Live on Bloomberg TV

00:00Your father was in the agriculture business. Do you know what that animal husbandry is. It started out as an animal husbandry major myself. I'm getting a robo call to get a message out right now . It's literally a robo call. If you speak Spanish and I came into my office one day and I said in Spanish the next person to speak to me in English aspired I don't care if the building is on fire you are now rapidly trying to build that 5 G. It is conceivable that we're going to be moving into a world without screen. Would you fix your tie please. People wouldn't recognize me if my tie was fixed but just seem to. All right . I don't consider myself a journalist and nobody else would consider myself a journalist. I began to take on the life of being an interviewer even though I have a day job running a private equity firm how do you define leadership. What is it that makes somebody tear you grew up in Oklahoma. Your father was in the agriculture business. So as a cattle business were you ever interested in that business or you want to get out of that business. Boone Pickens and I have something in common. We both started out as animal husbandry majors and then you switched to something else obviously. Do you know what that animal husbandry is David. Yes I do. Guy would start out as an animal husbandry major myself . And I realized private equity work better. OK so so you ultimately you got a job with Southwestern Bell Greg and Southwestern Bell was the result of the breakup of AT & T in nineteen eighty four. So what how did you get a job there. You were right out of college how'd you get the job. I like say I got my job the old fashioned way. My brother got me on OK. My wife and I were getting married and she said Yes I'll marry you but you have to get a job. I was in school. And so my brother said come on and get John at the phone company. So I went to Southwestern Bell and I started out my first job David was to having 19 inch magnetic tapes on the tape drives. You'd look at a screen and say hang this tape on that drive and I go find that tape man on the drive I'd push load and I'd push start and I would do that for a 12 hour shift. OK. And that propelled you to the top. I mean it was pretty much the foundation of everything that I do now that your brother is still working in the company right. He's a technician in Norman Oklahoma. He mentioned that you're the CEO of the company or he doesn't mention that you think the people he tries to protect that he's a member of the labor union I don't think that would be received very well . So when 1984 came the AT & T was broken up and they had seven Baby Bells and it was AT & T. How did the smallest become the one that paid up everybody else. And now there's really only two of you left horizon and you more or less leadership. I believe more than anything it was what what drove it. Something else happened then that doesn't get discussed much and that is AT & T owned a lot of wireless airwaves. But keep in mind in 1984 wireless service did not exist. And so those wireless airwaves got pushed out to these baby Bills kind of last minute type thing. And we got those airwaves. We went very aggressively building out wireless technology. And before long we had a nice wireless business that was catapulting us to growth. So there were some law changes that allowed us to actually start acquiring Pacific Bell Ameri tech. Ultimately BellSouth and then ultimately AT & T it was a huge Imani activity that I was got to be part of. You were the CFO for many of that. I was. Yeah for a lot of that and I'm getting I'm getting a robo call to get a message out right now. It's a literally a robo call that from President Trump or somebody or he doesn't call me he doesn't call you. OK. So while you were working and then Southwestern Bell later SBC you went to Mexico as part of your career. What were you doing in Mexico. We invested alongside Carlos Slim in the the telecommunications company in Mexico. That was one of the greatest experiences of my life. Did you speak Spanish before you got there. No but I started learning really quick and literally I got down there and after six months I was frustrated and I came into my office one day and I said in Spanish the next person to speak to me in English aspired I don't care if the building is on fire there's an earthquake. No English. And so within three or four months right takes off. Now you make a lot of mistakes probably in the interim. But you still speak you speak Spanish still a lot of guys. It's more than I speak. OK . So . OK. So here's what I don't understand. SBC buys AT & T. If AT & T was so good it would have been buying SBC. Why wouldn't you use the SBC name because you were better and stronger than AT & T. We were SBC. We were had been largely a regional company. Five states Arkansas Kansas Texas Oklahoma Missouri and so the opportunity to buy AT & T which is a global brand. And when we were acquiring them we asked ourselves the question what brands should we assume and keep in mind AT & T was in radical decline when we bought them and it was about a three minute debate as to whether to take on a global brand that is well-known and positioned you sell yourself very differently. Why are you in the entertainment content providing business Now you spent eighty five billion dollars recently to buy Time Warner. It's multifaceted and I'll try to simplify it. But look as we watch our customers and analyze our customers as we have developed a network delivery technology where they can consume video on all devices anywhere everywhere they are . It's been surprising and quite enjoyable to watch how people are now consuming video. And this is just in a world of 4G. And as we move these networks and we're moving there aggressively to 5G the amount of video you'll be able to consume in multiple formats where ever you are whenever you want to watch it we think is going to explode. Now I actually believed my board and I believed that if you are convicted that you're going to have this many new distribution points for a premium video all new distribution available anywhere anytime. Should the value of media be going up or going down. We believed it would go up . But then as we you began to analyze it you said look it isn't necessarily good for AT & T to own a media company. Yeah I think it is. But I think the more relevant question is is a media company being attached to a communications company like us worth more. What I mean by that is. So think about Time Warner and all the great brands Warner Brothers Studios and an unbelievable IP library. Think about HBO. Think about Turner with CNN bunch of CNN folks you're here. If you could actually take a business like this and put a lot of money into it invest in it and equip that content to be delivered directly to the consumer what better way to do that than to be paired with a company that has 170 million customers out there that we can distribute it to . OK so you you announced this acquisition for eighty five billion dollars. The U.S. government said well we don't like this acquisition even though it's a vertical merger. You weren't really buying a competitor. The U.S. government when the court to stop you. Do you think there was any political influence behind the decision to stop that or just try to stop that merger the deal hadn't even been formally announced yet and candidate Trump came out and said AT & T is acquiring Time Warner and thus CNN and that's the transaction this administration will never approve. And whether you are a supporter or detractor of Donald Trump one thing everybody in this room must admit is when this man makes a statement on the campaign trail he pursues it. And and so we were concerned when that statement came out. Now right on the heels of that statement a gentleman they make Abdul Rahim who is a professor at Pepperdine University was asked by a reporter what do you think of this transaction. And this law professor at Pepperdine said I don't see any issues with it I'm paraphrasing but he essentially said I don't see any issues with that. About a year later that law professor has been confirmed as the head of the Antitrust Division of the Department of Justice. And shortly thereafter a lawsuit is filed against a vertical merger the first time since the 1970s that a lawsuit had been pursued against a vertical merger like this. And so I look I've said publicly that it's an elephant in the room. One has to question you know is there political motivation behind this. I have no proof that there was but you know of one of two things. There's a radical coincidence or there are other motivations. I don't know. So where do you get your news. Do you watch CNN on the timer. I watch it a lot more than I used to. Yeah. Well if you have one critical eye right here if you're watching something and you don't like what they say do you call up somebody and say look this isn't the right thing to put on or you don't do that. No I don't get involved in the editorial content of the news but I'm a news junkie. I consume news constantly. Probably a little bit obsessively about it. Do you buy the equipment of my way in building out your five G. Our government has told us not to. And so I get it. If that much of our infrastructure will be attached to this kind of technology do we want to be cautious about who is the underlying company behind that technology. We damn well better be let's talk about the business of selling. Although you are now rapidly trying to build out 5G. What is it going to do for us . You're just always connected a real time network. It's just like turning a light switch on it's real time. Why is that important. It's really important when you start to conceive of services like autonomous cars. But I mean it's it is very serious right. Kid runs out in front of a car. You. That needs to be a real time always on always connected network. And this is really really important as you begin to conceive of these services. You can begin now to conceive of robotic manufacturing that is always on always connected via 5G networks . And just to kind of put this into perspective Internet of Things. You know the devices and sensors that are connected all over the place. Today's networks in a square mile you can connect 1000 2000 3000 of those in a 5G world. You can connect millions of those in a square mile. I couldn't conceive of the iPhone. We built a 3G network. You and I can't conceive of all the services are going to materialize with this kind of capability like when the iPhone was being developed. Steve Jobs come to you and try to explain it to you. What did you think of what he was saying. Yeah it was. So we were building a mobile Internet. That's what 3G was about. And as I said I didn't really know what the mobile Internet looked like how you just build it and people will use it. That's always been my my philosophy if you make something mobile utility explodes and the guy in a black T-shirt or black turtleneck shows up with a description and explanation of a product. He didn't have a product he had an explanation of a product. Think about a phone that doesn't have a keypad it's just a screen and it has little icon that you push these icons and stock quotes whether you get that. The minute we saw that it was. That's the mobile Internet. That's something we have to be a part of. That is what we are building the future for. So you said to Steve let's be partners. Or how did you do that. Let's pursue it. You know that's. And that was a very intense negotiation of business terms. Steve obviously had a lot of confidence and to do a deal we did the first exclusive deal with the iPhone. We launched the first one and it required us to fundamentally change our business model. It cost us a lot of money. We we took a lot of dilution when we did this deal. But we said we believe so strongly not only in the vision but in that guy Steve Jobs that we said let's make this bet right now with current situation like an I'm driving from Dallas to downtown Washington sometimes the cell coverage breaks down. Used to it was it was exit 13. It does not anymore. Thank you. Did you ever happen to you. It happened to me a lot and I would call every time I went through there. My network guy ise had dropped the damn call again. The problem was with these guys. They got go get a cell site permit. Right. And getting that done in this day and age by the way this is an important point. It can take two to three years to get a cell site permit . We hear a lot of people including the folks the administration talking about China is going to beat us to the world of 5G in China they don't spend two years getting a permit to build a cell site . They say we want to sell side over there and they just go build it. All right here this two to three years is going to be a problem is trying to ahead of us and 5G now. Do you think now no. Today we have put we have 5G live 5G standards base up and running in 12 markets in the United States China right now has zero. They're running some trials now. China is going to commit to this. They have said that this is a major focus of theirs from a economic development standpoint and a security standpoint. So they will come hard. They're investing heavily and so we have 5G by the way. Will you buy the equipment of Weiwei in building out your 5G. Are you allowed to or will you . Our government has told us not to. And so I get it. We are not using Weiwei a Chinese developer of this technology. Are the largest equipment producer in the world for telecom equipment. But look our government is being very aggressive on this. This is a security risk. I don't think we our government is doing their best work in explaining why this security risk exists and to me the biggest risk is not that the Chinese government might listen in on our phone conversations or you know mine our data somehow if we use their equipment. That's not the issue conceived for a moment. What I said that we can now put millions of connected devices in a square mile. This will be the basis for autonomous cars five to 10 years from now every manufacturing floor will be attached to 5G 5G will drop be driving robotics 5G will be driving the manufacturing floor 5G will be involved in traffic management around our cities I mean we'll be using this and utilities will be using this in refineries we have to ask our question ourselves a question if that much of our infrastructure will be attached to this kind of technology do we want to be cautious about who is the underlying company behind that technology. We damn well better be now are there things we can do to protect ourselves. That's a debate worth having. But I think our government is asking the right question. If we get 5 G. Am I going to have cheaper bills for my cellular. I hope not. I really hope so. But it's somewhere officiating David. It's not going to be cheaper. It is more efficient is a more efficient technology but not like the 5G experience with you on your smartphone. It's going to be just a better experience. Will. Will people pay more for different speed tiers in the future. Conceivably but I don't think we've really worked out what our pricing arithmetic looks like. So today who do you regard as your major competitors . It's not the traditional telephone companies I assume anymore . So when I wake up in the morning I want to know how we did in the marketplace yesterday against rise and T-Mobile Sprint Comcast Charter spectrum etc. As I think if you ask me who am I most concerned about who do I think about in terms of where we're going in the future. Look it's Amazon it's Netflix it's Disney. Those those are those are the competitive set that I spend more time thinking about now. You now have with the time Warner merger two hundred and ninety thousand employees . Correct. So how do you keep up with them. How do you meet with them. How do you spend time communicating your views with them and is it awesome to have two hundred ninety thousand employees are responsible for it. It's amazing it's a big responsibility obviously. I mean it's one of these things you spend a lot of time thinking about is fairly compensating Twitter ninety thousand employees particularly in a labor market that's three percent unemployment . So it's a competitive marketplace and we're we're spending a lot of time thinking about this health care for two hundred ninety thousand people is a big deal we'll spend five and a half billion dollars on health care this year for our employees. And how do you ensure that you can continue that into the future and sustain it. We have a 70 billion dollar pension plan. And how can you ensure these people that when they retire and they're 80 years old are not worried about their pension checks still coming. So you spend a lot of time on these kind of issues making sure the company is positioned in stable and fiscally secure to provide that. And then just the recruiting and so forth is a big deal on the pension plan investing more in private equity would be what I would recommend for your pension plan but you might consider that as a way to actually get returns. So what is the best plans you're happy to give you all 70 billion if you just take the liability with it okay. I mean think about that . We carry around these devices and they're bigger than they should be because there's a lot of compute in here. There's a lot of storage in here when you get to 5G. It is conceivable that we're going to be moving into a world without screens one of the downsides I assume is you have to come to Washington from time to time and deal with government officials. I hope that this is the most frustrating part of what I do day in and day out is I spend way too much time here every minute that I'm here is a minute that I'm not taking care of employees I'm not putting together new product I'm not hiring great executives and great people too much of our success and failure is dependent upon what the people in this town decide and do on a day to day basis. I take it you would never when you leave this job when to go into government. That would be a fair assessment. So you intend to expand outside the United States we yes we affect effect water media as has a rather large presence outside the US . I think about 30 percent of their revenues your telephone business. For example you're moving into Mexico. We've we've gone aggressively after Mexico. We went down there we bought a couple of companies that were floundering. We put them together . We've been investing. We've got a nationwide network in Mexico now 100 million people passed with this network. It's growing at a rather dramatic. We've been the fastest grower in Mexico now for the last three years. Like you used to work with Carlos Slim. Many years ago now you're competing with him. Is that a problem for you. It's not pleasant but. But actually no it's not a problem. Carlos is a fierce competitor and when we had to sell our interest in his company I immediately turned around and bought these guns. I'm a huge believer in Mexico the demographics everything about Mexico just fits with our business perfectly. You've had the job for more or less 12 years almost and you know you don't have a retirement age mandatory at your company I think. But you're 58. My wife has a mandatory retirement age. Yeah. So you expect to do this for how much longer would you say several years. I don't know. My board and I talk about that and there's obviously a lot that goes into that decision you know. Do you have somebody ready do you have a bench ready and so forth. So I've not given any external indication on that. So what do you do for relaxation when you're not worrying about your two hundred ninety thousand ploys the government interfering with what you want to do. We spend a lot of time in Wyoming and we have horses and loved trout fish and I play a really bad game of golf. And now you sponsor the AT & T at Pebble Beach. We do. So do you get to play with Tiger Woods or Phil Mickelson anybody you want to pick to play with when you're in that you're the amateur playing with them. Do you get. Unfortunately it has it's kind of like getting married there has to be somebody willing to play with you and so I don't I can't just say I want Tiger because you've seen me play so you don't win that tournament automatically or something. I've not even made the cut in that tournament before. So if you're not talking to people running it about making sure the cut line is different or something. OK. So now you have two daughters. I do and one and you have grandchildren. Five green five grandchildren. And what do they call you. They call me Pop not Boston or anything like that. I I was very strategic on selecting pop because and this is that this is really important for everybody to understand. Be strategical what you want your grandkids to call you. I chose pop because they can say pop sooner than they can say dad. And it irritates your son in law's to Dax What is it that you would say most people should know about your company . Technology Media telecommunications. That's kind of a sector that people in the financial analyst community talk about and they talk about it that way because I truly believe all of that is just melding and I believe the company that can create a premium media experience and pair that with a really significant distribution experience by G driven is going to create some experiences for customers that that you and I are conceiving . And just to make this point we carry around these devices and they're bigger than they should be because there's a lot of compute in here. There's a lot of storage in here when you get to 5G no that fast all that compute and all that storage goes away. It's back in the network. These form factors some would say they shrink I say they go away it is conceivable that we're going to be moving into a world without screens. It's just a totally different experience. And I I believe that AT & T is right at the very center of all this because if you asked yourself five years from now in this room will you be consuming more or less mobile bandwidth more. Who thinks more will you be consuming more or less premium entertainment more. Well I like where we are in both of those. OK well I want to thank you for a very interesting conversation and congratulations on your .

No schedule data available.

The David Rubenstein Show: AT&T CEO Randall Stephenson

David Rubenstein speaks with Randall Stephenson, AT&T Inc.'s chairman and CEO, about the future of technology, media, and telecommunications, including building 5G networks, competition with China, and last year’s acquisition of Time Warner Inc. for $85 billion. The interview took place on March 20 in Washington. (Source: Bloomberg)

More From TV Shows
All episodes and clips

Bloomberg Technology
The only daily news program focused exclusively on technology, innovation and the future of business from San Francisco. Hosted by Emily Chang.
More episodes and clips