• by Steve McClellan  @mp_mcclellan, August 15, 2016

WPP will take an estimated revenue hit of more than $100 million with AT&T’s decision to consolidate its ad account with Omnicom, according to an assessment of the shift (announced Friday) by Pivotal Research analyst Brian Wieser. 

Wieser estimates that the departure of the AT&T business from WPP (including most of the media, handled for the past nine years by MEC and a big creative assignment for subsidiary DirecTV that has been handled by Grey) would in isolation shave about 1% off the company’s bottom line. 

“Of course, other account wins and like-for-like client revenue gains that occur on an ongoing basis will help to offset this change for WPP,” Wieser stated in a note to clients issued Monday. “For Omnicom, we might assume a better than +1% tailwind to organic revenues given that company’s slightly smaller scale.” 

That said, the impact on profitability for the two holding companies is harder to assess, Wieser noted. Large accounts are often pursued as low-profit pieces of business, used to help attract talent and cover overhead costs. And account wins like AT&T might help Omnicom agencies reel in other new accounts given the halo effect and “prestige” factor of running a giant telecom account. 

Wieser also noted that sibling entities involving “proprietary/non-transparent trading such as Omnet or Icon” may help Omnicom’s profitability on the AT&T business. 

And Wieser cited the enormous leap, virtually out of the gate that the win provides for Omnicom’s new media agency brand Hearts & Science, which will oversee AT&T’s media assignment. That brand was established just a few months ago with Procter & Gamble (North America) as its charter client. 

Combined, the two accounts equate to approximately $8 billion in annual spending. “From a standing start, Hearts & Science is now one of the largest media agencies in the United States, and a strong third brand within Omnicom Media Group alongside OMD and PHD,” said Wieser. 

Despite the big shift, Wieser concludes that for now “our bigger picture perspective on both companies is generally unchanged.” He continues to rate both companies a “hold.”