AT&T financial chief dismisses price war talk as 'noise'

Despite a shift in how consumers are paying, John Stephens sees an opportunity for more service revenue.

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An AT&T store in downtown San Francisco. Josh Lowensohn/CNET

AT&T Chief Financial Officer John Stephens says he's isn't fazed by carrier rhetoric in the so-called price war.

"The competition is more noisy than disruptive," Stephens said Thursday at an investors conference in Miami.

T-Mobile's offer to pay off the early termination fees of customers willing to switch to its service was designed to wreak havoc on AT&T's customer growth. That didn't happen. While T-Mobile did post impressive customer growth in the first quarter, AT&T withstood the impact and topped expectations for customer growth, adding 625,000 contract customers and more than 1 million net new customers.

"It doesn't appear that based on our results, there was much of an impact," he said during his appearance, which was streamed live.

Stephens criticized T-Mobile's early-termination-fee buyout offer as financially problematic especially as an ongoing program.

"It's not something that a company with a best-in-class balance sheet would jump into," he said.

Still, the industry model is beginning to shift, with customers increasingly paying for their devices outright or in monthly installments instead of paying a subsidized price that comes with a higher monthly service fee and a two-year contract.

"It'll have an impact on traditional statistics," Stephens said of the shift. "Economically, it's just a tradeoff."

AT&T is seeing more service revenue from other areas, including the adoption of more expensive data plans, insurance plans, and new devices such as tablets.

On the idea of Wi-Fi replacing cellular, Stephens doesn't see that happening. He sees Wi-Fi as a complement to cellular, rather than as a substitute. He noted that there are technology hand-off and engineering requirements that aren't quite ready yet, and he sees a potential security issue with using public Wi-Fi to carry people's traffic.

Stephens also weighed in on the idea of "over-the-top" media, or programming that is viewed via an Internet connection instead of a traditional pay-TV service. He believes AT&T isn't as tied into the traditional pay-TV model as some of its competitors and is working to offer more over-the-top programming for its customers.

AT&T last month said it is partnering with the Chernin Group to jointly invest in and develop online video services, a la Netflix. Stephens added that between AT&T's 10 million broadband customers and 55 million contract smartphone and tablet customers, he has 65 million subscribers who don't currently have a video package.

"That's a huge opportunity," he said. "I would think that would interest content partners looking to tap into that base."

 

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