AT&T sees $1 bln mobile, U-Verse ads

By Ritsuko Ando and Daisuke Wakabayashi

NEW YORK (Reuters) - AT&T Inc. (T.N: Quote, Profile, Research, Stock Buzz) expects targeted advertising related to its video and wireless services to become a billion dollar business in three years, a senior executive said on Tuesday.

AT&T's combination of being the largest U.S. broadband Internet provider, a wireless carrier and its nascent U-Verse video service delivered over broadband networks provides it with a unique opportunity to sell advertising, said John Stankey, AT&T's president for operations support.

"We really expect over the next three years that we are going to be able to put this into something significant to contribute to the bottom line," Stankey said at the Reuters Global Technology, Media and Telecoms Summit in New York.

Stankey told Reuters Television that advertising over AT&T's networks could be a billion dollar business over the next three years.

AT&T said its advertising revenue from U-verse and wireless today is very small. The company last year created a team to put the infrastructure in place to take advantage of the advertising revenue opportunity.

"There is a great opportunity in advertising especially given the assets that our business has. We have a lot of wireless subscribers. We are the nation's leading Internet service provider and of course now we are getting into TV," said Stankey.

"We think there is a unique opportunity to move beyond the linear advertising. It can be a billion dollar business over time," he said.

AT&T, the top U.S. phone company, plans to spend between $6 billion and $6.5 billion to build out the infrastructure for U-Verse, which started rolling out last year over high-speed fiber-optic networks.

The company has said it expects the service, which is built on top of Microsoft Corp. (MSFT.O: Quote, Profile, Research, Stock Buzz) Internet protocol television (IPTV) platform, to be made available to 18 million homes in 13 U.S. states by the end of 2008.

Stankey said AT&T expects the U-Verse service to allow advertisers to better target customer interests and explore new interactive ways to TV watchers because it runs on top of an Internet network.

For some of its advertising, AT&T said it plans to find a partner to sell and serve advertising over the IPTV platform to consumers. When asked why it did not choose Microsoft as that partner, Stankey said such a decision would be "premature."

Microsoft, which trails Google Inc. (GOOG.O: Quote, Profile, Research, Stock Buzz) and Yahoo Inc. (YHOO.O: Quote, Profile, Research, Stock Buzz) in Web advertising sales, has targeted other platforms like mobile and IPTV as a way to generate ad revenue.