Telstra puts the razor back: marketing's a good idea after all
By Julian Lee, Marketing Reporter
March 4, 2004

Telstra has reversed its decision to slash its $400 million marketing
budget after facing the prospect of losing more ground to competitors
in the fiercely competitive mobile phone market.

Telstra marketing chief David Moffat had been expected to make the
cuts as part of a company-wide drive to take out at least $600 million
in costs over the next two years.

One proposal was to cut $70 million from the television advertising
budget.

But the decision was reversed after executives realised they had to
maintain marketing at current levels or risk losing out to rivals
Optus, Hutchison and Vodafone.

Late last week, Megan Keleher, Telstra's head of marketing services,
confirmed the telco would continue to market at similar levels.

She said the budget was always calculated on a "per needs basis".
Asked if it would be cut, she said: "Not at all. We are not cutting it
back. It is being maintained at current levels. Absolutely."

It is understood that after last month's half-yearly results, senior
executives lobbied to have marketing exempted from cost cutting.

"There has been a change of heart in the last couple of weeks," a
source said.

Savings have come from up to 100 redundancies in the marketing
department and a reduction from 14 to four in the number of agencies
that supply marketing services to the company.

At the results, chief executive Ziggy Switkowski highlighted marketing
as an underperforming area and flagged an imminent increase in
activity, especially in the mobile phone market.

New mobile phone subscribers to Telstra grew by 3.9 per cent - 6 per
cent short of its target - compared with Optus's 18 per cent.

"All eyes will be on the mobile phone market and so [Telstra] cannot
afford to lose any more ground," an analyst said. "They have got to
keep pushing."

In recent weeks Telstra has brought together the heads of its main
agencies - John Singleton, George Patterson Partners chairman Alex
Hamill, Young & Rubicam chairman and CEO Hamish McClennan and
Belgiovane Williams Mackay creative director Rob Belgiovane - to nut
out new strategies.

The first fruits of those discussions emerged last week with the
teaser ad campaign, entitled T-Time. It is understood to be the launch
of an umbrella campaign for all Telstra's existing bundled home,
internet and mobile phone packages.

One of the options also being considered is whether or not to develop
a new mobile phone brand to replace its youth brand, Communic8, or use
the existing Telstra brand as the vehicle for signing up younger
customers, a segment in which the company is regarded as weaker than
its rivals.

This story was found at:
http://www.smh.com.au/articles/2004/03/03/1078295449824.html