Expects AT&T merger with Time Warner to be ‘litigated in court’

In a Jan. 31 conference call, AT&T President and CEO Randall Stephenson, highlighting Q4 2017 financial results, provided color on the service provider’s plans to deploy FirstNet and millimeter wave spectrum in 2018, and further discussed the outlook for the pending merger with Time Warner, which the federal government is attempting to block.

In 2017, AT&T launched a commercial service dubbed 5G Evolution, which uses 4X4 MIMO, carrier aggregation and 256 QAM to increase throughput for users with compatible devices. The company also began limited deployment of small cells that support Licensed Assisted Access (LAA), which enables aggregation of licensed and unlicensed spectrum; those sites are live in parts of Indianapolis, Ind.

Looking ahead, Stephenson said FirstNet “is going to prove to be the foundation for taking wireless network performance to a completely new level. It’s designed and it’s hardened for America’s first responders. That will be our foundation for broad 5G deployment.” By the end of 2017, all 50 states, the District of Columbia and two U.S. territories opted-in to the program. The First Responders Network Authority has allocated $6.5 billion for the contract, and AT&T plans to invest an additional $40 billion. The arrangement allows AT&T to tap into 20 megahertz of 700 MHz spectrum for the dedicated public safety LTE network, which the carrier can also access for commercial services.

“We plan to deploy 40 megahertz of fallow spectrum that we’ve accumulated over the last few years,” Stephenson said, “along with the spectrum from FirstNet. And we’ll also be deploying the millimeter wave spectrum from our FiberTower purchase. This is going to give us a quantum leap in both capacity and performance.” AT&T now controls FiberTower’s millimeter wave spectrum, which Stephenson described as providing an average of nearly 360 megahertz of nationwide spectrum in the 24 GHz and 39 GHz bands. “Millimeter wave, it’s critical to our 5G strategy and we’ll be putting this spectrum to work later this year.”

He said, in 2018, AT&T is “laser-focused…on building the world’s premier gigabit network,” and that its spectrum position “is giving us a powerful platform to accelerate our move into a gigabit world. We expect to be the first U.S. company to launch mobile 5G service by and the end of this year, and our fixed 5G trials are going very well. We’re learning a lot, we’re gaining great insights into making this product a very strong commercial offering.”

Stephenson further lauded Republican-led tax reform efforts, which he said allowed the company to spend $1 billion on bonuses for 200,000 “front-line employees,” as well as provide a voluntary medical plan contribution. He also said the passage of a tax reform led AT&T to increase its 2018 capex plan by $1 billion.

On the software-defined networking front, Stephenson said AT&T has virtualized 55% of its network, “and, as a result, you’re seeing our networking and our IT cost structure falling significantly.” On its fiber holdings, he said the network reaches 7 million customer locations, a figure he expects to double in the next 18 months.

Time Warner acquisition and DOJ lawsuit

Last year AT&T announced plans to spend $85 billion to acquire Time Warner, a move the Trump administration’s Department of Justice is trying to block in the United States District Court for the District of Columbia based on a lawsuit filed in November last year. DOJ, in its filings, said AT&T “likely would…use its control of Time Warner’s popular programming as a weapon to harm competition.” At the time, Assistant Attorney General Makan Delrahim, head of the DOJ’s antitrust division, said, “This merger would greatly harm American consumers. It would mean higher monthly television bills and fewer of the new, emerging innovative options that consumers are beginning to enjoy. AT&T/DirecTV’s combination with Time Warner is unlawful, and absent an adequate remedy that would fully prevent the harms this merger would cause, the only appropriate action for the Department of Justice is to seek an injunction from a federal judge blocking the entire transaction.”

“Our top priority for 2018,” Stephenson said, “is closing our deal to acquire Time Warner. We were obviously surprised when the government decided to try and block the merger. It is a classic vertical merger between two companies that don’t even compete with one another. With 50 years of legal precedent, it’s the type of business combination the government has consistently approved with reasonable conditions. We do expect this case will ultimately be litigated in court. We remain very confident that we will complete this merger.” The trial starts on March 19.

For a detailed breakdown of Q4 financials, as well as a webcast of the investor conference, click here.






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