Wednesday, September 21, 2011

AT&T Still Confident in T-Mobile Deal

AT&T remains confident that its T-Mobile acquisition will come to a successful resolution, said Randall Stephenson, AT&T's CEO, speaking at the Goldman Sachs Communacopia XX Conference. Despite the DOJ lawsuit, Stephenson said the deal continues to gain support from the high tech community, labor unions, and numerous politicians because of the advantages it offers -- more services from the combined spectrum, $8 billion in additional network investment, and the repatriation of overseas call center jobs. The trial date of February 13 has just been set. If the case goes to trial, it might take 4-6 weeks to reach a conclusion. AT&T is seeking to pursue a separate negotiation track with DOJ and FCC that might bring resolution before the trial. Should the deal collapse, in addition to the break-fee and certain spectrum, T-Mobile would also gain a multi-year 2G/3G roaming agreement, which Stephenson said would not have a material impact on AT&T. Some other notes from his talk:

* AT&T had forecasted low growth for the U.S. economy in 2011 and so no adjustments are needed for its cost structure at this time. The company expects the low-growth or no-growth scenario for the U.S. economy to persist in 2012.

* Stephenson does not expect the availability of the iPhone on the Sprint network will be a factor for AT&T. The smartphone's adoption rate has continued to grow on the AT&T network even after if became available on Verizon.

* The nationwide HSPA+ upgrade was completed on schedule.

* Stephenson is very excited about LTE. The company had just launched its first five LTE markets and is on pace to add 15 more markets by the end of the year, covering a total of 75 million POPs. He sees big possibilities in LTE + Cloud services. The network is delivering 15 Mbps but the biggest advantage for LTE is its low-latency.

* The Chicago LTE network is using 2.1 GHz AWS spectrum.

* The cost curve benefits of the LTE network are going to be significant. There will be a capacity gain for the network and there will be a margin boost.

*The Uverse rollout will hit its target of a 30 million POP footprint this year. Going forward, AT&T is only planning fill-in upgrades to its plant. The deployment of new IP DSLAMs in certain markets will continue.

* As for sharing video content between Uverse and its LTE subscribers, Stephenson said AT&T has long been pursuing a multiscreen strategy. The issue is not really a technological one. The content guys are still trying to figure out the right business model for distributing across platforms.

A recording of the presentation is on the AT&T investor relations web page.