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Agencies ponder acquisition fallout

News, 26 October 2016

NEW YORK: AT&T's planned acquisition of Time Warner raises several issues for agencies, as they contemplate a likely streamlining of marketing budgets and a possible consolidation of the agency roster.

John Stephens, financial chief of telecoms giant AT&T, addressed the first of these in a conference call with investors on Monday when he noted that the combined outfit would be spending almost $6bn on advertising; Warner Bros, the film and TV studio, alone spent more than $900m last year, the Wall Street Journal reported.

"As our leadership and our corporate communications group has proven over the last year, we can mine savings out of combining two companies' advertising and corporate communications because we've been very successful at that," he said, in a reference to AT&T's acquisition of DirecTV in July 2015.

The sum Stephens said he anticipated saving was $1bn over a three-year period.

While agency consolidation in search of reduced costs is another frequent consequence of such major mergers, the Journal suggested that Omnicom was well-placed to keep the account: it is already the main agency for AT&T – in August it was awarded the consolidated data analytics, media, digital and creative business for AT&T across the US and Mexico – and handles most of Warner Bros' media business.

The flip side of the acquisition is that it could drive advertising innovation, particularly around addressable TV and cross-device advertising – assuming that privacy issues can be successfully negotiated.

"When you combine Time Warner's content with our [AT&T] scale and distribution...[and] put that with our customer insights and the addressable advertising opportunities that flow from that, we think we can build something here that's really special," Randall Stephenson, AT&T's CEO, told investors.

Industry figures agreed that there could be a significant increase in addressable TV inventory which might also persuade rival operators to step up their investment in this area. They also expected that data could be used to enhance the targeting of consumers across devices.

The deal still has to be approved by regulators, however, who may be concerned by a possible reduction in competition. And not all consumers may be enthused by the prospect of more targeted advertising.

Data sourced from Wall Street Journal; additional content by Warc staff