MCI-Sprint Merger Won't Cut DM, Experts Say
The growing crop of both long-distance and local service providers will provide new competition for the company, WorldCom, resulting in a need for more marketing, while it probably will preserve the Sprint brand, they said.
"I think MCI WorldCom at a minimum is going to maintain and, more likely, increase its presence and marketing activities throughout the consumer market," said Brian Adamik, senior vice president at The Yankee Group, Boston. "I believe you will see both brands in the market, with Sprint being the more high-value and MCI being more the price-value proposition."
MCI WorldCom Inc., Jackson, MS, the second-largest U.S. telecommunications company, agreed last week to buy No. 3 Sprint Corp., Overland Park, KS, for $115 billion in the largest corporate merger in U.S. history, though AT&T Corp., Basking Ridge, NJ, would continue to be the largest telecommunications company. The Federal Trade Commission expressed some concerns over the merger, however, and could nix it if the companies don't demonstrate that it will not simply allow them to increase the prices they charge to consumers.
All three telecommunications companies are among the largest marketers in the country. According to Competitive Media Reporting, New York, MCI spent $381.5 million on advertising in the first half of 1999, while AT&T spent $373.2 million and Sprint spent $227.5 million. Those figures don't include direct mail and telemarketing efforts, which could total another 40 percent, sources said.
A spokeswoman for MCI said it was too soon to determine what impact the proposed merger would have on the marketing activities of the two companies. Sprint officials did not return telephone calls for comment. Sprint uses McCann Erickson, New York, as its lead creative agency, while MCI uses Messner Vetere Berger McNamee Schmetter, also in New York. Both use other agencies for business-to-business advertising and other projects.
Ian Volner, a partner with the law firm Venable, Washington, DC, which represents the Direct Marketing Association on telecommunications issues, speculated that there might be some agency consolidation since the two companies would no longer be competing head-to-head. Emerging technologies like Internet access via cable and wireless connections would continue to provide competition against which the new company will have to invest marketing dollars, he said.
"At the end of the day, they're not going to do any less telemarketing and they will continue to market through the mail," Volner said, noting that much of the direct mail marketing the companies do is in the form of statement inserts.
In the wake of customer complaints about slamming, many long-distance carriers have cut back on telemarketing in the past year, said Jim Jacobson, director of investor relations at Sitel Corp., Baltimore.
"In the domestic market at least, there has been less and less use of telemarketing," he said, adding that neither Sprint nor MCI has been a large client of Sitel's in recent months.
Robert Van Voorhis, a spokesman for APAC Teleservices, Deerfield, IL, which provides outsourced teleservices support for several telecommunications companies, said it was too soon to draw any conclusions about how the merger might affect the companies' telemarketing efforts. He agreed with Adamik of The Yankee Group that Sprint would retain its own identity because of its powerful consumer brand and would continue to receive substantial marketing support.
The merger also comes as the FTC and the Federal Communications Commission are planning a joint meeting later this month to address the marketing of long-distance services. The agencies said they have been receiving complaints from consumers that advertising for some long-distance services is deceptive.
Volner said the new company will compete against a growing crop of smaller players, including the regional Baby Bells, or the local service providers that are seeking to grab a share of the long-distance market. At least one of those local providers, BellAtlantic, Philadelphia, has applied to provide long-distance service, and another, BellSouth, Atlanta, made a last-minute effort to buy Sprint before MCI's successful bid.