New AT&T CEO eyes M&A; spending to promote iPhone

NEW YORK (Reuters) - AT&T Inc.'s (T.N) new chief executive, Randall Stephenson, said the largest U.S. phone company may acquire overseas assets or technology companies to bolster its corporate and international sales.

Stephenson, who officially became CEO on Sunday, said AT&T could buy telecommunications assets abroad to gain a stronger foothold in foreign markets where it serves corporate clients.

"At some point, we may want to own some last-mile access as we aggregate traffic, so you might look for small companies that have that kind of access. It just depends on where the traffic develops over time," he told Reuters in an interview.

AT&T has said it would spend $750 million over the next two years to enhance its global infrastructure, including undersea cables and advanced networks.

Stephenson, who replaces retiring CEO Ed Whitacre, said AT&T may also seek deals similar to its 2006 acquisition of privately held applications service provider USinternetworking Inc. for $300 million.

USinternetworking specializes in business software and e-commerce, and the deal was seen helping AT&T better manage its clients' software applications.

"It fills a product hole that we've had in our product lineup. There are other areas where we'll have some holes to plug in the product lineup. It's hugely faster to acquire companies that have that expertise than to build it yourself," he said.

Stephenson declined to comment on details, such as whether it could buy a bigger company like Vodafone Group Plc (VOD.L).

His predecessor, Whitacre, was renowned for bold acquisitions. The current AT&T was formed through a series of mergers involving BellSouth, SBC and AT&T Corp.

Most analysts have said Stephenson was unlikely to stray from Whitacre's management style, although the company may be less acquisitive after so many big deals and massive spending on U-Verse, which is AT&T's answer to cable's all-in-one packages of Internet, television and phone services.

Stephenson, formerly chief operating officer, said the BellSouth deal would bolster the roll-out of U-Verse, which offers multiple high-definition channels and fast Internet access.

AT&T has said it plans to make the service available to 18 million homes in the 13-state territory that does not include former BellSouth regions by the end of 2008.

Within the former BellSouth territory, AT&T will launch U-Verse in Georgia by the year-end, and in Miami and other Southeast areas soon after, Stephenson said.

IPHONE EFFECT

Stephenson also said AT&T planned to spend aggressively to promote Apple Inc.'s (AAPL.O) iPhone, which was on track for sale in late June. AT&T is the exclusive U.S. carrier.

"Apple will do an aggressive launch of the product. We are putting a lot of money behind the launch as well, to drive traffic to the Apple stores and the AT&T wireless stores," he said. He declined to give a figure for the spending.

He shrugged off suggestions that AT&T may have ceded too much ground to Apple in a revenue-sharing agreement in order to be the exclusive carrier. The two companies have not revealed details of their agreement.

"There are different models but this one I'm expecting it to be a more profitable model than the traditional model," he said. "I am not concerned about it."

Stephenson said the iPhone could bolster sales of other phones as consumers are drawn to AT&T stores.

"The traffic and enthusiasm and buzz generated by the iPhone will actually sell more of all devices. We're just going to get more traffic in stores and not everybody is in the $500 phone market," he said.

AT&T shares have risen about 50 percent over the past year on strong sales of its wireless and Internet services.