AT&T CEO Says Large Telco M&A Unlikely
NEW YORK ( TheStreet) -- AT&T
Stephenson said at the Goldman Sachs Communacopia conference on Tuesday that the DOJ made clear signs it won't allow consolidation from four nationwide players in the wireless industry to three. He cited AT&T's failed $39 billion acquisition of T-Mobile
"For the next three years, we feel large scale M&A is not likely," Stephenson said of the U.S. telecom sector. "It seems to us the DOJ has been loud and clear," he added.
The AT&T CEO did reflect on the impact of merger and acquisition activity in the telecom sector, which sped up in the wake of the company's failed bid for T-Mobile.
Noting acquisitions such as SoftBank's recapitalization and takeover of competitor Sprint
Sprint's recent acquisition of wireless provider Clearwire
In terms of AT&T's core business, Stephenson forecast that the company's pension plan will end the year fully funded. The AT&T CEO also spoke about the company's focus on the transmission of wireless and wireline video service in coming years.
AT&T will make a big investment in the connected car and all of the video transmissions that are expected to emanate from automobiles as soon as 2014. "The future for us whether it is fixed line or wireless is our video capability," Stephenson said.
Those investments may also prove to be a benefit to AT&T's overall profit margins, particularly in its wireless business.
Stephenson said that as AT&T deploys its nationwide LTE network, capital spending is becoming roughly 50% more efficient. In New York City, about half of AT&T's total data traffic has moved to the company's LTE network, he said.
"We believe the cost dynamics are working in our favor ... I have never been in a situation where the bias for capital spending is a downward bias," Stephenson said, adding that it would be disappointing if the company's wireless margins don't expand by the end of the year.
One area of margin expansion may come from AT&T's changing smartphone subsidy model, as the company grows its customer base and renews its existing user base. Fourth-quarter wireless margins may improve as AT&T shifts its subsidy structure to 24-month upgrades, Stephenson said.