From NY times, June 15
News Analysis: Qwest Is Bidding to Be
Among the Giants
By SETH SCHIESEL
EW YORK -- A bit less than two years ago, just before Qwest
Communications International Inc. first offered stock to the public,
Joseph P. Nacchio, who had just left a top job at AT&T Corp., was
asked what he meant to create in Qwest.
"I want to create a full-service communications provider," said Nacchio,
Qwest's chief executive.
The answer did not ring true. After all, it seemed so much easier for
Qwest to build an advanced nationwide communications network and
then sell it.
But on Sunday Nacchio proved his strategy was real by firing off a pair
of hostile bids, worth as much as $55 billion in cash and stock, to acquire
both U S West Inc., the smallest of the Baby Bells, and the Frontier
Corp., one of the nation's biggest long-distance carriers.
Both of those companies had already agreed to be acquired by Global
Crossing Ltd. of Bermuda, another strapping young communications
provider.
Even as early as March 1998, Qwest's agreement to acquire LCI
International Inc. for $4.4 billion signaled that the company was serious
about serving callers in addition to serving other carriers. And maybe
because Philip Anschutz, the oil and railroad tycoon behind Qwest, had
already made his billions, he felt no pressure to sell while the getting was
good. Instead, he rolled the dice on creating a giant.
In some ways, the rise of Qwest represents an ideal confluence of ability,
personality and opportunity. Anschutz and Nacchio supplied the first
two. The Internet and Congress supplied the third, with the
Telecommunications Act of 1996 introducing competition that has
nurtured demand for communications generally and for Internet service
specifically.
Serendipity also played a role. One of the more interesting aspects of the
communications revolution is the way it has built on older, more
traditional industries. For example, the real estate easements and rights of
way won by railroads and pipeline companies 100 years ago -- networks
that crisscross the United States and reach into downtowns everywhere
-- have taken on a second life as pathways for high-capacity fiber optic
communications networks.
The first two letters in Sprint's name initially stood for Southern Pacific,
the railroad that started the long-distance giant. Through a series of
corporate mutations involving GTE and the old United Telephone, Sprint
became independent.
Likewise, MFS (originally Metropolitan Fiber Systems)
Communications, one of the first companies to broadly challenge the
Bells' local phone monopoly with business customers, emerged from
Peter Kiewit & Sons, a construction empire based in Omaha.
And the Williams Cos., which supplied Worldcom with its first fiber optic
network, the Wiltel communications unit, recently started yet another
national fiber optic network.
Through Anschutz, Qwest has become the Southern Pacific Railroad's
second great communications progeny. For all of the brilliance of Global
Crossing's founder, Gary Winnick, a Los Angeles financier, Global
Crossing does not enjoy Qwest's sort of heritage. It is not that an old
industrial pedigree has made its holders any more prescient, but it has
given them a head start.
So, while Global Crossing is by no means out of the game for U S West
and Frontier, given the sharp thumbs-down the market gave Qwest
Monday, a winning deal by Qwest would catapult it into the ranks of the
world's biggest communications companies. That would be an impressive
feat for Nacchio, a personable, engaging, fast-talking salesman who is
widely admired for his smarts.
In Qwest's machismo culture, executives have a good time and clearly
enjoy devising ways to crush competitors. It is a fairly productive
approach. Nacchio has assembled a crack executive team including
Lewis O. Wilks, Qwest's aggressive Internet chief, who came from GTE,
and Robert S. Woodruff, the chief financial officer from Coopers &
Lybrand.
In a way, though, Qwest's quest is something of a personal rivalry
between two former AT&T executives -- Nacchio and Robert
Annunziata, Global Crossing's chief executive, who have known each
other for years.
Before he left to head Teleport Communications Group, one of the early
competitors to the Bells in local markets, in 1984, Annunziata had spent
most of his career at AT&T.
Nacchio stuck it out at AT&T until October 1996, when it became clear
that the chairman, Robert E. Allen, would not anoint him as a successor.
In leaving to lead Qwest, he joined an exodus of senior AT&T
executives that included Alex J. Mandl, who became chairman of
Teligent Inc., the wireless communications company.
C. Michael Armstrong took over as AT&T's chief executive after Allen's
hand-picked successor, John Walter, failed to impress the board, and the
first big deal Armstrong made was to acquire Annunziata's Teleport in
January 1998 to get its fiber optic links to big business customers.
As part of the deal, Annunziata rejoined AT&T, but it did not last long.
Winnick hired him to lead Global Crossing at least partly for reasons
Nacchio was chosen to head Qwest: name recognition in -- and a
thorough working knowledge of -- the communications business.
In recent years, Nacchio and Annunziata have come to be rivals in almost
every sense, competing for the same investors, and many of the same
customers. Now they are competing for a place at the table with the
moguls of communications. |
