Thursday, November 14, 2019

Liberty Puerto Rico Speaks About its AT&T Acquisition

By on October 17, 2019

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Assures Transition Will be Smooth, but Does not Clarify Future Changes

Editor’s note: This report first appeared in the Oct. 17 issue of Caribbean Business.

If you are one of the more than 1.1 million AT&T subscribers in Puerto Rico and the U.S. Virgin Islands or form part of the 1,300-strong workforce the telecom giant employs for those markets, you will not see changes in your service or at work, for now.

After news spread about the telecom provider reaching a definitive agreement with Liberty Latin America to acquire its wireless and wireline operations, doubts have arisen regarding the next steps for the latter company, which is on the doorstep becoming a major communications and entertainment conglomerate in the Caribbean.

What do we know? The acquisition of AT&T’s operations will entail an all-cash $1.95 billion deal, plus fees and expenses, a transaction that could occur in the next six to nine months, if the Federal Communications Commission (FCC) and U.S. Department of Justice give the go-ahead. The transaction is thought to ameliorate the debt resulting from AT&T’s $85 billion acquisition of Time Warner Inc. last year.

In July, Reuters reported that its sources said AT&T was exploring the possibility of selling its assets in Puerto Rico and the USVI for $3 billion. However, Liberty’s chief of communications said AT&T had denied that information and focused on the matter at hand: Is this transaction a good deal for Liberty in Puerto Rico and Latin America?

“The AT&T network is in very good condition and there has been a lot of investment in its network after the hurricanes. We would benefit from that investment that AT&T already made in its network. Likewise, we made very large investments; the network, which as you know was at zero, was fixed and, in less than a year, was able to be rebuilt. That is one of the positives that this combination would have, that we would be having two networks in very good condition, the best fixed network with the best mobile network, and it would become a single network that would bring more redundancy and more resilience if we were to have to face an emergency such as a natural disaster again,” Giovanna Ramírez de Arellano, director of communications & corporate responsibility for Liberty Puerto Rico, told Caribbean Business.

Although the acquisition does not include AT&T subsidiary, satellite-TV provider DirecTV; the relationships and responsibilities assumed by the network dedicated to emergency response, FirstNet; nor the Global Business customers of AT&T, the resulting fusion represents the birth of a stronger and competitive market player brought to the game, a move that could be confused with a monopolistic practice but, in the opinion of Liberty Puerto Rico’s management, is an incorrect assertion because the deal involves the acquisition of products and services Liberty did not previously have.

“I would not like to talk about other companies but what I can say is that we do not expect that there will be many challenges with that [anticompetitive advantage claims] because we really are entering a complementary business. The competitive environment will remain basically the same and some other mergers that have occurred lately are national; this is only about Puerto Rico and is a bit smaller in terms of reach,” Ramírez de Arellano said.

In early 2017, an agreement was announced between Sprint and PRWireless Inc., better known as Open Mobile, joining their businesses in Puerto Rico and the USVI, a business that sought to offer better wireless coverage, increase speeds and technological capabilities and better serve the interests of its customers, especially business clients. It is unknown whether that transaction, which was disclosed in 2017, finally materialized. What is known is that today AT&T remains the fastest wireless network and has the greatest coverage in Puerto Rico, based on research firm Ookla’s “Speedtest Intelligence” analysis for the third quarter of 2019.

“The combination of AT&T’s leading mobile and wired businesses with Liberty Puerto Rico’s leading high-speed broadband and TV business will create a strong and competitive integrated communications player,” said Balan Nair, president & CEO of Liberty Latin America, in a press release. “At Liberty Latin America, we are focused on investing in digital infrastructure, innovation and 5G networks, and on delivering a friendly customer-service experience. This transaction is evidence of that, and we are confident this new combination will be good for our customers and our employees, including those joining us from AT&T.”

Meanwhile, AT&T Chief Financial Officer John Stephens described the transaction as a “result of our ongoing strategic review of our balance sheet and assets to identify opportunities for monetization” that “only made sense if we received a fair value from a buyer that is committed to taking this well-run business, with its skilled employees and loyal customer base, and help it thrive. Liberty Latin America has a strong reputation for quality of service, and we believe they have the experience to build on the success of these operations,” he added.

What we still don’t know

After the general facts of the sale were revealed, the public’s opinion has been monitored by Liberty Puerto Rico, which assured that until the spring of 2020, there is no reason to worry because no existing services will undergo changes. In addition, the company will respect AT&T employees’ collective bargaining agreement, which remains in force until 2023.

“It’s too early to talk about that but right now there is no plan for [personnel] cuts. They [AT&T employees] have an agreement signed until 2023 and it is valid. What I can assure you is that we need the talent and experience of the AT&T employees and we know that it is a very committed and very professional workforce and we count on those resources.”

Regarding the possibility of pricing changes, Ramírez de Arellano did not elaborate on whether it is in upcoming plans.

“For now, the two companies are still separate. I cannot comment on what the fees will be because it is too early to talk about that, but what I can tell you is that both companies are known for providing a lot of value for the money, with quality products and excellence, and we will continue that way.”

AT&T enjoys proven credibility in its customer service area locally. How will Liberty maintain that level of satisfaction, CB asked.

“What we have seen in general is that our customers feel confident because we have not seen an increase in calls by our customers to our call centers. We believe that our clients feel confident and are used to the [level of service] we provide them, to our services, to the innovative products we have. We have seen uncertainty in certain comments on social media, but we must explain that nothing changes for now. An agreement was signed that now has to go into the regulatory process. At least until the second quarter of 2020, the two companies [will] remain completely separate; there can be no integration, and everything remains business as usual,” the executive said.

After that period of calm, the operational transition will begin at full steam, a process to which “AT&T committed to supporting Liberty for three years, to ensure it happens in a fluid, easy way and without interruptions to the service that affects the customers.”

In terms of marketing, will AT&T cease to exist and now be called Liberty? CB asked. Silence was followed by: “We don’t know” and a laugh. “At this point, I still can’t answer that question. The AT&T brand will continue for a while; this will not be immediate, but yes, eventually, with time and the transfer, it will have to change,” concluded Liberty Puerto Rico’s communications chief.