Telcos Making Renewed Push For Business Customers

Telecommunications providers are taking another serious look at business spending, which has been particularly stagnant for the industry, as a catalyst for growth.

On Wednesday, AT&T Inc. (T) will launch a multimillion-dollar marketing blitz specifically targeting large and small businesses, which includes a commercial during the Super Bowl on Sunday. The campaign is designed to shed AT&T's reputation as a company focused solely on phone and Internet services, and to raise awareness of the different business capabilities it offers.

"This is different," said Kevin Peters, chief marketing officer for AT&T's business unit. "We want to start to be very loud about this."

It is the latest in a series of recent moves by the telcos to recommit themselves to the business world. While the bulk of a carrier's revenue from businesses comes from traditional services, newer offerings such as virtual private networks, on-demand storage and computing, and connected devices make up an increasingly significant share. In particular, cloud services have taken center stage as the carriers look to capitalize on the broader resurgence in tech spending and offset declines in their legacy business.

Verizon Communications Inc. (VZ) last week said it plans to buy Terremark Worldwide Inc. (TMRK) in a $1.4 billion deal to improve its business cloud services. T-Mobile USA on Tuesday unveiled a new pay-per-use international data and voice plan for companies. Sprint Nextel Corp. (S) last month unveiled a plan to develop more connected devices for cars, and to track packages and field personnel.

The moves come as corporations are signaling they are more comfortable spending on technology after delaying IT purchases and upgrades during the economic downturn, with companies such as International Business Machines Corp. (IBM) and SAP AG (SAP, SAP.XE) reporting higher profits.

AT&T plans to push the corporate message hard starting Wednesday, giving the business side the most marketing resources it has received since 2004. The company's Super Bowl commercial strings together several vignettes, including a shipment of Timberland Co. (TBL) shoes being tracked by AT&T's network, and a soda machine automatically alerting its supplier that it needs a refill, in a demonstration of the different services AT&T offers.

The company has built up many of its strategic business services, which make up 13% of the total business services revenue. These services include virtual private networks and website hosting, but have expanded into hotter areas, such as storage and computing as cloud services.

As a whole, business spending on telco services continues to look tepid because much of its revenue is tied to the employment rate: Fewer jobs mean fewer Internet and phone lines. AT&T reported last week that its business revenue in the fourth quarter was $9.4 billion, down 4.5% from a year ago. Strategic business services grew 17.1% from a year ago.

Even if the broader business-spending picture looks murky, companies will still invest in products that improve productivity or increase the automation of slower tasks.

"We see this as value creation that will thrive even in tough economic times," Peters said in an interview.

The marketing push comes a few days after Verizon said it would acquire cloud-services provider Terremark. The company said it wouldn't be quick enough to move into the area by itself, but acknowledged the importance of the market.

"As we looked at how best to position ourselves for opportunities in [the enterprise] market, it became increasingly clear to us that a purely organic build would not get us into this rapidly evolving market as fast as we wanted," Verizon President Lowell McAdam told analysts last week. ""We have viewed this space for a long time as a place that we wanted to grow our enterprise business."

The two businesses are highly complimentary, McAdam said. Terremark serves the federal government, Fortune 1000 and midsize companies, and Latin America. Verizon is traditionally stronger in Europe and Asia, and has focused on large multinational companies.

While AT&T and Verizon are looking to more advanced services, T-Mobile USA is looking to help businesses through more traditional means. The carrier, owned by Deutsche Telekom AG (DTE.XE, DTEGY), said rates under its new plans offer discounts as high as 80% to multinational companies.

"This is part of our overall strategy to increase our presence in the business space," said Femi Lakeru, who focuses on business and government customers for T-Mobile USA.

-By Roger Cheng, Dow Jones Newswires; 212-416-2153; roger.cheng@dowjones.com

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