As T-Mobile and Sprint fight an antitrust lawsuit this week in the hopes of combining into one wireless operator, AT&T’s operations chief said that no matter the trial outcome, it means a level of distraction for both carriers.
“It’s really good that it’s not our turn to be sitting in a federal court room and the distraction that comes with that,” said AT&T’s president and chief operating officer, John Stankey, speaking Tuesday at the UBS Global TMT investor conference.
AT&T and Stankey himself, who’s been with the company for more than 30 years including corporate strategy and M&A roles, is no stranger to megamergers—both successful and failed. AT&T closed its $85.4 billion acquisition of Time Warner in 2018, despite an antitrust suit from the U.S. Department of Justice. In 2011, AT&T ditched its own failed attempt to take over T-Mobile after facing pushback from regulators including the DoJ.
Immediate trial aside, regardless of whether the nation’s third- and fourth-largest wireless carriers are ultimately successful in their merger attempt, both T-Mobile and Sprint will have their hands full, Stankey indicated.
“We don’t know what the outcome of this trial is going to be,” he said. “But whatever it is, no matter which way it comes out, it’s going to mean a degree of distraction.”
If unsuccessful that means distraction from figuring their respective next moves. On the flip side, if approved, T-Mobile and Sprint have integration efforts ahead of them, which Stankey categorized as “more of a navel-gazing exercise internally, than it is necessarily a market-based exercise.”
Meanwhile, he noted, AT&T is out executing its own plan.
“The important thing for us is to continue to run our play,” said Stankey.
That play includes adding network capacity with additional spectrum and getting ready for the transition to 5G, in conjunction with finishing AT&T’s FirstNet public safety network buildout.
AT&T believes customers are seeing network performance enhancements, which is driving positive business trends as a result, he said.
“We believe our 5G E performance is on par or superior to anything anybody is going to turn up in the 5G environment in the near-term,” Stankey said.
2020 device upgrades, plus bundling HBO Max
Aligning with previous comments from AT&T executives, he reiterated that the company expects 2020 to kickstart a device upgrade cycle.
“2020 is going to be a major air-interface transition, which means customers are going to say it’s now worthwhile for me to upgrade my device,” Stankey said, noting that was seen in the transitions to both 3G and 4G. “It’s been a suppressed [upgrade] environment over the last couple of years and when that [2020 momentum] happens that opens up opportunity for us.”
He said opportunities include moving customers up into higher-tier unlimited plans, which helps drive ARPU increases, and the ability to entice customers to bundle wireless and entertainment offers, contributing to lower churn over time.
“When you’re in those higher unlimited plans and you’re getting entertainment and you’re getting the benefits of that great performing network to watch and stream those services that’s a good thing for us from a customer satisfaction perspective and long-term loyalty perspective,” he noted, adding AT&T plans to chase that cycle in 2020.
AT&T plans to have nationwide 5G by the mid-point of 2020 using its current spectrum holdings, including low-band 850 MHz. He said the increased capacity puts AT&T in a good position with more flexibility, pointing to the potential for MVNO deals.
“Now we can step back and ask, do we want to be more aggressive in the wholesale space, where we have not been for the last several years in our more capacity constrained environment.”
In terms of whether 5G upgrade cycles will spark a fresh round of price and promotion competition among carriers, Stankey said he’s not concerned. More so than with 3G and 4G, AT&T expects to navigate the expected upgrade cycle from “a position of strength,” he said, pointing again to network enhancements, such as 5G-capable equipment, additional spectrum and LTE-Advanced technologies.
He believes consumers won’t go elsewhere to get a better performance network, adding: “We have incredibly competitive pricing in the market, value, and third we’re going to be right in the sweet spot of that as we get into the device upgrade cycle as we launch HBO Max in May.”
Bundling content with wireless isn’t a new strategy for the major carriers—T-Mobile offers free Netflix, while Verizon recently started offering a free year of Disney’s new $7 per month Disney+ service.
However, the COO stressed that unlike Verizon, AT&T owns the content it’s offering and while acknowledging Disney+ is a good product, Stankey claimed HBO Max offers double the amount of content than Disney+, as well as regular HBO—which currently costs $15 per month. Current HBO subscribers will get two times the content of their current service while paying the same price, he noted.