Ina Fried

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AT&T’s President on Why T-Mobile Deal Should Pass Muster and Won’t be a Customer Nightmare

AT&T President Ralph De La Vega says that the company’s $39 billion plan to buy T-Mobile may be a shocker, but makes all the sense in the world.

In a brief interview on Sunday, De La Vega, also CEO of AT&T Mobility & Consumer Markets, told Mobilized the rationale for the deal, why it should gain regulatory approval and how the company will be able to digest such a large purchase without causing a nightmare for customers.

Here is an edited transcript of our conversation.

How did this deal come about and why does it make sense?

De La Vega: The first thing is, this deal alleviates the impending spectrum exhaust challenges that both companies face. By combining the spectrum holdings that we have, which are complementary, it really helps both companies.

Second, just like we did with the old AT&T Wireless merger, when we combine both networks what we are going to have is more network capacity and better quality as the density of the network grid increases.

In major urban areas, whether Washington, D.C., New York or San Francisco, by combining the networks we actually have a denser grid. We have more cell sites per grid, which allows us to have a better capacity in the network and better quality. It’s really going to be something that customers in both networks are going to notice.

The third point is that AT&T is going to commit to expand LTE to cover 95 percent of the U.S. population.

T-Mobile didn’t have a clear path to LTE, so their 34 million customers now get the advantage of having the greatest and latest technology available to them, whereas before that wasn’t clear. It also allows us to deliver that to 46.5 million more Americans than we have in our current plans. This is going to take LTE not just to major cities but to rural America.

You guys are already pretty big, already right up there with Verizon. How do you address any regulatory concerns that arise?

We are very respectful of the processes the Department of Justice and (other regulators) use.

The criteria that has been used in the past for mergers of this type is that the merger is looked at (for) the benefits it brings on a market-by-market basis and how it impacts competition.

Today, when you look across the top 20 markets in the country, 18 of those markets have five or more competitors, and when you look across the entire country, the majority of the country’s markets have five or more competitors. I think if the criteria that has been used in the past is used against this merger, I think the appropriate authorities will find there will still be plenty of competition left.

If you look at pricing as a key barometer of the competition in an industry, our industry despite all of the mergers that have taken place in the past, (has) actually reduced prices to customers 50 percent since 1999. Even when these mergers have been done in the past they have always benefited the customers and we think they will benefit again.

The other big concern with any merger is that you become busy with integration issues. Obviously this is a fast moving industry. How do you make sure that you guys are still doing what you need to do, rolling out the latest stuff, while you are handling a merger of this size?

I did this before when I combined the old AT&T Wireless with Cingular Wireless. I was the chief operating officer for Cingular.

Within three years we had reduced the churn rate in half and we had improved margins by 1,000 basis points. At the time of the merger, back in 2004, they said that we would lose customers and we would be too busy doing the merger integration process. The first process out of the chute, we led the U.S. industry in total net adds for that quarter, the fourth quarter of 2004. We have the same team. I am here and we are going to make sure this great AT&T team does exactly that again.

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