We’re live-blogging AT&T’s executive call this morning — the focus of the call, of course, is the company’s proposed acquisition of T-Mobile USA for $39 billion, which was announced yesterday.
First up is Randall Stephenson, the CEO of AT&T, giving the most top-level of views on the deal. Some of his statements:
“We’re confident that we’ll gain approval of this transaction… [it’s] a unique opportunity and a unique period of time,” says Stephenson, because it advances the FCC’s stated broadband goals.
From the first moments, AT&T’s Stephenson is keen to emphasize AT&T’s strong network (a point hotly debated by users). The deal represents “a major investment and a major commitment” towards mobile broadband, he says. Special emphasis on LTE here — the two operators together will focus on LTE. (That’s a new direction for T-Mobile, which has up to now put its emphasis on speeding up its 3G network instead.)
Spectrum, a dense network and the ability to sustain investment required are all important elements to growing mobile broadband services, he says.
Next up is AT&T’s general counsel, Wayne Watts. Putting him right up after Stephenson is a measure of how important the regulatory aspect is to this news.
For different reasons, both AT&T and T-Mobile are facing spectrum shortages. “This transaction helps achieve key policy objectives,” he says. Included in these: spectrum scarcity, and it will mean 95 percent 46 million more Americans, including rural communities, achieve wireless broadband goals. “This transaction enables the next era of…wireless broadband…and competitiveness.”
He notes that other wireless mergers that have been approved for the same reasons. Transaction efficiencies have meant cost efficiencies, he notes.
“The U.S. wireless markets is one of the most competitive in the world.” Mentioning of MetroPCS, Leap/Cricket and others — (but the gap between these smaller players and the biggies will just get even bigger — a massive deal in the case of procuring devices and offering network services).
“We expect we may have to make some divestitures.” That could mean a boost for those smaller players?
John Stankey, head of AT&T business solutions unit:
A lot of talk about redundant cell sites, and the sites we intend to keep…especially in urban centers. That will be a major deal for those people who have been complaining about AT&T’s coverage. This will improve by 20-40 percent.
“We’re excited about augmenting AT&T’s technical ranks with those of T-Mobile USA.” (Some inference there about who may stay and who will go in the merger?)
Dual-banding will be in operation for the first part of the combined operation (they two are on different frequencies, although they are both GSM operators). Harmonizing the networks for LTE will only be the final step of the merger,he says. “The current chip and handset system is already working on devices to work on LTE and UMTS [across different radio bands],” he says.
LTE is still on track for a mid-year launch at AT&T, he says.
Next up: Ralph De La Vega, head of AT&T Mobility
De la Vega’s five points for where the deal will mean most for AT&T (NYSE: T). It will improve customer experience, ARPU, room to improve churn, sizable margin opportunity, “just incredible opportunities” for next generation of services.
“We’ve done [mergers] before and we can prove that we can deliver.” (Roll-overs, offers of best rates, best devices: are all of these really not possible on T-Mobile today?)
The combined ARPUs will be higher than they are for either individual company today, he claims. (That’s one big promise…)
He says that post the Cingular merger, churn was cut by half…but isn’t some of that a function of simply less competition in the market?
CFO Richard Lindner up now.
We’re well positioned to fund the cash portion of this transaction. Service revenues will grow from $58.5 billion to $80 billion.
$7 billion in integration expenses and $2 billion capex.
As for cost cutting, some cell sites will be made redundant. In other areas: “There are obvious synergies as we reconcile billing and other areas.” (That’s a sign of where employees will be going.)
Some of the questions from analysts:
Q: Share buybacks and branding? AT&T won’t be buying back shares in the immediate term as they are dedicating all their resources to the purchase, says Lindner. De La Vega adds that it will be giving customers great value on the new combined network (in other words, no details on branding).
Q: Did you vet the transaction in advance with the Federal Communications Commission? Stephenson: no they would not have given us any indication, just a call in the due process of the deal.
Q: On next-gen spectrum issues: Volumes on our network are up 8,000 percent over last year. “We’ve got to stop and we have to think differently about how to accommodate this growth.” That’s the rationale behind the purchase. There’s a large synergy on spectrum requirements, this is going to be a chronic issue for our industry. If we realise growth opportunities (eg connecting cars) then this will be a bigger issue, but this will mitigate our spectrum issues. (The converse of this: a massive issue for other operators, particularly Verizon, who will be potentially needing to do the same — that is, acquire — to meet those demands.)
Q: On cell towers: We obviously do not expect to keep all the cell towers, says Stephenson. We will increase the cell grid — so operating costs will go up — so defining efficiencies will happen. He notes that detailed traffic engineering and detailed cost analysis has already been done on the deal: “We know exactly what we think we should keep.”
Again, the most important issue for AT&T right now is the regulatory clearance… As such, the company is closing off the conference call with yet one more message about how this deal will meet so many of the directives being put out right now by the FCC. Whether the FCC feels that way is something we will still have to see.