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Best 'Merger in Telecom History'

AT&T Hasn't Uncovered Any Health Threats From Lead-Sheathed Wires, CEO Says

AT&T still has questions about reporting in The Wall Street Journal this summer that warned of health threats from legacy lead-sheathed telecom cable (see 2307210004) owned by AT&T and other carriers, CEO John Stankey said Wednesday at a Goldman Sachs financial conference. AT&T has done its own investigation and come up with different findings, Stankey said. Meanwhile, T-Mobile CEO Mike Sievert said at the conference his company’s buy of Sprint was likely “the most successful merger in telecom history.”

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We started trying to understand well what it is that The Wall Street Journal said and what do they know,” Stankey said: “We really don’t know a lot of that yet. They haven’t disclosed any of the detailed testing results that were the foundation of their story.” Some conclusions were “inconsistent” with what “experts in the field felt was the case,” he said.

AT&T immediately started its own investigation, Stankey said. “Our results were different,” he said. New York state tested one of the sites cited by the paper and found “no public health crisis at that site,” he said. AT&T had a contractor retest the Lake Tahoe site that’s the focus of an ongoing lawsuit and was cited in the article (see 2308180001) and found “no public health crisis or risk,” he said. On Tuesday, AT&T got results back on another site from the EPA, which also found no health risk, he said. “We’re going to continue to work with our regulators who are the authorities … like the EPA” and “share information and data,” he said. “We feel we’ve been responsible,” he said. The WSJ didn’t comment Wednesday.

AT&T is growing its share of service revenue at a faster pace than T-Mobile, and doing so without selling a fixed-wireless product, Stankey said. “That should give you insight about how we’re thinking about going to market,” he said. “We are using our investment in the wireless network to find good, high-value, profitable customers,” he said.

Stankey noted AT&T has spent $100 billion on infrastructure and spectrum since he became CEO three years ago. “That’s a lot of money,” he said. Customers are relying more on what AT&T offers and getting a better value as a result of the investments, he said. Despite the “narrative” from some analysts, the behavior of AT&T and its competitors has been “very rational,” he said. At AT&T, average revenue per user is up, churn is at “historically low levels” and “customer satisfaction is up,” Stankey said.

AT&T subscriber growth was down in Q2 from the year-earlier quarter (see 2307260060) primarily because the company declined to make a bid on a large government account it served in the past “because of profitability” and as a result of new rate plans offered by Verizon and T-Mobile, Stankey said. In Q3, AT&T is seeing growing momentum, with a focus on customer segments that were “under-penetrated,” including public safety and the Hispanic market, he said. “We’re executing well,” he said. “I feel very comfortable with where the business is right now,” he said.

Stankey questioned how much of a threat cable wireless will present long term given their cost of providing service and growing data demands. “It’s tough to be a price leader forever,” he said: “You get into a situation where just giving away a line for free isn’t sustainable.”

T-Mobile CEO

Sievert acknowledged the wireless market is getting more competitive. “That’s maybe in part due to our merger,” he said. But analysts have asked the same questions about the challenges of competition over the past 45 quarters, he said.

We’re really comfortable in this competitive environment, and it is not rapidly changing,” Sievert said. “We have the best network in this space,” Sievert said. “Cash flows across this industry are way higher than five years ago or 10 years ago,” he said: People say the market is good now, “but isn’t it all about to fall apart? I don’t think so.”

Sievert said he wrote a relatively lengthy letter last month on why the company was slashing staffing levels by 7% to fully explain why changes had to be made (see 2308240028). “This is not a decision that we took lightly -- it’s not something that we do at T-Mobile every year,” he said.

Sievert announced that T-Mobile will authorize an additional $19 billion in share buybacks, adding to its existing $14 billion program. T-Mobile parent Deutsche Telekom won't sell any shares, he said. T-Mobile also plans to pay its first dividend of about $750 million in Q4, with expectations of paying out $3 billion in total dividends next year, with the payment expected to grow about 10% annually, he said.