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AT&T Wraps Self in Flag, Says T-Mobile Deal Essential to U.S. Competitiveness

A day after AT&T’s surprise $39 billion deal to buy T-Mobile was announced, the company made its case to investors, regulators and the media on why the deal should go through.

The company positioned the deal as key to ensuring the U.S. stays competitive, saying that the country needs ubiquitous wireless broadband and has limited spectrum to get there.

As expected, there was also a lot of talk on how the deal will improve call quality and and about AT&T’s history of successfully digesting large acquisitions.

Also, check out our coverage from yesterday, including an interview with AT&T’s Ralph De La Vega, objections from Sprint and what AT&T will owe T-Mobile if regulators squelch the deal.

Live Blog

4:48 am: Mobilized is hoping that the government requires better hold music on all conference calls as a condition of allowing the deal to go through, should it allow the purchase. (Actually, the music today isn’t so bad as far as these things go. Mobilized just isn’t a morning person.)

4:56 am: AT&T clearly has its regulatory work set out for itself, with Sprint urging close scrutiny and at least a few lawmakers already calling for an inquiry.

4:57 am: Meanwhile, Business Insider notes that Sprint’s shares are taking a beating in pre-market trading, trading off around 12 percent.

Deutsche Telekom, T-Mobile USA’s owner, surged as investors cheered its strategy to unload the troubled North American carrier.

5:02 am: We’ve just been warned to silence cell phones and electronic devices. I’d love too, but of course, the cell phone is the very thing dialed in to the call.

5:05 am: Call now getting underway. AT&T chief executive officer Randall Stephenson is set to speak first.

“What I want to do over the next hour…” Well, there you go. That’s how long this will go.

Transaction represents a “unique opportunity,” Stephenson says, promising the deal will improve quality, enhance the spread of LTE and reward investors.

5:07 am: Stephenson positions deal as essential to protecting America’s leadership, saying that wireless broadband is key to national competitiveness.

He also points out that AT&T is the only major carrier that has a union workforce.

5:09 am: Now he is talking LTE, making the case that the merger will allow AT&T to spread the next-generation network further.

“As for the regulatory process, we’re very respectful,” Stephenson said. But, he said, now is the time for the deal.

“We can’t afford to wait.”

5:11 am: Capacity needs have grown and will grow another 8-10 times in the coming years, Stephenson said, pointing to growth of tablets, mobile video and other services.

“Every time we have increased speeds, usage has jumped,” Stephenson said.

5:13 am: Stephenson handing things over to the company’s general counsel to talk about the regulatory process.

5:14 am: Company is “very confident” it can achieve regulatory approval, the top lawyer says. He notes history of past mergers.

“We studied the law, we studied the facts,” he says.

Says company did its own rigorous internal review, expects regulators to do their own.

5:15 am: Says FCC will look at whether deal is in the public interest, while the DOJ will look at whether it benefits competition.

“We are confident we can meet these standards.”

5:16 am: General counsel notes spectrum challenges and the fact that T-Mobile had no clear path to a next-generation network on its own.

He also makes the “benefits U.S. competitiveness” argument. Sounds like this deal is being wrapped in the flag. “An American company investing billions of dollars in America,” he says.

5:19 am: On the competitiveness front, AT&T is touting not only competition from Sprint and Verizon, but also from prepaid and smaller competitors such as Leap Wireless and Metro PCS.

“These aggressive competitors are not sitting still,” AT&T’s top lawyer said.

AT&T’s general counsel Wayne Watts is wrapping up. Says expects thorough review and some conditions, but sees deal being approved after market-by-market analysis.

5:22 am: On to head of AT&T’s business solutions unit, who is outlining why wireless broadband is so critical to American industry.

5:23 am: Meanwhile, Sprint thought now would be a good time to introduce its Nexus S 4G phone and plans to bring Google Voice to all its CDMA phones. Mobilized will get to that in a sec, Sprint. We’re a little busy here.

5:25 am: Don’t like your cell service today? Well, this transaction is for you. Greater cell density and other benefits will improve service, exec promises.

5:28 am: Integration plan. First, combine companies’ 2G and 3G networks. Identify which cell sites to keep, make them dual-band to support T-Mobile and AT&T’s separate frequencies.

Second step will be to rationalize spectrum owned by two companies, which should free up spectrum for LTE.

5:31 am: Exec speaking now is John Stankey, head of business solutions unit, FYI.

5:33 am: Next up, Ralph De La Vega, president and CEO of AT&T Mobility and Consumer Markets. He notes that he personally has a lot of experience, having led deal 7 years ago between Cingular and AT&T Wireless.

5:34 am: Interesting balance between touting deal for investors and not spooking regulators and the public.

De La Vega did talk about higher ARPU–that’s average revenue per user. Investors like higher ARPU, but consumers have another term for it–higher prices.

5:38 am: Interesting point–“Retail store rationalization.” Just figured out another party that won’t like this deal: Mall owners.

5:39 am: On to CFO Richard Lindner, who is outlining some financial details.

There is a collar on AT&T’s share price, as well as further limit that Deutsche Telekom’s ownership in AT&T won’t drop below 5 percent.

Lindner reiterates company hopes to close deal in 12 months and will work with regulators promptly to try to reach that goal.

5:42 am: Back to touting investor benefits, such as higher margins and revenue over the long haul.

Again, this will be a fascinating balance for the company to strike as it tries to sell investors and regulators on the deal at the same time.

5:43 am: Expect $7 billion in integration expense and $2 billion in capital expenses, but will be offset as starting in third year of deal AT&T expects $3 billion per year in efficiencies.

5:45 am: Modest dilution over the first three years, Lindner said, with deal accretive after that, Lindner said.

5:47 am: Synergies in this deal should be even more than in Cingular-AT&T Wireless deal of seven years ago.

“We’ve done this before so we are confident in our ability to execute,” Lindner promises.

5:47 am: While dividends are up to the board, Lindner said there should be enough cash flow for merged company to continue dividend.

End of formal remarks and on to Q and A.

5:52 am: Company asked about change to companies’ plans before deal closes.

No change, AT&T says. LTE roll-out will continue as planned ahead of deal closing. However, companies will continue to be competitors.

5:53 am: Asked if they had a chance to pre-vet the deal with regulators, AT&T says no.

Has given heads-up calls and started dialogue, it says.

5:53 am: Asked what concessions it might be willing to offer, such as willingness to accept price caps or other consumer assurances.

AT&T says deal not just about going from 4 to 3 carriers, says regulators will look at local markets which are actually more competitive with regional carriers.

“That’s where you find lots of competitors,” Stephenson said.

“There will continue to be enormous competition.”

Says will have detailed conversations with staff at regulators, but too early for specifics on possible concessions. “I cannot now predict what other issues may arise.”

5:58 am: AT&T says it doesn’t plan to drop previously announced deal to acquire former MediaFlo spectrum from Qualcomm for nearly $2 billion.

“We want that spectrum. We need that spectrum.”

6:00 am: Also interesting: No T-Mobile presence on the conference call. Just AT&T talking about the deal.

6:04 am: Asked whether AT&T thinks it may have to shed subscribers on the order of 15 percent, as Verizon was forced to as condition of Alltel acquisition, Stephenson said his expectation is that no divestitures should be required. But, he said, “I don’t even want to get into that right now.”

6:10 am: Last question. On network synergies and capital spending relative to “uneven performance” of network in recent years. (I think that is a subtle reference to all the dropped calls and other complaints)

There’s a lot of variables more than just capital spending, AT&T said.

With that, the call ends with a final wrap-up from AT&T placing the flag back around the deal.

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