By Maria Saporta and Urvaksh Karkaria
Friday, March 25, 2011
AT&T Inc.’s proposed acquisition of T-Mobile will put Atlanta in the catbird seat in wireless communications.
AT&T Mobility, the wireless arm of Dallas-based AT&T and the fastest-growing part of the company, is headquartered in Atlanta.
“I think this deal and this merger can be nothing but good news for Atlanta,” said Ralph de la Vega, president and CEO of AT&T Mobility and Consumer Markets, in an exclusive interview March 23. “Atlanta will be home to a unit of AT&T that is the growth engine, that will continue to grow for the foreseeable future, and that’s a good thing.”
De la Vega also said that plans call for AT&T Mobility’s headquarters to remain in Atlanta once the acquisition goes through the approval process, which is expected to take about 12 months.
“We don’t have any plans to make changes in the way we run our business,” de la Vega said, adding that AT&T is a large business with multiple operating centers — in Dallas, the New York/New Jersey area and the West Coast, among others.
AT&T employs about 20,000 people in metro Atlanta, which is a major operations base for the global telecommunications company.
Asked if AT&T’s employment will grow in Atlanta as a result of the T-Mobile deal, de la Vega said, “It clearly could.” But he also said many issues will need to be worked out to integrate the two companies.
The proposed T-Mobile acquisition helps AT&T (NYSE: T) muscle up in its fastest-growing sector — the wireless business, telecom analyst Jeff Kagan said.
About 50 percent to 55 percent of phones AT&T sells are smart phones, which allow consumers to surf the Web, Kagan said.
AT&T’s wireless business accounted for 47 percent of the company’s total revenues in 2010, up from 44 percent in 2009. During 2010 it added nearly 8.9 million net new customers, up from 7.3 million in 2009.
And wireless is very profitable, accounting for 67 percent of AT&T’s 2010 income, up from 63 percent in 2009, according to the company’s annual report.
“The beautiful thing about this is that the mobility business goes from being close to $60 billion to $80 billion headquartered in Atlanta,” de la Vega said. “It’s the fastest-growing part of the business. Atlanta is in a good position.”
Atlanta is home to another fast-growing division — AT&T’s emerging devices business that didn’t exist two years ago.
“We’ve added several jobs in that division this year,” de la Vega said.
Although Atlanta will benefit, de la Vega pointed out that the deal is good for the entire company and the consumer from several angles.
“What we have seen that’s really driving our industry is the growth of data,” de la Vega said. “We have seen data usage grow by 8,000 percent in the last four years. The amazing thing is that we think this is just the beginning. The mobile broadband revolution is fueling all of this demand. What we see in the next five years is growing eight to 10 times more. That’s putting tremendous pressure on the spectrum.”
The AT&T/T-Mobile deal will allow the company to more efficiently use that spectrum to handle that increased demand, he said.
Also, when the two networks combine, its cell grid will become more dense with additional coverage that will add capacity in urban areas and improve quality.
Getting the additional T-Mobile spectrum is critical for AT&T, which has been publicly criticized for buggy service. Having additional spectrum will reduce congestion on AT&T’s network, reducing the number of dropped calls and improving call quality.
Adding spectrum gives AT&T “more lanes on the highway,” Kagan said.
AT&T also has committed to deploy the latest generation of mobile broadband technology — 4G LTE (or long-term evolution). De la Vega said AT&T will be able to serve 95 percent of the country with this technology.
The proposed T-Mobile acquisition will help create a more robust infrastructure and network, allowing AT&T to serve a larger customer base, across a wider geographic area, said Nikil Jayant, executive director of the Georgia Centers for Advanced Telecommunications Technology.
Complementary capabilities of AT&T and T-Mobile, in wireless and backbone infrastructure, would boost coverage in rural areas and also drive innovation in general, Jayant said.
“Beyond phone calls, text messages and Internet video and gaming,” he said, “AT&T will be able to deliver richer and societally important services such as mobile health care.”
Jayant noted the proposed merger also offers a timely context for the nation to practice consumer advocacy.
The proposed acquisition was popular with investors in the United States and internationally with AT&T’s stock increasing after the deal was announced March 20, a rare occurrence that de la Vega sees as a “huge vote of confidence” in the deal.
“This is a world event that the markets responded to,” he said.
AT&T also has committed to invest another $8 billion over the next seven years in its broadband technology infrastructure.
Business leaders familiar with Atlanta’s history in the communications industry see this move as a positive development.
“I think this is good news,” said Georgia Tech President G.P. “Bud” Peterson. “Wireless is becoming a larger and larger part of AT&T’s business for obvious reasons. They pick up two value attributes with the acquisition: market share and spectrum/bandwidth.”
At one time, Atlanta was home to BellSouth Corp., once the largest of the nation’s Baby Bell companies. Back in 2003, BellSouth passed on the opportunity to buy the legacy AT&T. A sister Baby Bell company — SBC — then stepped in and bought AT&T, adopted the world-renowned name, and then turned around and acquired BellSouth in 2006.
At the same time, however, SBC and BellSouth had formed a joint company for their wireless business, Cingular, based in Atlanta. De la Vega was Cingular’s chief operating officer, and he ended up overseeing the integration of Cingular Wireless and AT&T Wireless in 2004.
This new deal bodes well for Atlanta, according to David Dorman, an Atlanta native who is a longtime telecommunications executive, a former CEO of AT&T and currently the non-executive chairman of Motorola.
“If you add T-Mobile, wireless is their biggest, most exciting and fastest-growing business; and being right here in Atlanta is a plus,” Dorman said. “Having AT&T’s most significant business in Atlanta is a real feather in Atlanta’s cap.”
Dorman agreed that the deal also made sense from a technology standpoint because the two companies have a common platform and because it will add much needed capacity to their spectrum.
“Wireless is growing like crazy, and wireless data is growing even crazier,” Dorman said. “I think it’s actually quite good for both companies, and it’s also good for the consumer.”
Dorman said the wireless business has helped Atlanta regain its standing in telecommunications. “By far the brightest star in their constellation is AT&T wireless going back to the Cingular partnership,” Dorman said. “Given how much the center of gravity has shifted to wireless, Atlanta is well-positioned.”
AT&T continues to invest in the community. On April 2, it and the Georgia Aquarium will unveil the AT&T Dolphin Tales — which represents a multimillion-dollar, multi-year investment for the lead sponsor.
“This will surely do nothing but benefit Atlanta and our company,” de la Vega said.
In summing up the deal and what it means for Atlanta, de la Vega said: “We are fixing to have one of the most exciting phases of telecommunications in our history with a huge jump in mobile communications. This puts AT&T right in the middle of that growth.”