When: Today, March 22nd at 6PM & 11PM ET
Where: CNBC’s ”Mad Money w/Jim Cramer”
Following is the unofficial transcript of a CNBC interview with Ralph de la Vega, AT&T Mobility President & CEO, on CNBC’s “Mad Money w/Jim Cramer” tonight at 6PM & 11PM ET. All references must be sourced to CNBC.
JIM CRAMER, host: Ralph de la Vega, welcome to MAD MONEY.
Mr. RALPH DE LA VEGA: Good to be here. Good to be here.
CRAMER: Good to see you. Have a seat, have a seat. All right, so everyone's sitting there watching a basketball game, except for people who don't know what they're talking about, and suddenly it comes over--comes over the wires...
Mr. DE LA VEGA: Right.
CRAMER: ...that you are buying T-Mobile. When did this deal get started? How did it get in your mind? And how come someone didn't say, `You got to be kidding me! They're too big!'
Mr. DE LA VEGA: Well, you know, this is the best deal for both companies, Jim. It's marriage made in heaven if you want to look at it. The network that we use is compatible, the technology's compatible and the spectrum was compatible. So we can bring tremendous benefits to the customers and to the shareholders immediately. We announced it in New York yesterday; we had great response from the market. The thing that I like about this is it brings tremendous benefit to the area where the country's focusing on, which is mobile broadband. And, you know, mobile broadband has been growing in our company 8,000 percent over the last four years.
Mr. DE LA VEGA: And it's going to grow eight to 10 X that amount in the next five. Combining the companies relieves the spectrum exhaustion conscience that we have in major cities throughout the country.
Mr. DE LA VEGA: So it allows us to continue to grow this wonderful broadband connectivity that we're providing throughout the country. And as you know, we made a commitment to take the best technology in the world, LTE...
Mr. DE LA VEGA: ...and extend it to 95 percent of the country. That means that not just the urban areas, but rural America...
Mr. DE LA VEGA: ...is going to get the best technology in the world. And I think it's an economic driver and it's going to be good for the country.
CRAMER: Right. You talk about it as a marriage. When did you guys get engaged? Because every day I picked up the paper, I saw that T-Mobile might be talking with Sprint, might be talking with anybody else. When did the engagement consummate?
Mr. DE LA VEGA: Well, it happened quickly. I think when we—when we realized...
CRAMER: You're a big company. How fast?
Mr. DE LA VEGA: Well, we're fast.
Mr. DE LA VEGA: You know, we like to be innovative and fast, and I think Randall Stephenson, our CEO, did a great job of bringing the deal together.
CRAMER: All right, you're willing to pay a $3 billion breakup fee. You are willing to do a lot of other things if this deal doesn't work. That is a level of certainty that I've never seen. I mean, why? Why 3 billion? How do--how does he arrive at that? That's a gigantic amount if this thing—if Justice Department says forget it, you're out.
Mr. DE LA VEGA: Well, that--we feel very confident, and we're not going to, you know, kind of comment on the exact process...
Mr. DE LA VEGA: ...that the department's going to use. We're very respectful of what they use. But if you look at what's happened in the past, Jim, the Department of Justice has always looked at competition on a local market level.
Mr. DE LA VEGA: And when you look at it on a local market level, 18 out of the 20 top markets has five or more competitors, and most markets in the country have five or more. So the combination of this will still keep the US as the most competitive marketplace in the world. We're very confident of that.
CRAMER: Right. Dan Hesse's been out saying, he's the head of Sprint, the head of--the chairman of...a man you respect, he is saying that it's really a straw man, that some of these other players, whether it be a Leap or a MetroPCS, that they really can't be considered true competitors.
Mr. DE LA VEGA: Oh, absolutely. You know, if you look at the Metro, the Leaps, even the Tracfones at MVNO have added the most customers in the industry in the last year. So they have been very successful playing the market. And companies like MetroPCS is rolling out LTE, they're rolling out smartphones...
Mr. DE LA VEGA: ...and they're very nimble and very good competitors.
CRAMER: Now, on the conference call yesterday you used the term that you do not--you say no divestitures are needed, but that obviously there may have to be. What are you willing to give away? Would you be willing to fund Clearwire for Sprint? Would you be willing to fund competitors to get this deal done?
Mr. DE LA VEGA: I don't know that it's appropriate to talk ahead of time what we'd be willing to do. But I think if you look...
CRAMER: Well, it's OK. It's you and me.
Mr. DE LA VEGA: Yeah.
CRAMER: Yeah, I'm sorry.
Mr. DE LA VEGA: But, you know, I think if you look at other competitors, I know you had Dan here, but we mentioned at the beginning of the show...
Mr. DE LA VEGA: ...the importance of spectrum. I just want to make sure we get that perspective right. If you look at the amount of spectrum that AT&T and T-Mobile have combined, Sprint has more.
CRAMER: Right. OK.
Mr. DE LA VEGA: In fact, if you look at the spectrum that they have per subscriber, they have three times the amount of spectrum we do per subscriber. So they're still going to be a great company, they're still going to be great competition, and the US is going to still be a really competitive market.
CRAMER: All right, Ralph, this is MAD MONEY. We are not in front of the Justice Department and we're not at a trade show. I looked at this deal and your stock went up. I've never seen such a huge deal where the acquired stock went up. What's the market thinking?
Mr. DE LA VEGA: Well, the market is looking at the deal and looking at the values of the synergies, Jim.
Mr. DE LA VEGA: Now, we've outlined them, and the values of the synergies, if you net...the value of them, actually exceed the purchase price. So the market has seen that this is a great combination. Number one, it makes sense: compatible technology, compatible spectrums. The companies can come together just like we did with the AWE-Cingular merger...
CRAMER: Mm-hmm. Right.
Mr. DE LA VEGA: ...and bring tremendous benefit to the shareholders, and we're very pleased with the market reaction.
CRAMER: As someone who's been recommending your stock literally from day one because of the stability of the dividend and the possibility of long-term growth, I see a story that says AT&T deal raises fears of higher charges. Handily, as someone who would--wants people to be shareholders, don't I actually want higher charges?
Mr. DE LA VEGA: Well, I think what--if you look at the history of the merger and the pricing activity in this country, Jim, what you're going to find is prices have actually fallen 50 percent over the last 10 years. Even though you had the Sprint-Nextel merger, the Alltel/Verizon merger, prices have come down. What we're allowing the customers to do is to use more and more of our services, so we derive the value to the shareholder by giving customers a great value but having them use our services more and more. That's why we've seen this huge outgrowth of data...
Mr. DE LA VEGA: ...even though the data prices per megabyte have actually gone down.
CRAMER: All right, one last question. Shareholders might say, you know what? I hope that they are able to not spend that much money on capital expenditures now, they cut back the number of towers they use, they don't need all these towers, and they can start giving--return more money to shareholders. But in terms of growth, you want the opposite of that. How do you reconcile these two?
Mr. DE LA VEGA: Well, I think the way we do it is the way we're planning to run our business. I think we're going to continue to invest, Jim. In fact, we have said that we're going to invest an additional 8 billion, 8 billion in infrastructure to facilitate us making this merger work and extending LTE to 95 percent of the population. We have a metric that we say that about every billion dollars results in 7,000 new jobs. So I think that bringing new jobs to the economy, new jobs to the country, extending a critical infrastructure to the country, and I think it's good for the overall economy.
CRAMER: Well, I mean, then a big decline in the tower stocks may be misplaced. It sounds like that you would not necessarily--I mean, I know when you did the last deal with Cingular and AT&T Wireless, you were able initially to be able to reduce the number of towers.
Mr. DE LA VEGA: Mm-hmm.
CRAMER: Then it went right back up.
Mr. DE LA VEGA: You know, what I see happening in the future is this industry is sitting on top of the greatest growth curve that probably any industry has seen. When we're talking about growth demands that are eight to 10 X what we're seeing today, I think there's great opportunity for growth in every aspect of this industry, from towers to providers to application developers, you name it. It's a great growth industry.
CRAMER: All right, I want to thank--I want to thank Ralph de la Vega, who has really been incredibly candid about this stuff. He's president and CEO of AT&T Mobility and Consumer Markets, and has really been the guy I think driving this whole transaction.
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