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CEOs at center of possible deal
Notebaert's experience puts heft behind Denver telco's ambitions By Jeff Smith, Rocky Mountain News Monday, February 7, 2005

Qwest Chief Executive Richard Notebaert has been at this before.

In 1998, Notebaert, then chief executive of Chicago-based Ameritech, helped engineer the sale of that Baby Bell to San Antonio-based SBC Communications for $55 billion.

It took more than a year for the deal to pass regulatory muster and opposition by consumer groups that argued the merger would deal a severe blow to competition.

This time around, as Qwest attempts to acquire long-distance giant MCI, some of the same concerns are present. And for Notebaert, even higher stakes may be involved. A bid to buy MCI may be the difference between surviving the shakeout or languishing alone with a deteriorating business.

"The best defense is sometimes a good offense," said Bruce Allen, president of Bruce G. Allen Investments in Denver. "If Notebaert can pull this off .
. . it ensures Qwest remains a dominant player here in Denver and a strong corporate presence for years to come."

As of Sunday evening, MCI reportedly hadn't returned calls from Qwest officials including Notebaert for a couple of days. The Wall Street Journal reported that MCI and Verizon had continued to conduct "exploratory talks."

Qwest's bid last week to acquire MCI for at least $6.3 billion also may reflect an increasing level of commitment to Denver for Notebaert, who temporarily retired at the age of 52 in 1999, shortly after the Ameritech-SBC deal was completed.

And when he took his next job as chief executive of Naperville, Ill.-based Tellabs, a telecommunications equipment manufacturer, it looked like he might settle for good in the Chicago area, where he and his wife, Peggy, had developed strong roots and were involved in a number of civic activities.

Notebaert grew up in the Midwest, in Wisconsin, and began his career at Wisconsin Bell in 1969 before moving to Ameritech in 1983 as vice president of marketing and communications. He later served as president of Indiana Bell before becoming president of Ameritech in 1993.

But taking former Qwest CEO Joe Nacchio's place in June 2002 showed how much Notebaert wanted a chance to run a regional Bell again, even if it meant leaving an area he and his wife enjoyed. He gradually has become more involved in civic activities in Denver, including as a board member for the Denver Center for the Performing Arts.

By all accounts, Notebaert has done a good job restoring Qwest's credibility and skirting bankruptcy. Under his watch, the company erased $2.5 billion of revenue from its 2000 and 2001 books, and agreed to pay $250 million to settle its accounting scandal with the Securities and Exchange Commission.
Shareholder lawsuits are pending.

The Denver telco also changed its motto from "Ride the Light" to "Spirit of Service," and its service ratings have improved.

Improving the company's financial condition has been more difficult.

Qwest has been able to slash $10 billion of debt since 2002, largely through the $7 billion sale of its Dex directory business, but that plan was devised under Nacchio.

Qwest's remaining $17 billion of debt is difficult to service because of its money-losing fiber-optic network and its declining local phone business in its 14-state region.

A combined Qwest-MCI would have less overall debt, since MCI already has gone through bankruptcy reorganization. Notebaert also figures he can trim
$1 billion to $4 billion in annual costs, according to sources familiar with the merger, by eliminating duplication of the two long-distance, fiber-optic networks.

"This is a bold move that will transform the company from a regional player to (more of) a national player," said Jeffrey Kagan, an independent telecommunications analyst in Atlanta.

But without a deal - and there's plenty who think Qwest will be trumped by Verizon, BellSouth or another party - Notebaert will be left leading a declining company against stronger competitors.

There will be fewer options then, analysts say, even wondering if Qwest will be able to avoid a bankruptcy reorganization itself.