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Verizon isn't threatened by AT&T, T-Mobile's promises of free HBO and Netflix: CEO Lowell McAdam

  • Verizon doesn't need to buy a major media company to offer free subscriptions like AT&T's deal with HBO, CEO Lowell McAdam told CNBC.
  • Customers will be attracted by the strength of service, not if they can get Netflix for free, he added.
  • Verizon's plans to expand its 5G wireless network, but has no plans to buy a cable operator like Charter or Comcast, McAdam said.

Verizon isn't threatened by AT&T snapping up Time Warner because it can negotiate those deals without having to spend billions on another media company, Chairman and CEO Lowell McAdam said.

"If we wanted to offer something like HBO, we can call (CBS CEO Les Moonves) and get Showtime in a commercial arrangement," McAdam said on CNBC's "Squawk on the Street" on Thursday. "I don't need to own the content in order to prove that to customers."

AT&T said on Tuesday that it would expand free HBO subscriptions to all of its Unlimited Choice customers, in addition to its Unlimited Plus users. The company agreed to purchase Time Warner for $85 billion in October 2016. Meanwhile, T-Mobile has added free Netflix to family plans.

Despite all the promises of new bells and whistles, a reputation among consumers for being a reliable network will be more important, McAdam noted. He pointed out that only 2 percent of Verizon's cell sites went down when Hurricane Harvey hit Houston, as opposed to its competitors which lost 75 percent of their networks.

"I don't know that you have to give away something that has value in order to sell your service," McAdam said. "That's the edges we're going around at this point. ... At the end of the day, customers will buy based on their experience, doing what they need to do, not whether they have Netflix or not."

However, Verizon did delve into purchasing media companies when it bought AOL in June 2015 for $4.4 billion, and Yahoo in June 2017 for $4.48 billion. The two acquired companies were merged into a subsidiary called Oath. The integration is still ongoing, and McAdam said he was hopeful the content will "pull more people to its wireless service and ultimately to our 5G service." ItsGo90 video service has also allowed Verizon to offer an over-the-top video (OTT), non-cable or satellite service, but he acknowledged that the OTT field is "very crowded."

"We may partner with somebody, we may use that, but I'd say from an infrastructure perspective, we've been satisfied with it as a consumer offering," he said.

McAdam also squashed reports the company was considering purchasing Charter, Comcast, Disney and/or CBS. Verizon will instead focus on building out its wireless 5G network, he said.

"I think Charter has a great company, great business model," McAdam said. "We are very focused on deploying fiber and 5G and that's where we need to put our capital dollars, and buying a cable company and having to reconfigure their network didn't make any sense for us."

The new network will "usher in what I think is the fourth industrial revolution in this country," he claimed. It would allow for more automation of services like transportation and health care, as well as more entertainment through virtual reality and other gaming advancements, McAdam added.

Executing the new system will cost $18 billion in capital expenditures, but McAdams said expenses won't go up for the "short term." The company does have some cost-cutting measures in place including offering lower streaming video qualities on its unlimited data plans, which could cut costs by $10 billion over the next four years.

"You can give a different quality of video," McAdams said. "Most people on a cellphone can't tell the difference between 480 and 1080p. You give customers that sort of option."

Disclosure: Comcast is the owner of NBCUniversal, the parent company of CNBC and CNBC.com.