Martin Sorrell, CEO, WPP, said 2009 is going to be a tough year. "One the US will have a new President who will have to pick up the pieces after the current President George Bush exits. Second, China must relax after the strong it had, and India too can't carry on with its 10% GDP growth."

According to Sorrell, there will be a 1-2% impact of a slowdown on growth in the advertising industry. "Countries that continue to grow, like India, will still help us, because advertising is a portion of GDP. In India, it is growing at 20%, and sometimes at 30%. In the first five months, India has grown by more than 20%, which is higher than China. But India has to relax. If the Indian economy is to grow at 5-6% next year as opposed to 10%, one would still see double the rate in marketing services."

He does not see a recession in the US or other countries in 2009. "I don't think there will be a recession in the classic sense, which is two quarters of negative GDP growth, either in the US or worldwide. But there will be or is a slowdown and that is having an impact on Western Europe and US."

Excerpts from CNBC-TV18 Anuradha Sengupta's exclusive interview with Martin Sorrell: 

Q: For several years now, you have been consistently looking forward to 2008 because of the triple triggers of Olympics, US Presidential elections and the Euro Football Championship. We are now in 2008 and US is in a recession.

A: The US is not technically in a recession, although lot of people say so. There is a slowdown coming in Western Europe and we are beginning to see signs of tightening. We saw it in March and clearly that is having an impact in the US.

Q: Isn’t it negating the impact of those 3 triggers you were looking forward to?

A: Not yet. But there is no doubt that 2009 is going to be a tough year. Even when we go through 2009, there will not be a recession in the classic sense which is two quarters of negative GDP growth either at the US level or worldwide level. But there will be a slowdown and that is having a impact on Western Europe and is going into the US as well.

Q: But it is going to impact Asia as well. We are talking about inflation in India at 11%.

A: Yes, in the last couple of days, there has been that announcement and in China too we have got significant inflation. So, they will have an impact. The world is not decoupled. If you talk to the World Bank, they still look for growth across the world in GNP of around 4 to 5%.

Slower growth in Western Europe and the US is being compensated. Clearly, India is growing at 10% GNP and so is China. I think 2009 will be a tough year. We will have a new US President who will have to pick up the pieces after George Bush and because China must relax after the Beijing games. India too cannot carry on at 10% GDP growth.

Q: Are you saying that your industry will see the impact of the slowdown worldwide next year?

A: Yes. There are already signs of tightening. The toughest part will be in 2009. I don’t think we will come out of this until 2010. We have 4-5 events in 2010 that should help. But it is tough stuff at the moment. Coming into next year, we have had the subprime crisis, insurance issues, food and house prices both the US and UK put pressure on the consumers and this massive inflation in input prices and commodity prices, which have driven up prices in turn of packaged good companies. So, we are talking about some pretty heavy features that we have to overcome. We have had 10-12 years of unprecedented growth and low inflation, but it is now picking up in all the major economies

Q: By how much do you sense the industry will not grow?

A: This year it was 4-5% or 5-6%, which will be better than last year. Clearly, there is 1-2% impact of the slowdown. The countries of the world that continue to grow like India will still help us because advertising is a portion of GNP.

In India, for example, it is growing 20% and sometimes 30%. India, for the first five months of this year is up more than China, by more than 20%. But it has to relax. So, if the Indian economy is to grow at 5-6% next year as opposed to 10% you would still see double the rate in marketing services.

JWT winning the first Grand Prix for India in Cannes is symbolic of the changes that are taking place in the Indian economy and the growth that we are seeing there.

Q: For 2010, you were looking at Asia revenues of USD 3 billion. Is it on target?

A: We had the second or third Asian get-together of WPP companies about 3-4 weeks ago. Despite all the noise from our competitors, the gap in Asia now is getting wider. Obviously, organic growth is the key driver; winning more businesses and developing relations with the growing band of multinationals. The Tatas, the Ambani brothers and Sunil Mittal are making aggressive moves.

Q: How do you react when you pick up the Financial Times and read about the two Ambani Brothers squabbling over their business? What kind of an impression does it create of India or send out to the world’s financial community?

A: There are squabbles among families in every country and I don’t think it matters. That is not unique to India. It is not a common thing but it is a thing that you see elsewhere in the world. So, I don’t see it impacting.

Q: Obviously this is a time to celebrate because you are looking at awards and the best work in the industry. Yet my sense is that the economy is slowing down and the community seems pretty insulated. The TNS numbers for the first quarter says that it is flat. Does that mean the community is going to be insulated in terms of spends?

A: When you say insulated in terms of spend, this is a unique event and all the bookings for this were made before Taylor Nelson Sofres (TNS) came out with their numbers. I think this is a fairly insulated community. When they come to Cannes, they want to enjoy themselves.

I am not sure that is necessarily the image you want to propagate for the industry. To celebrate success is one thing but to celebrate other things is another thing. So, it is the event which is the most important advertising event. It still has to shift to all the other things we do.

Q: You had your eye on Synovate for a while, but has anything happened on that front?

A: We took a while around Synovate. The two are not mutually exclusive but we have had our eye probably on Taylor Nelson Sofres (TNS) for a longer time. We went and saw TNS on March 27 for the first time and talked to them. I think they were always nervous of our possible advances. But we went and talked to them even before we knew they were talking to Germans.

Q: How exactly will Taylor Nelson Sofres (TNS) help WPP? Why do you want it so badly within the WPP fold?

A: It would be nice to have it.

Q: You have said 30% chance we stay; 30% we go up and 10% we turn hostile.

A: There are four things that could have happen now: we could walk away, which we put 30% probability on. There is 30% probability that we stay where we are i.e we just deal with the current offer or proposal, which they have said is inadequate. There is a 30% probability that we would increase from where we are to improve our offer and 10% probability that we would go hostile. My reading of the probabilities is 60%. We stay where we are or we walk away.

The most difficult thing for the TNS shareholder is to figure out where the stock will be trading if we walk away because a merger of equals brings no immediate value. It is all these promises of 15% margins and 60-70 million pound synergies in 3-years time and these are not forecast by the way.

When people make these synergy estimates, they do not put their names to them. They just say it is a possibility and the advice is to just add up the numbers and make sure that they are okay. Margins of 15% in the research industry is unknown.

The non-traditional advertising business should be two thirds of our business rather than a half. Measurability that is direct and market research should be half of our business rather than a third. TNS helps us to reach that objective.

Q: How long do you think before this comes to closer?

A: That is upto TNS and GfK. It is about dealing with a company based in Europe with a strong tradition going back to 1934 in Bavaria. It is a very traditional company.

Q: What changes do you want to see in the business? Interestingly, Group M Mindshare went through some restructuring.

A: Mindshare changed their structure and are always trying to evolve. I would not call it a restructure. I would call it a refashioning of their strategic objective.

Q: Why would someone want to come to a media-buying agency and look for management consultancy?

A: I do not think it is a management consultancy. They are referring to media planning and buying and channel planning.

Q: It was really unusual to hear WPP agency Mediacom sell a part of its stake to Sam Balsara because from what we know of WPP in India. You are looking to buy and to hear you sell is unusual. What was happening there?

A: We injected Mediacom into Sam’s operation and ended up with a minority stake. Sam is certainly talented enough to run his own business. We have got a lot of confidence in him. His daughter works in the business too and so it is dynastic business as well. We thought it was a useful addition to the operations in India and particularly to work with a man of Sam’s quality.

Q: Isn’t it unusual for WPP to do this?

A: No because we have 49.9% interest in CHI (Clemmow Hornby Inge), the company we bought in the UK. So, it is not unusual. I don’t think there is a typical solution.