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AT & T, T-Mobile Merger ‘Inevitable,’ says Verizon COO

Tue, 05/17/2011 - 1:33pm
Maisie Ramsay

Verizon Communications COO Lowell McAdam said at an investor conference Tuesday that the company had expected AT&T to acquire T-Mobile USA for years, calling the deal “inevitable” because of AT&T’s need for spectrum.

“To me, that was inevitable. It was kind of like gravity,” McAdam said at the J.P. Morgan Global Technology, Media and Telecom Conference. “It was obvious to use AT&T was going to have to make a move like this to get spectrum to meet its customers demands.”

McAdam, who is in line to succeed Verizon CEO Ivan Seidenberg, also defended the wireless industry against claims that increased consolidation will shut down competition.

“AT&T will be stronger, but inhibiting that is not a way to make the market healthier overall,” he said, adding that he expected there to be more consolidation among smaller wireless carriers. “It wouldn’t surprise me if, in five years, we have three very strong competitors out there.”

AT&T’s merger with T-Mobile will make it the largest wireless operator in the country with a combined customer base of more than 120 million subscribers, more than twice the size of Sprint’s 51 million subscribers. The deal would also leave AT&T and Verizon Wireless with a combined market share of about 80 percent, giving the two operators a near-duopoly hold on the U.S. wireless industry.

McAdam also discussed Verizon’s LTE deployments, saying the company wouldn’t be marketing the mobile broadband service as a stand-in for cable Internet like the company’s FiOS service.

“It’s not a real DSL replacement service,” McAdam said of the company’s LTE network.

Verizon will push its FiOS service for customers who need high-speed Internet connections, while focusing on LTE for customers who need mobile broadband.

Verizon’s complicated relationship with Vodafone also came up. McAdam said Vodafone, which owns a 45 percent stake in Verizon Wireless, was shifting its relationship with Verizon “from a financial relationship to one that matters to customers.”

The two companies will partner on products for Vodafone’s enterprise customers. McAdam said Vodafone CEO Vittorio Colao has “killed a couple of Vodafone products” to switch to Verizon’s business products, and said the two companies were working on cloud computing and “joint procurement actions.”

McAdam’s statements came two months after rumors surfaced that Vodafone and Verizon planned to pool the sections of their enterprise units that serve multinational corporations.

McAdam confirmed that Verizon is on track to pay Vodafone a long-awaited dividend in 2012. Verizon hasn’t paid a dividend to Vodafone since 2005.   

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