AT&T’s U.S. Vision Rankles Europe as Vodafone Bid on Hold

AT&T Inc. Chief Executive Officer Randall Stephenson comes to Europe several times a year bearing a message: The region would do well to learn from the Americans in developing new mobile technology. Problem is, Europe isn’t particularly interested in the lesson.

“I don’t think there is a huge amount of teaching that can be done to the Europeans,” Vodafone CEO Vittorio Colao said of Stephenson’s assessments during a Feb. 10 meeting with reporters in New York. Though Europe has lagged behind the U.S. in introducing fourth-generation networks -- something Stephenson has repeatedly pointed out -- “where we launch 4G, we have good results,” Colao said.

The 6-foot-4-inch Stephenson, dubbed “the long tall American” by Jon Fredrik Baksaas, chairman of the GSMA mobile industry group, has made no secret of his interest in buying a carrier in the region. And Colao’s company is the likeliest target -- though AT&T is barred from doing a deal until summer.

AT&T remains interested in a potential acquisition of Vodafone even after giving up the option to bid for the U.K. carrier for six months, according to people familiar with the situation. The company made a public announcement Jan. 27 to satisfy strict U.K. stock-market regulations designed to limit merger speculation, the people said, adding that AT&T will probably need to wait out the deadline before making an offer.

Verizon Cash

Though AT&T said no transaction is imminent, Vodafone is the biggest European mobile company and one of the healthiest, flush with cash after closing a deal last week to sell its 45 percent stake in AT&T’s U.S. rival Verizon Wireless for $130 billion.

Stephenson took to the stage for a private session at the Mobile World Congress in Barcelona this week. He has long made it clear that European carriers have been too slow in rolling out the next generation of service, also called LTE, for long-term evolution.

“Today in the U.S., four national carriers and dozens of regional providers are building out LTE, and you just don’t see that happening anywhere else in the world,” Stephenson said on a Jan. 24 earnings call.

And last June, Stephenson spoke at the Brookings Institute in Washington. Europe today “is unfortunately probably among the bottom in terms of developing technologies,” he said. “The United States, I believe, is at the top.”

‘American Uncle’

Stephenson says newer, higher-speed networks can stimulate data use and allow carriers to raise prices. He blames Europe’s governments for a thicket of regulation that makes it hard for companies to own airwave licenses for enough time to make long term investments or sell the radio spectrum needed to carry their phone signals. The criticisms have led Sanford C. Bernstein analyst Robin Bienenstock to label him “the American uncle.”

AT&T says it’s ahead of plan on LTE and is poised this summer to reach its year-end goal of having networks in place that have the potential to serve 300 million people in the U.S. In the January earnings call, Stephenson said mobile data is now a $23 billion business, growing at 17 percent a year.

The company might find that its 4G success in the U.S. doesn’t translate well to Europe, said Tero Kuittinen, head of sales and marketing for Alekstra Oy, a Finnish mobile-diagnostics company. European carriers have been struggling with declining profits as average monthly bills continue to shrink in the face of intense competition among carriers and the weak economy, Kuittinen said. At Vodafone, for instance, service revenue has fallen for the past six quarters.

Gutter Scraps

“AT&T’s European cousins,” Kuittinen said, “are fighting over scraps in the gutter.”

Colao, a 52-year-old Italian who has run European telecom companies for more than a decade, has articulated a substantially different vision from Stephenson’s. While AT&T has focused on 4G, Vodafone is betting that bundles of services, like mobile, TV and Internet, will increase customer spending and loyalty.

To that end, Vodafone approached Grupo Corporativo ONO SA, Spain’s largest cable company, people familiar with the matter said this month. The British carrier is also considering an increase in its stake in Greece’s Hellas Online SA, two people familiar with the plans said last week. And Vodafone beat out billionaire John Malone’s Liberty Global Plc in bidding for Kabel Deutschland Holding AG, which culminated in a 7.5-billion-euro ($10.3 billion) deal with Vodafone last July.

Brad Burns, an AT&T spokesman, and Matt Morgan, a Vodafone spokesman, both declined to comment yesterday.

Europe Meetings

Vodafone shares rose 0.3 percent to 246 pence as of 2:33 p.m. in London trading, valuing the carrier at 65 billion pounds ($108 billion). AT&T slipped 0.2 percent to $31.95 in New York for a market value of $166 billion.

When Stephenson comes to Europe, he often meets with European Commission Vice President Neelie Kroes, a person familiar with the trips said. The two got together last month at the World Economic Forum in Davos to discuss takeover possibilities, the person said. Kroes is in charge of reworking the rules governing telecommunications in Europe, including the spectrum regulations that Stephenson has criticized.

“How you manage spectrum policy will determine how much investment comes to Europe,” Stephenson said in October at a meeting with the leaders of big European carriers in Brussels. “In six years, Europe has gone from first in network technology to one of the last.”

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