AT&T at UBS Conference Notes

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AT&T’s (T) CEO Randall Stephenson Presents at the UBS Global Media and Communications Brokers Conference

Going to be doing more on getting the customer to cloud without touching public internet

“you’re going to see us continuing to push the gas pedal particularly on the B2B side. This has proven to be really powerful. And getting the customer from a mobile handset to a virtual private network into whatever their cloud provider is, Amazon, IBM, Salesforce.com and then back without ever touching the public Internet, this is proving to be really, really important and we’re getting a lot of traction, momentum. You should see us do more and more in that area.”

Switching to software defined networking with virtualized hardware is a big undertaking

“moving to Software-Defined Networking and all that we’re doing, this requires a fundamental shift to the capabilities of our workforce. This is probably one of the biggest logistical issues I’ve taken on in my career, getting hundreds of thousands of people reoriented from circuit switch to IP and from dedicated hardware, software combined to virtualized hardware in a network that’s managed by software.”

People aren’t upgrading handsets like they have in the past

“the revenue trends are all kind of skewed this year by the equipment revenues and obviously our upgrade cycles on smartphones is way down this year. People aren’t upgrading like they have in the past. And as we’ve gotten into this handset financing that has an immediate hit to top line revenues. And just upgrades are not happening as quickly as they were, so it’s causing us suppressive view on revenues.”

We made a mistake in the 2G world choosing GSM because we had to have more cell density, but that puts us at an advantage in the world of mobile broadband because you need density

“For the last decade, I have been frustrated by the disadvantage we were in by virtue of the technology path we chose. There’s a couple of players in the industry that went CDMA in the 2G world and we went GSM. And just admit it, CDMA propagated better. It’s just a better technology in the 2G world. 3G, our GSM technology did not propagate as well. The byproduct of that was we had to deploy a much more dense cell grid than our competitors. And as a result, we were at a cost disadvantage. And it just kind of grinded on me, right. Now enter the world of mobile broadband and particularly mobile video and the world of LTE, what does everybody have to have? A dense cell grid. And so we have the most dense cell grid by virtue of our technology path that was chosen before, we have the most dense cell grid in the industry and others are now having to catch up in terms of cell site density. And so our capital requirements in terms of achieving this cell site density are going to be lower in the foreseeable future as a result that we have quite a head start by where we are.”

There is a strong demand for alternative in Mexico, but Carlos Slim is not going to just lay down and let us take share

“make no mistake about it, I’ve been partners with Carlos Slim for 22 years. I do not expect Carlos is just going to lay down and allow us to take share, all right. I know this guy. He is going to be very, very aggressive. But there is a strong demand for an alternative in Mexico. And the AT&T brand in Mexico is an aspirational brand. It’s one thing we’ve been very pleased to see and so we’re having a lot of success in Mexico.

Just think of Mexico like another state of the US

” a lot of businesses, U.S. businesses doing business in Mexico and Mexican businesses in the United States giving them just – think of Mexico as another state of the United States, okay, and your pricing looks and feels like that.’

SDN is going to have a consequential impact on capital spend

“going forward, Software-Defined Networking, this is not an inconsequential impact on capital requirements. It is a rather significant effect on our capital spend. So there’s going to be a continual downward pressure on our capital spending just by virtue of SDN virtualizing the core network. Thing about the cloud moves out in the datacenter into the core network, so all the economics that we have experienced in the datacenter by cloud computing is moving into the big iron core network of AT&T. That’s consequential.”

After seeing deals get killed, people are probably thinking less about M&A

“After getting up and reading the Journal this morning that Staples and Electrolux with GE were killed [ph], I don’t think anybody would be talking about M&A for the next foreseeable future.”