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tv   Bloomberg Businessweek Debrief A Conversation With Justin Trudeau  Bloomberg  May 3, 2019 6:00pm-6:30pm EDT

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david: your father was in the randall: do you know what animal husbandry is, david? david: i started out as a animal husbandry major myself. [laughter] randall: i'm getting a robocall too. david: you are getting a message right now? [laughter] randall: it is literally a robocall. i said in spanish, the next person to speak to me in english is fired. i don't care if the building is on fire. david: you are now rapidly trying to build out 5g. randall: it is conceivable we will move into a world without screens. >> would you fix your tie, please?
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david: well, people wouldn't recognize me if my tie was fixed, but ok. just leave it this way. alright. ♪ david: 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 of running a private equity firm. how do you define leadership? what is it that makes somebody tick? you grew up in oklahoma. your father was in the agriculture business? randall: yeah. david: so, it was a cattle business. were you ever interested in that business, or did you want to get out of that business? randall: boone pickens and i have something in common. we both started as animal husbandry majors. david: ok. and you switched to something else? randall: obviously. [laughter] randall: do you know what animal
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husbandry is, david? david: yes, i do. i started out as a animal husbandry major myself, then i realized private equity work better, but ok. [laughter] david: so you, ultimately, you got a job with southwestern bell. randall: correct. david: southwestern bell was the result of the breakup of at&t in 1984. so, how did you get a job there? you were right out of college? how did you get the job? randall: i like to say i got my job the old-fashioned way, my brother got me on. [laughter] david: ok. randall: my wife and i were getting married, and she said come in yes, i will marry you, but you need to get a job. i was in school. my brother said i will get you on the phone company. i went to southwestern bell and i started out, my first job, david, was to hang 19-inch magnetic tapes onto tape drives. you would look at the screen and say this tape on that drive. i would find that tape, mounted on the drive. i would push load and push start and do that for a 12-hour shift. david: ok, and that propelled you to the top, right? [laughter] randall: it was pretty much the foundation of everything that i
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do now. david: your brother is still working in the company, right? randall: he is a technician in norman, oklahoma. david: does he mention you are the ceo of a company or he doesn't mention that, you think, to people? randall: he is a member of the labor union. i don't think that would be received very well. [laughter] david: ok. when 1984 came, at&t was broken up, and they had seven baby bells, and there was at&t. how did the smallest become the one that ate up everybody else? now there is just verizon and you. randall: leadership more than anything is what drove it. something else happened that does not get discussed much, and that is at&t owned a lot of wireless airwaves. and, keep in mind, in 1984, wireless service did not exist. and so those wireless airwaves got pushed out to those baby bells, a 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 catapulting us
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to growth. so there were some law changes that allowed us to actually start acquiring pacific bell, ameritech, ultimately bellsouth, and then ultimately at&t. it was a huge m&a activity i got to be part of. david: you were the cfo for many of that. randall: i was. i'm getting a robocall right now. david: you getting a message now? [laughter] david: that from president trump or somebody? randall: [laughter] he doesn't call me. david: doesn't call you? ok. [laughter] david: while you were working at then-southwestern bell, you went to mexico for part of your career. what were you doing in mexico? randall: we invested alongside carlos slim in the telecommunications company in mexico. it was like one of the greatest experiences of my life. david: did you speak spanish before you got there? randall: no, but i started learning really quick. and, literally, after six months, i was frustrated. i came into my office and said
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in spanish, the next person to speak to me in english is fired. i don't care if the building is on fire, there is an earthquake, no english. so within three or four months, but you make a lot of mistakes in the interim. david: you still speak spanish still? randall: [speaking spanish] david: ok. more than i speak. ok. [laughter] david: okay, so, here is 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 century better and stronger than at&t? randall: we were sbc. we had been largely a regional company, five states, arkansas, oklahoma, kansas, texas, missouri. so the opportunity to buy at&t, which was a global brand, and when we were acquiring it, we asked ourselves the question when we acquired them, what brand should we assume?
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keep in mind, at&t was in radical decline when we bought them. it was about a three minute debate as to whether you take on a global brand that is well known and positions you differently. david: why are you in the entertainment content providing business now? you spent $85 billion recently to buy time warner. randall: multifaceted. i will try to simplify it. but, look, as we watch and analyze our customers, as we have developed network delivery technology where they can consume video on all devices, anywhere, everywhere they are, it has been surprising and quite enjoyable to watch how people are now consuming video. and this is just in a world of 4g. now as we move these networks, and we are moving there aggressively, to 5g, the amount of video you will be able to consume in multiple formats wherever 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 are going to have this many new distribution points for premium
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video, all new distribution available anywhere anytime, should the value of media go up or go down? we believed it would go up. but then as you begin to analyze it, look, is it good for at&t to own a media company? yeah, i think it is, but the relevant question is, is a media company being attached to a telecommunications company like us worth more? and what i mean by that is, so think about time warner, all the great brands, warner bros. studios and an unbelievable ip library. think about hbo. think about turner with cnn -- if you can take a business like this and put a lot of money into it, invest in it, and equip that content to be delivered to the consumer, then what better way to do that than to be paired with a company that has 170 million customers out there that
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we can distribute to? david: ok. ok. so you announced this acquisition for $85 billion. the u.s. government said, well, we don't like this acquisition even though it is a vertical merger. you weren't really buying a competitor. the u.s. government went to court to stop you. do you think there was any political influence behind the decision to try to stop that merger? [laughter] randall: 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 is a 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 so, we were concerned when that statement came out. now right on the heels of that statement, a gentleman who is a professor at pepperdine university was asked by a
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reporter, what do you think of this transaction? and this law professor at pepperdine said, i don't see any issues with it -- i am paraphrasing, but he essentially said i don't see any issues with that. about a year later, that law professor has been confirmed to the head of the antitrust and shortly thereafter, a lawsuit is filed against a vertical merger, the first time since the 1970's that a lawsuit had been pursued against a vertical merger like this. and so, look, i have said publicly it is an elephant in the room, one has to question is there political motivation behind this? i have no proof there was, but one of two things, it was either a radical coincidence or other motivations. i don't know. david: where do you get your news? do you watch cnn all the time? randall: i watch it a lot more than i used to. [laughter] david: ok. randall: with a critical eye. david: ok.
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if you are watching something and don't like what they say, do you call somebody up? or you don't do that? randall: no, i don't get involved in the editorial content of the news, but i am a news junkie. i consume news constantly. i probably a little bit obsess about it. david: will you buy the equipment of huawei in building out your 5g? randall: 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 do we want to be cautious about who is the underlying company behind that technology? we damn well better be. ♪
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david: let's talk about the business of cellular though. you are now rapidly trying to build out 5g. what is it going to do for us? randall: you are always connected, a real-time network, just like turning a light switch on.
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it is real-time. why is that important? it is really important when you start to conceive of services like autonomous cars. but i mean it is very serious, right? a kid runs out in front of a car. you, it needs to be a real time, always on, always connected network. this is really important. as you conceive of these services, you can begin to conceive of robotic manufacturing that is always on, always connected via 5g networks. and to just the kind of put this into perspective, internet of things, devices and sensors that are connect all over the place, today's networks in a square-mile, you could connect 2000, 3000 of those. in a 5g world, you could connect millions of those in a square mile. i couldn't conceive of the iphone when we built a 3g network. you and i cannot conceive of all the services that will materialize with this kind of capability. david: when the iphone was being developed, did steve jobs come to you and try to explain it to you? and what did you think of what
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he was saying? randall: we were building a mobile internet. that is what 3g was about. as i said, i did not know what the mobile internet looked like. how, just build it, and people will use it. that has always been my philosophy. if you make something mobile, utility explodes. and the guy in a black turtleneck shows up with a description, an explanation of a product. he did not have a product. he had an explanation of a product. think about a phone that does not have a keypad. it is just a screen, and it has little icons. you push these icons, stock quotes, weather, you get that. the minute we saw that, it was, that is the mobile internet. that is something we have to be a part of. that is what we are building the future for. david: so you said to steve, let's be partners? or how did you do that? randall: let's pursue it. you know, and it 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.
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we launched the first one. and it required us to fundamentally change our business model. it cost us a lot of money. 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. we said, let's make this bet. david: right now with the current situation, i am driving from dulles to downtown washington, sometimes cell coverage breaks down. randall: used to. it was exit 13. it does not anymore. [laughter] david: did it ever happen to you? randall: it happened to me a lot. and i would call every time i went through there, my network guy, i would say, i dropped the damn call again. the problem with these guys is they have to get a cell site permit. in this day and age -- it can take two or three years to get a cell site permit. we hear a lot of people, including folks in the administration, saying china is going to beat us to the world of
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5g. in china, they don't spend two years getting a permit to build a cell site. they say we want a cell site over there and they just go build it. here, this two to three years is going to be a problem. david: is china ahead of us now in 5g? randall: now, no. today, we have live 5g standards-based up and running in 12 markets in the united states. china right now has zero. they are running some trials. now china is going to commit to this. they have said that this is a major focus of theirs from an economic development standpoint and security standpoint. so they will come hard. they are investing heavily in it. david: will you buy the equipment of huawei in building out your 5g? are you allowed to? or will you -- randall: our government has told us not to, and so i get it. we are not using huawei, a chinese developer of this technology.
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they are the largest equipment producer in the world for telecom equipment. but, look, our government is being very aggressive on this, that 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 is not the issue. conceive 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 be driving robotics, 5g will be driving the manufacturing floor. 5g will be involved in traffic management around our cities. i mean we will be using it in utilities.
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we will be using this in refineries. we have to ask 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 is a debate worth having. but i think our government is asking the right question. david: if i get 5g, am i going to have cheaper bills for my cellular? randall: i hope not. [laughter] david: it is going to be cheaper. randall: it is more efficient. it is a more efficient technology. look, the 5g experience with you on your smartphone is going to be just a better experience. will people pay more for different speed tiers in the future? conceivably, but i don't think we have really worked out our pricing arithmetic looks like. david: today, who do you regard as your major competitors? it is not the traditional telephone companies, i assume, anymore. randall: so when i wake up in the morning, i want to know how
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we do against verizon, comcast, t-mobile, sprint, charter, verizon, et cetera. if you ask me who am i most concerned about, who i think about in terms of where we are going in the future? look, it is amazon, netflix, disney. those are the competitive set i spend more time thinking about. david: you now have with the time warner merger 290,000 employees. randall: correct. david: so how do you keep up with them? how do you meet with them? how do you spend time communicating your views to them? is it awesome to have 290,000 employees you are responsible for? randall: it is amazing. it is a big responsibility. obviously. i mean, it is one of these things you spend time thinking about is fairly compensating 290,000 employees, particularly in a labor market that is 3% unemployment. and so it is a competitive marketplace.
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and we are spending a lot of time thinking about this. health care for 290,000 people is a big deal. we will spend $5.5 billion on health care of this year for our employees. and how do you ensure you continue that into the future and sustain it. we have a $70 billion pension plan. and how can you ensure these people that when they retire and are 80 years old that they are not worried if a pension check is still coming. so you spend a lot of time on these issues, making sure the company is positioned, stable, and fiscally secure to provide that. and then just the recruiting and so forth is a big deal. david: on the pension plan, investing more in private equity would be what i would recommend recommend for your pension plan. you might consider that as a way to get good returns. [laughter] david: what is the best pleasure -- randall: i would be happy to give you all $70 billion if you would just take the liability with it. [laughter] david: let me think about it. ♪ randall: we carry around these
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devices and they are bigger than they should be because there is a lot of compute in here, there is a lot of storage in here. when you get to 5g, it is conceivable that we are going to be moving into a world without screens. ♪ reens. ♪
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david: one of the downsides i assume is you have to come to washington from time to time and deal with government officials. randall: this is the most frustrating part of what i do day in and day out, is i spend too much time here. every minute that i am here is a minute i am not taking care of employees, not putting together new product, not hiring great employees, great executives and great people. too much of our success and failure is dependent upon what people in this town decide to do on a day-to-day basis. david: i figure you would never, when you leave this job, want to go into government. randall: that would be a fair
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assessment. [laughter] david: do you intend to expand out of the united states. randall: we, yes, in fact, warner media has a large presence outside of the united states. about 30% of the revenue. david: your telephone business, for example, you are moving into mexico? randall: we have gone aggressively after mexico. we went down there. we bought a couple of companies that were floundering. we put them together and have been investing. we have got a nationwide network in mexico now. 100 million people pass through this network. it is growing at a rather dramatic -- we have been the fastest grower in mexico for three years. david: you used to work with carlos slim many years ago. now you are competing with him. is that a problem for you? randall: it's not pleasant, but actually, no, it is 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 companies because i am a huge believer in mexico. the demographics, everything about mexico just fits with our
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business perfectly. david: you had the job for more or less 12 years, almost. and you don't have a retirement age mandatory in your company, i don't think, but you are 58. randall: my wife has a mandatory retirement age, yeah. [laughter] david: so you expect to do this for how much longer? seven years? randall: i don't know. i don't know. my board and i talk about that. there is obviously a lot that goes into that decision. do you have somebody ready? do you have a bench ready, and so forth. so, i have not given any external indication on that. david: so what do you do for relaxation when you are not worrying about your 290,000 employees, the government interfering with what you want to do? randall: we spend a lot of time in wyoming. we have horses. i love to trout fish. and i play a really bad game of golf. david: and now you sponsor the at&t at pebble beach. randall: we do. david: so do you get to play with tiger woods, phil mickelson? anyone you want to play with? you are the amateur playing with them. do you get to do that? randall: unfortunately, it is
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like getting married, there has to be someone willing to play with you. so i can't just go to tiger because he has seen me play. david: so you do not win automatically or something? [laughter] randall: i have not even made the cut in the tournament before. david: you are not talking to people running it about making sure the cut line is different? ok. [laughter] david: you have two daughters. randall: i do. david: and you have grandchildren, five grandchildren. what do they call you? randall: they call me pop. david: not boss or anything like that? randall: i was very strategic on selecting pop. because, and this is really important for everybody to understand, be strategic on 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 to death. [laughter] david: ok. what is it that you say most people should know about your company? randall: technology, media, telecommunications. that is kind of a sector that people in the financial analyst community talk about. they talk about it that way
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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, 5g-driven, is going to create some experiences for customers that you or i aren't conceiving of. and just to make this point -- we carry around these devices, and they are bigger than they should be because there is a lot of compute in here. there is a lot of storage in here. when you get to 5g and they are that fast, all that compute and all that storage goes away. it is back in the network. these form factors, some would say they shrink -- i say they go away. it is conceivable that we are going to be moving into a world without screens. it is just a totally different experience. and i believe at&t is right at the very center of all of this. because if you asked yourself five years from now in this room, will you be consuming more
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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. david: ok. well, i want to thank you for an interesting conversation, and congratulations on your success. randall: thank you, david. [applause] ♪ so with xfinity mobile
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scarlet: i'm scarlet fu. this is bloomberg "etf iq," where we focus on the access, risks, and rewards offered by exchange traded funds . ♪ scarlet: fresh off apple's earnings, shorthand for tech. is qqq a proxy for the best-performing stock of the year? get schooled on fees. the case for why teacher retirement funds would benefit from a shiift to low-cost passive. betting on 5g.


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