5/7/98 AT&T's Baker Resigns to Head Fledgling Internet Phone Service
By JENNIFER L. SCHENKER
Special to THE WALL STREET JOURNAL
PARIS -- AT&T Corp.'s chief of international operations, Mark Baker, quit
to lead a start-up company that plans to provide phone service using Internet
technology, the latest defection to hit AT&T as its new chief executive, C.
Michael Armstrong, reshapes management.
Mr. Baker, who will become the CEO of USA Global Link Inc., of Fairfield,
Iowa, joins a growing list of telecommunications veterans who are bailing out
of old-line telecom companies to seek their fortunes in high-tech's hottest
area, the Internet. In return for taking the job, Mr. Baker, 51 years old,
accepted a $10 million sign-on bonus and stock options valued at millions
more, according to Global Link executives.
He may be leaving AT&T in the nick of time. The company has drawn
criticism from analysts and business customers who say AT&T's global
business plan lacks fire. While rivals such as MCI Communications Corp. --
soon to join with WorldCom Inc., Sprint Corp., and British
Telecommunications PLC are building furiously in numerous overseas
markets, AT&T has relied instead on a series of loose service alliances with
national carriers. Moreover, AT&T's one big investment, in AT&T
Unisource, which it owns with several small European phone companies, has
fallen behind bigger rivals and has been rocked by numerous partner and
executive defections. This is leading AT&T to lose ground quickly in the
battle to nail down long-term orders from multinational businesses for global
services.
Mr. Armstrong aims to revamp AT&T's efforts to rely more on hard
investments in networks or established businesses in numerous foreign
markets. He also has said he may seek to further his goals overseas through an
outright merger with a big international player.
AT&T confirmed Mr. Baker's departure, but declined to comment further.
Mr. Baker declined to discuss AT&T's strategy, but did point to a few of what
he regarded as successes, including an uptick in AT&T's latest international
quarterly numbers and its recent tough negotiations with Mexico and
Argentina over international phone rates, which he led. At Global Link, "the
opportunity to drive a young, dynamic company that is clearly poised to take
a major position in the telecommunications industry comes once in a lifetime,"
he said.
The little company started as a "callback" service in which a caller overseas
can dial a local phone number and get an open line for making cheap phone
calls around the world. For a time, such services were able to make a healthy
profit by undercutting exorbitant international rates, but as these rates are
now falling, Global Link must find a new path to make money.
This has led it to install network gear and Internet-related software and
systems to offer an array of services, including Internet phone service, faxing
over the Internet, e-mail, Internet access, global e-mail and voice mail as well
as wholesale transmission services for other carriers. Instead of sending calls
and data in the traditional fashion, Global Link will transmit its signals in
packets or electronic envelopes as other Internet companies do. "This is the
direction the telecommunications industry is going," Mr. Baker said.
"AT&T has stagnated internationally," said Berge Ayvazian, a senior vice
president at telecommunications consultancy Yankee Group in Boston. "It has
not been able to adapt to changes in Japan and the Asia Pacific and it is losing
ground in Europe."
Other AT&T executives have resigned in the last two years to join start-ups.
Former AT&T President Alex J. Mandl, Mr. Baker's former boss, quit to
lead Teligent Inc., a wireless venture, and Joseph P. Nacchio, the chief of
AT&T's consumer business, left to join Qwest Communications International
Corp., which is building a $2 billion fiber-optic network. In January, Jeffrey
Weitzen, former chief of AT&T's Business Markets unit, quit to become
president of personal-computer maker Gateway 2000 Inc.
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