $600 million ad budget, thus saving the new company a bundle in marketing costs.

And then there is one piece that makes no sense all: Killing off T-Mobile's advertising smarts, because AT&T's marketing is, famously, a mess and has been since 2009 when the company was forced to admit in court that Verizon (VZ)'s 3G wireless network was better than its own.

The loss turned AT&T into the whipping boy of the wireless advertising world, and its competitors have been piling on ever since. T-Mobile's current campaign, featuring model Carly Foulkes in a series of pink summer dresses, relies almost entirely on bashing AT&T's less-than-great wireless network.

It's not just that AT&T provided its enemies with the information needed to back their claims that the company sucks. It's that AT&T's current ad campaigns are a mish-mash of unrelated themes. It's not at all obvious that the ad in which an office worker is annoyed that he wasn't invited to "the taco party outside Bill's office" is from the same company that's trying to sell the Windows Phone 7 with the little orange gremlin.

T-Mobile's ads, however, are remarkably consistent. There's always the gangly Foulkes, with her bat-like ears, yakking on about 4G and AT&T's failings, and sporting another pink outfit.

Counterintuitively, AT&T's ads perform a lot better than T-Mobile's do, mostly as a function of AT&T's massive scale. Here are the two company's ad budgets and their U.S.-only revenues:

  • AT&T:
    Revenues: $123.5 billion
    Ad budget: $2.1 billion
    Revs per $1 in adspend: $58.83
  • T-Mobile: Revenues: $22.3 billion
    Ad budget: $600 million Revs per $1 in adspend: $37.17* Source: Kantar; SEC; and Deutsche Telekom.
A little math shows that for every dollar AT&T spends on advertising it makes $58.83 in revenues. At T-Mobile, every ad dollar only brings in $37.17 in sales. AT&T's advertising is 58 percent more efficient than T-Mobile's. Clearly, even if the only thing that AT&T did after merging the two companies was ax T-Mobile's marketing department, the new company will generate its revenues more efficiently than before.

There are three other sets of victims with their heads on the chopping block in this merger. In order of interest they are:

  • T-Mobile girl Carly Foulkes: She's surprisingly popular on the web, in part because she used to be a fashion model. Like all fashion models, she did some topless work, too. AT&T does not have an equivalently appealing pitchwoman. It can't keep Foulkes anyway, given that Foulkes' entire oeuvre has been dedicated to kicking AT&T while it's down.
  • AT&T and T-Mobile's ad agencies: AT&T's major agency is Omnicom's (OMC) BBDO; its media buyer is WPP (WPPGY)'s MEC. T-Mobile's agency is Publicis Seattle; its media buyer is Publicis (PUB)'s Optimedia unit. There is no sense in keeping all these shops on a single AT&T brand. The combined client will probably fire two of them.
  • Digital media: T-Mobile's digital ad budget appears to be about $188 million (if you subtract the Nielsen number ($412 million) from the Kantar number ($600 million), because Nielsen doesn't count internet advertising.) That's a huge amount of ad dollars and T-Mobile is probably one of the largest web advertisers in the U.S. Post-merger, it's all gone.
*Correction: Due to a misplaced decimal point, this article originally vastly overstated the effectiveness of AT&T's ad budget. Damn you, Microsoft Excel! Nonetheless, the point remains: Due to AT&T's scale its ad dollars are apparently more effective than T-Mobile's. This error was pointed out by BNET's commenters, below.
Related: