Honda website
Honda website

OCTOBER 26, 2000

What Formula 1 can do for AT&T

OUR revelation that Jaguar Racing is to be sponsored next year by AT&T came just a few days before the announcement that the giant American telecommunications company, established by Alexander Graham Bell over 100 years ago, is to be split into four different business units as part of a major restructuring. These will cover the different spheres in which AT&T operates with mobile services under the AT&T Wireless banner, cable telephone businesses as AT&T Broadband, AT&T Business for commercial telephone services and the main long distance fixed line services aimed at the general public. The floating of the individual units should help the company to clear away some of its short-term debts and operate more quickly in the fast-moving telecommunications world. It is the company's biggest shake-up since the US courts ordered it to be broken up into the Baby Bells in 1984. In recent years the company has been run by former IBM man Michael Armstrong who has spent $110bn buying into broadband technology and cable television. Unfortunately the company's share price has nearly halved in the last year and the break-up of the business is a result of that.

The Formula 1 sponsorship will help the company launch whatever new brands it intends to introduce as a result of the break-up of the old business. Our understanding of the deal is that AT&T is hoping to do a deal with the Ford Motor Company - Jaguar's parent company - in order to secure Ford's telecommunication business which is worth many millions of dollars each year. Such an arrangement can also help Ford reduce its telephone costs as AT&T will be in a position to offer substantial discounts if it controls the entire Ford business.

AT&T is not the first company to try to gain business through F1 sponsorship and it remains to be seen whether Ford will actually be convinced but clearly AT&T thinks that a deal costing $10-20m in sponsorship is a worthwhile gamble in Formula 1.