Ina Fried

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Exclusive: AT&T’s Ralph De La Vega on Which Smartphones Are Winning

After his on-stage grilling on Thursday, I had a chance to catch up with AT&T’s Ralph de la Vega to talk about some of the trends that AT&T is seeing.

It turns out he’s seeing a lot of the same things that the rest of the industry is seeing–namely the rise of Android, the continued strength of the iPhone and struggles for others, including BlackBerry. And, while AT&T has been one of the biggest supporters of Windows Phone, de la Vega acknowledged that the sales haven’t been what either AT&T or Microsoft would have liked.

“We actually like that software very, very much,” de la Vega said. “It hasn’t sold as well as Microsoft or we would want it to.”

However, he noted that it is essentially a version one of a new operating system and said he still has high hopes for the future, particularly if both Microsoft and new hardware partner Nokia can execute on their vision.

“I think for the first thing out of the chute it is pretty good,” de la Vega said. “I think they just need to make it better….Giving customers more application choices, having a bigger app store with more functionality on the phone–I think that is all that it needs.”

Here’s an edited transcript of our conversation:

AllThingsD: You guys have always offered the broadest range of smartphones. What are the trends?

De la Vega: They definitely are buying a lot less feature phones than they used to. We’ve seen a dramatic shift from feature phones and quick messaging devices, which were texting devices only, into smartphones. We love that.

Android is becoming more popular. Our Android business is doing very, very well. I think what’s happening is people have latched on to smartphones. I think over time there will be fewer and fewer feature phones.

There are a million Android devices. Do you want to see more customization? I know at Mobile World Congress you said that you would carry the HTC device that is very Facebook-centric. Do you want to see more devices like that, that are a little more specialized?

De la Vega: I think you are going to see more people put a different UI on top of Android, like HTC has very successfully done. I love what they have done with their UI. It’s very simple, but it is still Android. I hope others will step up to the plate and Android itself will get better.

Nokia has made this huge bet on Windows Phone. One of the reasons, they have said, is to have a bigger presence then they have had in many years in North America. How interested are you in adding them to your lineup?

De la Vega: We already have Windows Phone 7 in our lineup. We actually like that software very, very much. It hasn’t sold as well as Microsoft or we would want it to, but I think having the Nokia hardware capability with the Microsoft software capability is a really good combination. They have to prove it by bringing some great devices to market. But I would love to have a great Nokia device with Microsoft Windows Phone 7.

Windows Phone 7, is it a hard sell, or are their features that are missing?

De la Vega: Keep in mind this is the first product that Microsoft has come out with since Microsoft redid their OS. I think for the first thing out of the chute it is pretty good. I think they just need to make it better. If you listen to what Steve Ballmer is saying (Mango, the next version), is going to add about 500 features. I think they are going to make it a lot better. Giving customers more application choices, having a bigger app store with more functionality on the phone, I think that is all that it needs.

Actually, I loved Windows 8. That looks a lot like a Windows Phone screen, with the tiles. I think that’s a huge win for Microsoft. Now they have their same look and feel on their PCs and tablets as they have on their smartphones.

Is there really a tablet market or is it at this point still an iPad market? Do people come in looking for something other than an iPad?

De la Vega: I think you are going to see more and more people come in to look at other tablets that may look interesting to them. I think it is going to be up to the competition to challenge Apple, not only on the software, but also on the hardware. What Apple has done very well is killer software, but the hardware is beautiful. I think they are raising the bar very high, but this is a competitive industry. I am pretty sure the other guys are not going to sit still and let Apple have all of that market share.

Originally, I think you were planning to carry the Motorola Xoom. Is that still what you guys are planning?

De la Vega: We’re still planning to carry it. We’re still working with Motorola on a few issues. But we are planning to carry multiple tablets, not just Motorola but several others as well.

All of the people that offer us smartphones, Ina, are offering us tablets. The question is which ones of those are good enough to stand up to the iPad. That’s a very high bar.

Historically, one of the big consumer smartphone devices has been the BlackBerry. With the Curve, they really did help expand the smartphone market, but clearly their sales lately have not been what they were. What sort of feedback have you given them?

De la Vega: I think customers want more applications and they are going to eventually move to where they have one OS. Right now they have OS 7 and they have QNX.

Are you guys being more cautious about your plans? Have you scaled back from maybe where you thought a year ago you would be in terms of BlackBerries?

De la Vega: We don’t necessarily scale back. We offer their full product line. We just see customers in some cases choosing other products rather than traditional BlackBerries.

What have been the positive surprises? We talked about how BlackBerry has had a rough time and with Windows Phone, even though you like the product, the volume hasn’t been maybe what you hoped for.

De la Vega: iPhone and Android. I’ve been very pleased with HTC. HTC has come out with the HTC Inspire and it is selling extremely well in our stores. I think HTC has done a great job with the user interface. You go in and it is distinctive and I think other players are going to have to step up to that. So, Android and Apple are really the hot products right now.

I was talking with the CEO of France Telecom a week or two ago. One of the things he was talking about was working with Apple toward a standard of an even smaller SIM card. Is that something you guys are at all interested in?

De la Vega: We’re working with the industry to look at how to take a smaller footprint device with the SIM card. I think that probably will happen.

You are more interested in helping to make that happen than seeing some e-SIM sort of approach?

De La Vega: We think that making the card smaller and shrinking the size is a no-brainer and we should be able to make that happen.

Am I going to see you on Monday in San Francisco at Apple’s Worldwide Developer Conference?

De La Vega: Unfortunately I can’t be there on Monday. I have other commitments, but I’m anxious to see what Steve has to say. It looks like he is going to be on the stage. That’s really great news. I’m glad he is healthy enough to be back. We’ll be glad to have him back.

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