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AT&T exec says problems soon without T-Mobile merger

Mark Milian
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Major merger in telecom industry
  • AT&T Mobility CEO Ralph de la Vega says the network faces short-term problems
  • T-Mobile USA's assets could alleviate the troubles AT&T faces, he says
  • But AT&T faces a potentially long regulatory approval process

Orlando, Florida (CNN) -- AT&T's wireless network will face major challenges "in the short term" unless the carrier is able to begin integrating T-Mobile USA's infrastructure, said AT&T Mobility CEO Ralph de la Vega.

He didn't specify an exact timeframe for when his company's problems could compound but acknowledged that the network's needs must be addressed in less than three years.

AT&T announced plans to acquire the American T-Mobile unit from Deutsche Telekom on Sunday in a $39 billion transaction.

"With this deal, we're set" for both the short and long haul, de la Vega said in a brief interview on Tuesday.

Analysts predict that AT&T could see major scrutiny from the regulating bodies that must approve the deal. However, it's unclear how long that process might draw out.

"One of the key drivers (for the deal) was the need for additional spectrum," he said on a panel at the CTIA Wireless conference. "It resolves the pending spectrum challenges that we're facing in major cities."

Wireless spectrum is the airwaves on which cellular signals travel. Without enough spectrum, phone calls can get dropped and internet surfing can slow to a crawl when too many gadgets are trying to connect at the same time.

People in the industry talk of an impending "spectrum crunch." Federal Communications Commission Chairman Julius Genachowski dedicated a large part of his speech at this week's mobile conference to the topic.

"Unleashing more spectrum must be a national priority," he said. "Every day we are not freeing up spectrum for mobile broadband is a day with real costs to our economy."

The FCC is one regulator, along with the Department of Justice, that will review AT&T's acquisition proposal. Genachowski declined in his speech to comment on the deal. He promoted the idea for broadcasters to auction their spectrum -- something he's championed but hasn't succeeded in implementing.

However, Verizon Wireless CTO David Small isn't feeling a spectrum crunch. He said Verizon secured ample airwaves at the FCC auction in 2008, when the company spent an estimated $9.6 billion.

"We bet pretty big with the 700 megahertz spectrum that we bought, and we feel that that gives us a very good path forward for 4G LTE," Small said. "There is not a Verizon Wireless spectrum concern in the short term."

At that same auction, AT&T paid $6.6 billion, analysts said then, in addition to the $2.5 billion spent to acquire Aloha Partners earlier that year.

AT&T is positioning the T-Mobile purchase as a proactive move to alleviate overflow in major cities. Poor service quality in cities such as New York and San Francisco has been a criticism lobbed at AT&T over the past several years.

De la Vega, the AT&T executive, said he expects Verizon will face issues down the road if it doesn't continue to aggressively buy spectrum. "You wait and see," he said.

Verizon's forecast determines that its network will be stable until 2015 before it will need to buy more or free up spectrum from its own holdings, Small said. That's despite iPhone data usage being "a little bit higher than what we had expected," he said. "We feel we're in pretty good shape for the next three to four years."

Small was also unimpressed with AT&T's pledge to expand the rollout of its faster 4G LTE network to 95% of the U.S. population from 80% if federal regulators approve the T-Mobile merger. "From my view, that's old news," Small said of AT&T's promise.

Verizon had set a deadline in 2013 for when its own version of that network technology will match its 3G coverage, which blankets about 97% of Americans. Verizon's 4G LTE began deployment in December, currently covers 59 cities and will add 88 more by the end of the year.


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