If you don’t already use your mobile phone to check email, use the Web, maps, etc., AT&T’s (T) wireless boss Ralph de la Vega is hoping you will soon.
In a fireside chat with Morgan Stanley’s Simon Flannery, he sketches out a familiar growth plan for us: He’s expecting wireless data services like mobile Web access to lead growth, as mobile Internet networks get faster, and more people buy smartphones like Apple’s (AAPL) iPhone and RIM’s (RIMM) BlackBerry. What de la Vega isn’t saying: He needs this to be true, because we’re spending less money on mobile phone calls, and the carrier will have to grow somewhere.
The big risk: That most people might just want to use their phone as a phone — and not as mini-computers.
Other key points: No comment on 3G iPhone release timing or when the new BlackBerry Bold will come out. Happy to offer Google Android phones if Google (GOOG) will work with AT&T to customise the operating system to their liking. (Which he seems to think they will.) And thinks he has leg up on Sprint’s (S) WiMax JV with Clearwire (CLWR) because AT&T’s 3G network is only going to get faster, is already widespread, and already works with lots of devices. As we’ve said, the WiMax-LTE format war will be an interesting one to watch.
– Ralph’s opening marks: We’re the best!
– Wireless data growth in 50% range. But in very early stages of “wireless data revolution.”
– Only 16% of “postpaid” subs have smartphones. Think we can do better. Exclusive U.S. provider of the new BlackBerry Bold (RIMM).
– AT&T’s new spectrum: Combine 700 MHz spectrum that we have + AWS band, we cover 95% of the U.S. Well-positioned to grow.
– HSPA Release 7 next 3G step. Peak speeds to 20 mbit. Mostly a software update to network. LTE will have peak speeds of 100 mbit/sec. Backwards-compatibility to HSPA and GSM.
– Q&A begins: How should we be thinking in terms of timing for BlackBerry Bold and 3G iPhone? Expecting a non-answer. New devices have faster processors, more memory. Really! Devices will get smaller and thinner, with QWERTY keyboards that slide out whichever way you want. Not commenting on other iPhone plans at this point. Going to launch Bold “as soon as possible.”
– How is smartphone adoption moving? ARPU lift? Smartphone market anywhere from high 20s to low 40s (percentage-wise) in various markets. Smartphone subs spend “almost double” what normal subs do. Which is why they are so excited about iPhone, RIM.
– Bragging about how 3G network beat Verizon, etc., in a recent test. Going to take TDMA spectrum and put it into GSM and UMTS network.
– With AT&T 3G, your workforce will be more effective on the road than at the office!
– Quietly working on “machine-to-machine” stuff. UPS, FedEx trucks tracked. Machine-to-machine traffic going to surge. Went into sign manufacturing company. Wirelessly enabled their signs; signs have SIM card for remote control of sign.
– What’s impact of economy on wireless industry and AT&T? When you look at Q1 compared to Q1 a year ago, our net adds were up 9%. Everyone else was either flat or declining net adds year-over-year. That says that we’re doing something right. Think we have great services and great retail partners! Bad debt levels are very stable; well below 2%. Sometimes people are tempted to lower credit scores during downturn to keep growth going; we haven’t done that. Obviously pressure in housing market, but think wireless services are a staple.
– Churn a big part of profitability. Very impressed with progress in many markets, where churn is less than 1%.
– Big fear of aggressive price war in Jan.-Feb. We’ve had unlimited high-end pricing for a while now. How would you characterise it? Wireless a “very dynamic market” and team will respond. Think we responded appropriately. Resulting impact minimal. Have seen about as many people migrate up to unlimited as those migrating down; low single-digits of overall base.
– Going to see us have capex in low teens relative to revenue. More work on 3G network; expanding footprint. Expectations for fast speed with new devices.
– LTE vs. WiMax: What happens? I think we have time-to-market advantage. HSPA running at 3.6 mbit/sec. Running in labs to 7.2 mbit/sec. Software upgrade to 20 mbit/sec. Have ecosystem in handsets, data cards. Today’s laptop cards are good to 7.2 mbit/sec. Just need to turn it up on the network. WiMax doesn’t do you any good — you need enough network coverage, devices.
– Smartphones going to get smarter. Forget today’s flip phone — I think those devices in a few years will be obsolete. Phones going to have touchscreens, QWERTY keyboards. Jury still out on update cycle.
– Google Android: AT&T at forefront about giving customers choice. A lot of discussion about open access and Android. When you cut through hype, it’s just about giving people choice to use any device, OS, software they want. We already do this. Android would be giving customers another choice. If Google will work with us to customise it, we look forward to doing it. Important that we have flexibility to fine-tune operating system. We believe in giving customers choice; if they want Android, we’ll work with them. Not appropriate to comment on timing.
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