RINGING THE CHANGES: Technological innovation is no longer enoughto sell telecom products to businesses, so the industry has revamped itsPR approach to woo cash-strapped companies. Julia Hood reports

Nortel Networks reported a net loss of $3.5 billion on

October 18.



By any standard, that's a stunning decline, upstaged only by its loss in

the previous quarter of $19.4 billion. The Canadian company is

also in the process of laying off half its workforce, reducing it from

95,000 to 45,000.



What happened? A timeline of Nortel published by The Financial Post

offers a glimpse at Nortel's rise and fall. The company reached a share

price high in July 2000, hitting $123.10. But stocks plummeted

26% after third-quarter results were released, and the company never

recovered, even when it met expectations in January 2001 with year-end

revenues of $8.89 billion.



As of October 22, 2001, the shares were trading at $5.56.



Nortel and many of its competitors borrowed money to try and compete in

what they saw as an endlessly expanding universe. "The increase in

borrowing by the (telecom) industry over the last three years eclipsed

the total national debt accumulated by Britain in the past two hundred

years," reports The Financial Post.



Business customers just aren't spending as much money on telecom systems

anymore. Nortel's new president and CEO, Frank Dunn, spoke briefly about

the state of the market in the earnings release: "While we believe we

are beginning to see early indications that capital spending by service

providers is approaching sustainable levels, it still remains difficult

to predict."



Nortel is far from alone in its pain, and the downturn has hit service

providers, device makers, and equipment companies alike. The b-to-b

market is a tough neighborhood all round, with shrinking budgets and

interest in creating whole new telecommunications systems evaporating

among customers.



"Telecom was part of the whole bubble that went on in 1999 and 2000,

with enthusiasm about the requirement for bandwidth coming about from

the increased use of the internet, and the transition in the economy

that was driven by electronic transmissions," explains Berge Ayvazian,

CEO of The Yankee Group, a research and strategic consulting firm

specializing in communications technology. "Reality stepped in at the

end of 2000, and it's been a very rapid decline."



As a result, the whole industry is in crisis mode. But PR strategists in

agencies and in the companies themselves have been finding targeted ways

to reach commercial customers, and convince them that telecom technology

and services offerings are still vital to doing business.



Change amidst decline



The market is changing so rapidly these days that companies are revising

marketing plans on a monthly basis, rather than once every six

months.



One of the reasons for this is a constantly changing field of

competitors, with companies like Covad Communications and NorthPoint

going out of business and leaving customers in the lurch.



"One of the messages that we are trying to hammer home is financial

stability," says Chad Couser, manager of PR for Cable & Wireless. "This

company actually has no debt and we have money in the bank. That's a

message we try to communicate as much as we can."



Businesses are also less interested in hearing about the bells and

whistles of a particularly technological innovation. During the boom, it

was possible for companies to talk in broad theoretical terms about the

future of technology and the impact that continued innovation would have

on customers.



No one cares about the theory anymore. "Customers right now don't think

their major concern is technology," Couser adds. "They are interested in

solutions to help them, not in one particular technology."



The past year has not been a total disaster for newcomers, however.

Until recently, AltiGen Communications, which provides IP and PBX call

centers for businesses, was a relatively unknown player in the market.

But together with its agency of record, Neale-May & Partners, the

company has mounted a successful PR push for the past year.



By leveraging the media audience at trade shows and traveling across the

country to meet with reporters and analysts, Richard De Soto, AltiGen's

SVP of marketing and sales, and Neale-May have helped the company get

the attention of Gartner Dataquest, which ranked it number one in its

sector. To put that in perspective, numbers two and three were 3Com and

Cisco Systems, respectively.



One of De Soto's strategies is to use the IP technology during

interviews, so he is talking to reporters over the internet. "I'm

calling you from an IP line," he says with a laugh. "People used to

think that it was a really bad transmission on IP lines."



Still, De Soto admits that great PR has yet to really impact the bottom

line. "Brand awareness still has to occur," he says. "We need to have

more stories in the media about success with collecting clients. That is

probably one area where we have been weak."



CloudShield's challenge when it launched was to get analysts to

recognize its "packet processing" technology, which is designed to speed

up the systems of telecom providers. Taking on a three-step approach,

CloudShield and its PR agency, Launch Squad, first targeted industry

analysts, then key editorial contacts, and finally, the customer

community. "The collective weight of that helped put us on the map,"

explains Dave Clauson, founder and VP of marketing.



One strategy that is consistent across most of the industry is

recruiting customers to endorse the value of the company's products and

services.



"We spend a good deal of our effort when preparing announcements in

finding a customer who is willing to talk," says Walt Gasior, PR

director for AT&T Business, managed services. Customers may be

interviewed by the media, or prepare testimonials to be included in the

press release. "It's important because it gives substance to the fact

that what you are offering is valued by the market."



Nextel takes it one step further, inviting customers to speak at

conferences where the company is making a technology presentation. "They

can give their real-life experiences; they speak the audience's

language," explains Audrey Schaffer, Nextel's director of corporate

communications. "A lot of our customers are willing to talk about it

when they know that their own customers will be reading it. It allows

them to be viewed as being on the cutting edge."



Employee communications



Nortel is not the only company laying off staff. Qwest Communications,

Cisco, AT&T, and Verizon are just a few that have also added to the

unemployment rolls. While layoffs may be perceived favorably by the

market, and viewed as a financial necessity, companies need to take a

strategic, long-term view on how they treat employees.



"Employees are shaken," says Zanku Armenian, SVP and head of Brodeur

Worldwide's telecom practice. "Companies need to think about what we can

do to invigorate them."



Armenian says that in the current climate, companies have to pay greater

attention to employees and other constituencies that were neglected

during the boom, including customers, business partners, and

investors.



"We've typically focused on media relationships before. That has

changed," Armenian says. "On top of that, the media wants more concrete

news."



And the media will recognize poor management of key constituencies. "The

business press wants to know who is in charge, and why they are good

leaders," says John Metzger, CEO of Metzger Associates. Retaining the

best employees and providing honest, clear information on the company's

outlook will keep employees engaged, and make them good references for

the health of the organization.



Working together



The telecom players may have to abandon some of their cutthroat

competitiveness and find ways to come together as an industry to find

solutions to their problems. Ayvazian of The Yankee Group likens it to

the apparent end to bipartisan political squabbling that has occurred in

Washington, DC following the September 11 terrorist attacks. "There

needs to be an ability to get behind one initiative," he says.



To that end, The Yankee Group is developing a program called The Fifth

Utility, with the intention of bringing telecom players together to

develop a communications response to the new demands of a country

fighting terrorism.



"What's really missing is the infrastructure to allow information to be

exchanged and utilized effectively," he says. It is a problem, he

thinks, that the industry can come together to solve.



"What a boon to the telecommunications industry it would be for them to

work together," Ayvazian maintains. "To create a common project for

them, to get them working together, rather than squabbling over things

like whether the DSL market should be open to competition."



However, that will require stronger communication.



TELECOM AGENCIES

Rank Agency Name Telecom Revenues

2000

1 Fleishman-Hillard 12,702,000

2 Ketchum 9,097,000

3 Porter Novelli 9,077,000

4 Brodeur Worldwide 8,000,000

5 GCI Group/APCO Assoc. 6,023,657

6 Edelman Worldwide 5,831,896

7 Ogilvy Worldwide 5,536,900

8 PR21 3,710,274

9 KCSA 3,500,000

10 Sterling Hager 3,237,423

11 Magnet Comms 3,137,000

12 BSMG Worldwide 2,842,519

13 The MWW Group 2,508,555

14 Applied Comms 2,200,000

15 Publicis Dialog 2,171,259

16 Neale-May & Partners 2,100,000

17 Sterling Comms 2,000,000

18 Earle Palmer Brown/PR 2,000,000

19 A & R Partners 1,800,440

20 Wilson McHenry 1,800,000

21 Cohn & Wolfe 1,793,000

22 Gogerty Stark Marriott 1,729,340

23 Gallagher PR 1,665,530

24 Chen PR 1,413,150

25 Gibbs & Soell 1,334,290

SOURCE: Council of PR Firms Auditing: No audit was required for

inclusion in the rankings. The CEO/CFO/principal was required to sign a

statement verifying the accuracy of the data and agreeing to possible

participation in a random audit Disclaimer: While every effort has been

made to ensure the accuracy of these figures, PRWeek cannot accept

liability for, nor make financial guarantees based upon the information

in this chart.



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