Notebaert Resignation Further Shakes up Qwest

By David Sims

TMCnet Contributing Editor

 

The man grudgingly admired for his "tenacity" in Qwest's (News - Alert) ultimately futile attempt to acquire MCI in the spring of 2005, Richard C. Notebaert, Qwest chairman and chief executive officer, has informed the Board of his decision to retire in both positions upon the selection of a successor, for which a formal search is under way.

 

Last week it was Qwest Communications International announcing that Barry K. Allen, executive vice president of operations, would retire from the company, effective June 29, and that Robert D. Tregemba, currently vice president of network operations and engineering, would assume the new role of executive vice president of network operations.

 

The company plans no changes in strategy or operations as a result of today's announcement, company officials say, and no timetable has been set for naming a new chairman and CEO.

 

"The time has come for me to spend more time with family and focus on other commitments," Notebaert said in a prepared statement, adding that "I will leave the company only when the Board has selected a leader."

 

Notebaert said he would "work closely with the Qwest Board in its search."

 

Last week, announcing Allen and Tregemba's shifts, Notebaert said "while I will truly miss Barry and his passion to deliver sustained value to our customers while improving productivity, I look forward to working closer with Bob."

 

Two years ago Qwest lost out a bitter, high-profile attempt to acquire MCI, which went to Verizon (News - Alert), a failure that some blamed Notebaert for. For months afterwards Qwest was still swinging to break up the Verizon-MCI merger, and argued against SBC Communications Inc.'s then-proposed $16 billion purchase of AT&T (News - Alert) Corp.

 

Qwest, the smallest of the big four local telephone carriers, said at the time, in the spring of 2005, if SBC acquired AT&T, it would lead to higher prices, reduced quality of service and innovation as well as fewer choices for consumers, according to Reuters reports.

 

SBC was the No. 2 U.S. local telephone carrier with mostly consumer operations, while AT&T was the nation's biggest long- distance telephone company with a large, lucrative business customer base.

 

Denver-based Qwest lobbied federal regulators to oppose the SBC/AT&T deal, and was actively trying to break up the Verizon/MCI deal out of fear they would dominate the telecommunications market, leaving other companies – such as, say, Qwest – to be niche service providers.

 

In April 2005 MCI's board, responding to Qwest's overtures, expressed concern about Qwest's $17 billion debt load and the long-term value of the Qwest shares MCI investors would receive as partial payment. The MCI board also questioned whether Qwest could meet its forecast of nearly $3 billion a year in cost savings from the proposed merger.

 

In late March 2005 Qwest's board met one day after MCI Inc. accepted a $7.64 billion acquisition offer from Verizon -- about $800 million less than the most recent Qwest bid, but from a much more financially sound suitor.

 

Qwest officials told the Denver Post at the time the company expected to fight until the bitter end to win long-distance provider MCI, and claimed to have alternatives in its quest to survive: "We do have a Plan B," chief executive Richard Notebaert had told The Post.

 

That plan was to pick up the pieces that antitrust regulators require Verizon and MCI or the players in another big telecom merger, SBC and AT&T, to divest. Some analysts said the most valuable pieces could be local fiber-optic loops in several major metro areas.

 

At the end of February 2005 the likes of Forbes magazine were urging Qwest's CEO Richard Notebaert to give it up already. Notebaert "has showed an admirable tenacity in his continued attempts to acquire MCI," wrote Forbes. "But after two failed bids -- and with a third one potentially under way -- it's time for him to give it up."

With his company struggling to stay alive, Notebaert needed to concentrate on other options, Forbes opined: "The smallest of the major regional phone carriers, Qwest is hemorrhaging customers, has $17 billion in debt and had losses of $1.79 billion for 2004. It's hardly the ideal acquirer for a company looking to assure its future prospects."