AT&T's Stephenson: It will take 18 months to build out 'robust' LTE coverage in Mexico

AT&T (NYSE: T) CEO Randall Stephenson said it will likely be around 18 months before AT&T can deliver a truly strong LTE data experience beyond urban areas in Mexico. The AT&T chief said though that he is confident AT&T can ride the wave of mobile data growth that the carrier expects from Mexico's burgeoning middle class.

Speaking at the J.P. Morgan Global Technology, Media and Telecom Conference, Stephenson said it "will take 18 months before you have a really good, robust LTE experience" with "broad, ubiquitous coverage" in Mexico. He said AT&T will move quickly to deploy LTE in urban areas and on highways, but in more rural areas and popular vacation spots it will take some time.

AT&T closed its $1.88 billion deal for Nextel Mexico at the end of April, a few months after it closed a $2.5 billion deal to purchase Mexican wireless carrier Iusacell.

AT&T's Iusacell controls between 20 and 25 MHz of 800 MHz spectrum, primarily in the southern half of the country, including Mexico City and Guadalajara, and an average of 39 MHz of PCS spectrum nationwide. The carrier's Nextel Mexico business controls around 20 MHz of 800 MHz spectrum and 30 MHz of AWS spectrum.

Stephenson said that AT&T now has "a better spectrum position in Mexico than anybody." He noted that AT&T's goal is to have "one seamless LTE network" between the U.S. and Mexico.

"We are convinced that what we experienced in the U.S. we will experience in Mexico" in terms of mobile data usage, Stephenson said. AT&T will be able to offer a single rate plan and data plan that U.S. customers can use in Mexico, which he said will be a unique offer for both consumers and businesses. Indeed, he said that by year-end, customers on AT&T's Mobile Share Value shared data plans will be able to use that same plan at no extra cost in Mexico and have data used in Mexico deducted from their data bucket.

In terms of other opportunities in Latin America, Stephenson said if AT&T saw interesting businesses opportunities it would take a look at them but right now the focus is on Mexico.

Turning back to the U.S., Stephenson said that AT&T is moving to re-engineer its network through Software-Defined Networking. SDN is designed to let operators cut costs and deliver new services to customers faster by moving more of carriers' core networks to the cloud and shifting away from proprietary hardware.

"The capacity implications and the cost implications of this this are really dramatic," he said. Last week John Donovan, senior EVP of technology and operations for AT&T, confirmed that AT&T is on track to virtualize 5 percent of its network this year, en route to virtualizing 75 percent of the network by 2020.

Stephenson said that when carriers move data centers from dedicated physical hardware to a cloud architecture, utilization rates of cloud services jump from around 40 percent to 90 percent. He noted that it is more capital-efficient to move to that model.  

In the U.S., Stephenson said AT&T still has the option to move millions of customers to smartphones. At the end of the first quarter, 84 percent, or 57.2 million, of AT&T's postpaid phone subscribers had smartphones. He also said AT&T will continue to focus on getting smartphone customers to add other devices likes tablets, wearables and connected cars to their shared data plans.

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