AT&T's (NYSE:T) proposed $39 billion acquisition of T-Mobile USA was "inevitable" given the spectrum and market positions of the two companies, Verizon (NYSE:VZ) Communications COO Lowell McAdam said. McAdam, who is in line to succeed Verizon Communications CEO Ivan Seidenberg when Seidenberg retires, said Verizon had been thinking for the past four years that AT&T would have to make such a move.
"To me, that was inevitable. It was kind of like gravity," McAdam said of the AT&T/T-Mobile deal. "It was obvious to us that they were going to have to make a move like this to meet their customers' demands."
McAdam, the former CEO of Verizon Wireless, made the comments at the J.P. Morgan Technology, Media and Telecom Conference. The executive touched on a host of other topics, including Verizon's views on the smartphone market, its LTE network and the potential of machine-to-machine communications.
On smartphones, McAdam said he thinks there will be a third dominant operating system to compete with Apple's (NASDAQ:AAPL) iOS and Google's (NASDAQ:GOOG) Android, though he made it clear that Verizon has yet to pick a favorite. "I do believe there is room and naturally you'll see a third operating system--and we'll support all three of those," he said. He named Microsoft's (NASDAQ:MSFT) Windows Phone 7, Research In Motion's (NASDAQ:RIMM) BlackBerry and Samsung's bada as potential contenders.
Additionally, McAdam addressed concerns that wireless penetration rates will soon level off, and wireless carriers' growth will slow. He said wireless penetration rates could reach as high as 500 percent, due in large part to M2M connections--and he pointed to the 6,000 companies working with Verizon at its LTE Innovation Center in Waltham, Mass., as an example. "The whole growth thing is kind of amusing to me, that people think we're somehow topping out here," he said.
On M2M specifically, McAdam said industry metrics for M2M and other non-traditional postpaid connections will have to evolve beyond revenue and profitability. "The models of the industry will change as the industry evolves," he said. "I could have a 60 percent margin on an M2M connection, but it might be $1 a month. I'll take that all day long. I'll take millions of those."
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