WHEN: Today, Monday, May 18th

WHERE: CNBC's "Squawk Box"

Following is the unofficial transcript of a CNBC interview with AT&T Chairman & CEO Randall Stephenson on CNBC's "Squawk Box" (M-F, 6AM-9AM ET) today. Following is a link to the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000380320

All references must be sourced to CNBC.

JOE KERNEN: AT&T HAS SAID THAT THE COMPANY EXPECTS TO CLOSE THAT BIG DEAL, THAT $48.5 BILLION ACQUISITION OF DIRECTV BY THE END OF THE SECOND QUARTER AND KAYLA TAUSCHE IS AT THE ANNUAL JPMORGAN TECH MEDIA AND TELECOM CONFERENCE IN BOSTON. SHE IS JOINED BY SQUAWK NEWSMAKER AND AT&T CHAIRMAN AND CEO RANDALL STEPHENSON. TAKE IT AWAY KAYLA.

KAYLA TAUSCHE: THANKS SO MUCH, JOE. RANDALL STEPHENSON IS A FACE THAT IS VERY FAMILIAR TO "SQUAWK BOX" VIEWERS. CHAIRMAN AND CEO OF AT&T AND WE'RE SO GLAD TO HAVE YOU WITH US THIS MORNING.

RANDALL STEPHENSON: GOOD TO BE HERE. THANK YOU.

TAUSCHE: TODAY IS THE ONE-YEAR ANNIVERSARY ACTUALLY –

STEPHENSON: DOESN'T SEEM POSSIBLE.

TAUSCHE: OF THE ANNOUNCEMENT OF THE DIRECTV DEAL. I KNOW YOU GUYS JUST RECENTLY EXTENDED THE TERMINATION DATE FOR THE DEAL. PEOPLE EXPECT IT WILL GET DONE, BUT GIVE US AN UPDATE ON THE PROGRESS.

STEPHENSON: WE'RE IN THE SAME PLACE. WE THINK THE DEAL GETS DONE. THE CONVERSATIONS HAVE BEEN PRODUCTIVE. WHAT'S HAPPENED RIGHT NOW AS YOU KNOW, THERE WAS A STAY REQUEST FOR THE TITLE TWO RULES THAT WAS FILED LAST WEEK BY THE INDUSTRY AND THE JUDGE PUT A PRETTY TIGHT TIME HORIZON ON THE FCC TO RESPOND TO THAT. SO THAT'S PROBABLY GOING TO TAKE A LOT OF THEIR ATTENTION OVER THE NEXT WEEK OR TWO. I THINK THAT'S DUE ON FRIDAY. SO THERE'S NOT GOING TO BE A LOT DONE OVER THE NEXT WEEK AND ANYTHING OTHER THAN TITLE TWO. BUT WE FEEL LIKE THIS THING WILL PROGRESS AND WE STILL FEEL LIKE WE ARE ON TARGET TO HAVING IT CLOSED IN THE SECOND QUARTER.

TAUSCHE: YOU TOOK THE TACK OF CHOOSING TO SUE THE FCC OVER THE NET NEUTRALITY RULES. AND THERE IS A QUESTION OVER WHETHER THAT IS A STRATEGY YOU WILL HAVE TO ABANDON TO GET THE DEAL DONE. IS THAT SOMETHING YOU ARE PLANNING TO ADDRESS?

STEPHENSON: WE'VE BEEN REAL CLEAR FROM THE BEGINNING THAT TITLE TWO WAS NOT PROBABLY THE BEST WAY TO REGULATE THIS INDUSTRY. THIS IS AN INDUSTRY THAT IS CHANGING REALLY, REALLY FAST, IT IS ATTRACTING A LOT OF INVESTMENT. AND TO TAKE AN INDUSTRY LIKE THIS, MOVING THIS QUICKLY AND PUT IT UNDER RULES FORMULATED IN THE 1930s, TO REGULATE THE BLACK DIAL TELEPHONE DIDN'T SEEM TO MAKE A LOT OF SENSE TO US. AND SO WE HAS BEEN CLEAR THAT WE INTENDED TO CHALLENGE THOSE RULES. BUT REGARDLESS OF WHETHER THE COURTS MODIFY THE RULES OR REVERT THIS BACK TO THE FCC, WE DO THINK THERE IS GENERAL WILLINGNESS ON THE PART OF CONGRESS TO PASS LEGISLATION. THAT'S PROBABLY A MORE SUSTAINABLE PATH TO GET NET NEUTRALITY WITHOUT DUMPING IT INTO TITLE TWO. AND THEN DON'T FORGET THERE IS GOING TO BE A NEW FCC PROBABLY 18 MONTHS, 20 MONTHS FROM NOW, AND YOU'RE A 3-2 VOTE AWAY FROM THOSE RULES CHANGING. SO TO US, IT'S A MORE SUSTAINABLE PATH IS A LEGISLATIVE PATH.

TAUSCHE: BUT IN THE MEANTIME, WE'RE IN THIS GRAY AREA WHERE THE INDUSTRY IS CHANGING SO MUCH. AND BIG COMPANIES ARE NEEDING TO DO DEALS TO GROW REVENUE, TO GET ACCESS TO CONTENT AND DISTRIBUTION NETWORKS THEY DIDN'T HAVE BEFORE. WE JUST SAW COMCAST DROP ITS BID FOR TIME WARNER CABLE AFTER OPPOSITION. YOU'RE DOING A BIG DEAL WITH DIRECTV. VERIZON JUST BOUGHT AOL. HOW CAN YOU PURSUE THESE BIG DEALS WITH SO MUCH IN WASHINGTON UNCLEAR RIGHT NOW?

STEPHENSON: WELL, LACK OF CLARITY IN THE RULES IS ALWAYS A BIG ISSUE FOR PEOPLE THAT ARE INVESTING A LOT OF CAPITAL. THAT'S ONE OF THE REASONS WE DID FILE THE LAWSUIT. WE NEED TO BRING CLARITY TO THIS AND SEE IF WE CAN BRING A MORE SUSTAINABLE PATH AND CLEAR RULES ON HOW TO INVEST. THAT IS REALLY, REALLY IMPORTANT. I WILL TELL YOU, THOUGH, THAT BASED ON OUR READING OF THE TITLE TWO ORDER THAT CAME OUT, AS I POINTED OUT, WE'RE OPERATING AND WE'RE INVESTING UNDER THE SCENARIO THAT THESE RULES WILL PROBABLY BE CHANGED. WE DON'T THINK THIS RULEMAKING IS SUSTAINABLE FROM A LEGAL STANDPOINT, BUT THE COURTS WILL DECIDE THAT. BUT IRRESPECTIVE, THE CONGRESS SEEMS INCLINED TO MAKE A CHANGE HERE, SO WE REALLY THINK THAT THESE RULES WILL BE MODIFIED INTO A FORMAT THAT WILL BE CONDUCIVE FOR INVESTMENT IN THE LONG HAUL.

TAUSCHE: JOE KERNEN, LET'S BRING YOU INTO THE CONSIDERATION.

KERNEN: THANKS. SO RANDALL, IF YOU'RE INVESTING AS IF THE RULES DON'T STAND UP, DOES THAT MEAN THAT YOU ARE NOT GOING TO NECESSARILY PAIR BACK CAPEX IN THE BUILD-OUT OF BROADBAND NOW? THAT WAS ONE OF THE THINGS THAT YOU SAID MIGHT BE THE RESULT OF THIS RULING IS THAT YOU AND OTHERS WOULD SLOW DOWN ON THESE BIG CAPITAL EXPENDITURES, BECAUSE YOU AREN'T GUARANTEED A RETURN ON YOUR INVESTMENT. IF YOU THINK THEY'RE NOT GOING TO HOLD UP, DOES THAT MEAN YOU'RE STILL INVESTING?

STEPHENSON: YEAH, JOE, THE EXACT COMMENT I MADE WAS WE'RE GOING TO PUT A PAUSE ON OUR NEW BROADBAND DEPLOYMENT PLANS UNTIL WE SEE HOW THESE RULES CAME OUT. WE HAVE SEEN HOW THE RULES CAME OUT AND THE TITLE TWO ORDER THAT CAME OUT OF THE FCC AND AS WE READ THOSE RULES, WE DO BELIEVE THEY ARE SUBJECT TO MODIFICATION BY THE COURTS AND REMAND BY THE COURTS OF THE FCC TO ADDRESS THEM. BUT EVEN IF THEY DON'T, I'LL SAY IT AGAIN, BASED ON HOW THE RULES HAVE BEEN WRITTEN AND HOW WE'RE READING THE TONE IN CONGRESS, WE'RE ACTUALLY FAIRLY CONFIDENT THAT BY ONE MEANS OR ANOTHER, THAT THE RULES ARE GOING TO BE MODIFIED. THIS DOESN'T SEEM TO BE A SUSTAINABLE APPROACH TO REGULATING THIS INDUSTRY. WE'VE SAID WE'RE GOING TO INVEST AROUND $18 BILLION THIS YEAR. THAT WILL ALLOW US TO DEPLOY A WIRELESS BROADBAND A SOLUTION TO 13 MILLION HOMES ACROSS THE U.S., AND 2 MILLION FIBER TO THE HOME DEPLOYMENTS THIS YEAR. WE'RE GOING TO STAY ON TRACK WITH THAT AND CONTINUE AT ABOUT AN $18 BILLION LEVEL. THAT COMPARES TO ABOUT $22 BILLION LAST YEAR.

TAUSCHE: BUT WE LEARNED RECENT THAT BROADBAND – BECKY? BECKY WE WILL LET YOU IN HERE.

BECKY QUICK: JUST A QUICK FOLLOW-UP ON THAT, KAYLA. RANDALL, WHEN YOU SAY READING THROUGH THIS YOU FIND THINGS THAT YOU THINK WILL BE MODIFIED BY THE COURTS, ANYTHING SPECIFICALLY YOU CAN POINT TO? SOMETHING YOU THINK CLEARLY DOESN'T LIVE UP TO EXPECTATIONS?

STEPHENSON: WELL, THE THING THAT WE HAVE SAID WAS PROBLEMATIC ALL ALONG WAS THE PROCESS THAT WAS USED TO PUT THESE RULES IN PLACE. AND THAT IT WAS DONE WITHOUT A FULL DATA GATHERING, WITHOUT A FULL REVIEW, AND SO WE THINK THAT BY ITSELF WILL PROBABLY BE CHALLENGED BY THE COURTS. SO JUST TO GO AT THIS FROM A MORE RATIONAL RULEMAKING STANDPOINT WOULD BE THE ONE THING WE COULD SEE REMANDED BACK, AND SO THERE HAD TO BE A FULL GATHERING OF DATA, A REVIEW OF THIS AND A COMPREHENSIVE APPROACH. SO THOSE ARE SOME OF THE THINGS. BUT THEN ONCE AGAIN, JUST THINKING ABOUT REGULATING THE INTERNET END TO END, AS KAYLA POINTED OUT A MOMENT AGO, AN INDUSTRY THAT IS CHANGING THIS FAST, THAT IS THIS DYNAMIC, I THINK JUST FROM A LEGISLATIVE STANDPOINT, OR FROM A NEW ADMINISTRATION STANDPOINT, ONE WOULD HAVE TO ASK, IS THIS REALLY HOW WE WANT TO REGULATE THIS INDUSTRY? KEEP IN MIND TITLE TWO WAS PUT IN PLACE WITH A 3-2 VOTE BY THE COMMISSION. TITLE TWO COULD BE CHANGED BY A 3-2 VOTE FROM ANOTHER COMMISSION. SO THERE'S JUST A LOT OF MOVING PARTS HERE THAT WE THINK IT'S REALLY UNLIKELY THESE RULES STAY IN PLACE LIKE THEY ARE IN THE LONG TERM.

TAUSCHE: YOU TALK ABOUT BUILDING OUT THE WIRELESS BROADBAND INFRASTRUCTURE THAT YOU HAVE, BUT IN THE LAST FEW MONTHS BROADBAND HAS BECOME A DIRTY WORD. THAT BECAME A LIGHTNING ROD OF SORTS IN THE COMCAST/TIME WARNER DISCUSSIONS. I BELIEVE THAT DIRECTV/AT&T WILL ONLY HAVE, WHAT, A 17% SHARE IN BROADBAND? BUT HOW LIMITED IS YOUR ABILITY TO GROW THAT SHARE WITH ALL OF THE FOCUS ON BROADBAND AND COMPETITION THERE?

STEPHENSON: THE AREA WHERE WE HAVE STRUGGLED THE MOST WAS OUR TV PRODUCT. AND IF YOU WANT TO GAIN BROADBAND SHARE, YOU HAVE TO HAVE A VIABLE TV PRODUCT. OUR TV PRODUCT TODAY IS SUBSCALE, IT'S U-VERSE. IT'S A GREAT PRODUCT, IT SELLS TERRIFIC. BUT IT IS LIMITED IN TERMS OF SCOPE AND WHERE WE HAVE BUILT. WE DO DIRECTV, AND WE CLOSE THAT TRANSACTION. WE GO FROM A TV PRODUCT THAT'S LOSING MONEY TO A TV PRODUCT THAT'S PROFITABLE. I MEAN, DAY ONE, OVERNIGHT THAT HAPPENS. AND NOW YOU PAIR THAT WITH THE BROADBAND PRODUCT AND YOU HAVE A MUCH MORE ROBUST PRODUCT OFFERING IN THE MARKETPLACE, AND WE THINK WE'LL BE VERY SUCCESSFUL IN COMPETING AGAINST THE CABLE GUYS AND TAKING SHARE FROM CABLE.

ANDREW ROSS SORKIN: HEY, RANDALL, JUST WANTED TO JUMP IN WITH A DIFFERENT QUESTION ON TV AND ON BUNDLING, AND YOUR VIEWS ON WHAT THIS FIGHT GOING ON, THIS BATTLE BETWEEN VERIZON AND DISNEY/ESPN. THIS IDEA OF TIERING THESE VIDEO SERVICES. YOU'RE ABOUT TO GET INTO THE TV BUSINESS EVEN MORE THAN YOU ARE ALREADY IN. YOUR TAKE ON WHAT'S GOING ON?

STEPHENSON: IT'S AN INTERESTING TIME, RIGHT? THE INDUSTRY IS CHANGING FAST. THE OVER-THE-TOP MODEL IS GAINING MOMENTUM. YOU'RE SEEING NETFLIX AND THE HULUs GAINING A LOT OF MOMENTUM. AND WHAT IT IS DOING IS IT'S CHANGING NOT JUST THE TV DISTRIBUTORS LIKE VERIZON OR COMCAST OR AT&T AND HOW WE THINK ABOUT THE BUSINESS, BUT IT'S ACTUALLY AFFECTING HOW THE CONTENT DEVELOPERS ARE THINKING ABOUT THE BUSINESS. WHAT HAPPENS AS PREMIUM CONTENT MOVES FROM TRADITIONAL LINEAR STREAM TO OVER THE TOP? THE ADVERTISING MODELS CHANGE, AND THIS UNBUNDLING OF CONTENT, IT CAUSES A CHANGE IN THAT AS WELL. SO, YOU'RE SEEING A LOT OF STRESS IN THE ECOSYSTEM AND THE ENVIRONMENT. THESE MODELS ARE CHANGING REALLY, REALLY FAST.

TAUSCHE: BEFORE WE GO, YOU DID A DEAL WITH HULU LAST WEEK? IS THAT THE BEGINNING OF AN AT&T OVER THE TOP STRATEGY, YES OR NO?

STEPHENSON: A YEAR AGO WE DID A DEAL WITH PETER CHURNING GROUP TO DEVELOP UNIQUE CONTENT FOR THE WIRELESS MODEL. AND THAT WAS OUR BEGINNING. HULU IS JUST ADDITIVE TO WHAT WE HAD DONE THERE.

TAUSCHE: RANDALL STEPHENSON, CHAIRMAN & CEO OF AT&T, THANK YOU SO MUCH FOR JOINING US.

STEPHENSON: THANK YOU, KAYLA.

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