Verizon Wireless’ (VZ) relative silence in regards to AT&T Inc.’s (T) proposed $39 billion acquisition of T-Mobile USA Inc. has been in stark contrast to the rancor offered by a number of smaller players in the mobile space that see the proposed transaction as a detriment to the industry’s competitive balance.
That silence was somewhat explained at an investor conference this week where Verizon Communications Inc. COO Lowell McAdam noted that the deal was an inevitability and that it shows the need to get more spectrum into the “right hands.”
Speaking at the J.P Morgan’s 39th Annual Technology, Media and Telecom Conference, McAdam said that the proposed deal was “sort of like gravity” in that it was bound to happen.
“The spectrum in the U.S. is not in the hands of carriers that can do something with it,” McAdam explained. “So, AT&T was going to have to make a move like this in order to get spectrum and to meet their customer demands. T-Mobile had it, so a merger like that was going to happen.”
McAdam noted that with wireless being such a capital intensive industry, carriers need to have scale in order to be competitive, and the deal will provide AT&T with that scale and become stronger.
“But, inhibiting that is not a way to make the market stronger,” McAdam said. “We have to get spectrum in the right hands and there is a lot of spectrum that is stranded out there. I applaud the FCC for stating plans to get more spectrum out there and that is something we are going to need to keep ahead of customer demands.”
McAdam noted that he expected further consolidation among smaller carriers, and that he would not be surprised to see three very strong competitors in the market within the next five years.
Those three could be assumed to include both Verizon Wireless and AT&T Mobility.
McAdam also touched on Verizon Wireless’ device plans, noting that the carrier was hoping a third operating system would come along to match the might of Apple Inc.’s iOS and Google Inc.’s Android OS.
“I do believe there is room for a third OS,” McAdam said. “We will support all three as much as we can,” adding that the carrier has never been a “one-device company.”
Verizon Wireless recently began selling Apple’s iPhone, adding to its Android-powered Droid lineup of smartphones.
McAdam also looked to clarify the company’s intention in regards to its rapidly growing LTE footprint and how it fit into the company’s overall broadband portfolio. Those plans seem to indicate expansion of LTE as a broadband service for rural locations, with Verizon’s Fios wired service as an offering targeting urban areas. McAdam cited the network efficiencies of Fios for dense areas compared with trying to serve those markets with a more limited spectrum resource.
Verizon Wireless has been expanding its rural LTE plans with its LTE in Rural America program, which has attracted a handful of rural operators. The program allows rural operators to use Verizon Wireless’ 700 MHz spectrum assets to construct LTE networks in return for reciprocal roaming agreements.
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