leader on Qwest
By Tom McGhee, Staff Writer
Thursday, March 10, 2005
Qwest Communications chief executive Richard Notebaert talks about a merger he is pursuing with MCI during an interview with The Denver Post on Wednesday afternoon.
Notebaert, still in the hunt to acquire long-distance provider MCI, confirmed Wednesday that he would lead a combined company and personally prefers Denver as a headquarters location.
But he wouldn't commit to a Denver headquarters or say whether a merged company would bear the Qwest name.
He emphatically ruled out Qwest's filing for bankruptcy under his watch.
Notebaert took the helm at Qwest in 2002 after the bottom had fallen out of the telecom sector and Qwest was embroiled in an accounting scandal. Many were suggesting bankruptcy would be the next step. He said he never contemplated the move. Instead, he sold assets and took other actions. "We took a tougher road. It was a lot harder to do what we have done than had we gone and eliminated all the liabilities, all the debt and stiffed all the suppliers. That's just not the right thing", he said.
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Notebaert outlines vision, strategies
Thursday, March 10, 2005
Qwest chairman and chief executive Richard Notebaert talked Wednesday with a group of Denver Post writers and editors. Highlights of the interview, edited for space and clarity:
Q: Are you naive in thinking you can win a bidding war against Verizon?
A: We expect to win. We have a superior offer on the table. Even if you might not feel it is superior, it has the potential to be a superior offer. We're very serious about it. We expect to win.
Q: You've projected cutting (12,000 to 15,000 jobs - out of more than 80,000) in a merger with MCI. What type of positions?
A: It's where you have the overlap. For instance, you don't need two national sales forces; you don't need two technicians working on the same piece of equipment; you don't need two networks - we've got a great backbone network; you don't need two treasurers, two CEOs, two heads of HR (human resources).
Q: You'd be CEO of the combined company?
A: That would be my expectation.
Q: Where would the headquarters be?
A: That's a fair question. The only thing I would tell you is that I'm here. I like it here.
Q: What would be the name of the combined company?
A: That we haven't picked either, because the MCI brand gets some mileage in the corporate accounts and the government accounts. And Qwest, today, has very good ratings from customers. One structure would be you have Qwest and you have MCI, and you have a holding company and you name the holding company. But you have to look at the trade-offs you get on the one brand versus the other brand. We probably would not name everything MCI.
Q: What would the board structure be?
A: We haven't gotten that far yet. But 10 to 12 people on a board is a good size.
Q: Split down the middle?
A: No. We're buying them.
Q: Has (Qwest founder and board member) Philip Anschutz spoken with (Mexican billionaire and MCI's largest shareholder) Carlos Slim Helu about the deal?
A: I've got two reactions. The first is: How would I know? The second reaction is: Where does that kind of ... stuff come from? Is it just somebody throwing pizza on the wall and thinking, 'If the tomato paste sticks ... '?
Q: Have you talked to Carlos Slim?
A: I have talked to a lot of the shareholders of MCI, and I wouldn't itemize who they were. I can tell you this: I have not called any shareholder of MCI. The calls have come from the outside toward me. I don't think I should initiate a call. That doesn't feel right.
Q: Qwest is offering (about $5 billion in stock and) $3 billion in cash for MCI, which has $5 billion of cash on hand. Aren't you bidding for MCI with their own money?
A: Don't look at Qwest, and don't look at MCI. Look at the (combination). At the end of the day, what is the value you are creating? You can stand alone if you want, or you can create the future. That is what this is about. They cannot stand on their own two feet.
Q: Can Qwest?
A: We can for some period of time. We are going to have to take some action, whether we do MCI or we do Plan B or Plan C.
Q: What are those plans?
A: I will just give you a little flavor of B, though I probably won't talk much about C. If the (Verizon-MCI and SBC- AT&T) transactions were to take place (there may be a divestiture of some assets). Depending on those assets, we would look at (bidding for) those assets. But again, I wouldn't want to leave you with the thought on our mind that there is anything but Plan A at the moment. We expect Plan A to be successful.
Q: If the MCI bid fails, would that make Qwest a vulnerable takeover target?
A: Well, you know, one of the things that people have written about is that we have a great poison pill in our ($17 billion) debt.
Q: Have you ever considered taking Qwest into bankruptcy to clear the books?
A: I wouldn't do that. I came here to fix it, not to break it. I am not working for a court.
Q: You received a $2.9 million bonus plus 2 million (stock) options this year. Are you overpaid?
A: If you benchmark that against compensation packages for other people in similar jobs with similar opportunities, I think you would find it is at the low end of the compensation. And if you take the base salary, you will find that it is the low end of my peer group.
'Better' deal for MCI
Right now, shareholders would reject Verizon's offer, Qwest CEO says
By Jeff Smith, Rocky Mountain News
Thursday, March 10, 2005
Qwest Chief Executive Dick Notebaert indicated Wednesday that he believes MCI shareholders would reject Verizon's $6.75 billion offer if they were to vote on the deal today.
"Look at what's happened to MCI stock over the last week," Notebaert said. It's trading several dollars above the Verizon offer . . . . So what is the market trying to say?"
Notebaert's comments came in an interview Wednesday with the Rocky Mountain News as Qwest continued to press its campaign to sell investors, analysts and others on its proposed acquisition of Virginia-based long-distance carrier MCI.
In a nearly hourlong interview, Notebaert reiterated why Qwest thinks its offer is appealing to short-term and long-term MCI investors. He noted that 38 percent of the offer is in cash for the "tactical" investors, with the "strategic" investors getting 40 percent of the new company and benefiting from an estimated $2.7 billion to $2.9 billion in annual cost savings.
Notebaert also dwelled on why he thinks a Verizon-MCI deal, combined with the already announced AT&T-SBC merger, would create a "duopoly", especially in the wire-line market serving large businesses and the government. He defended his call for Congress and regulators to scrutinize that, saying it's consistent with his position on consolidation for the past decade.
"If there are sever to eight (competitors) today, I think that's too many . . . . (and) consolidation is good", Notebaert said. "If there's two, I think that's duopoly and that's too much concentration and that's uncomfortable. I've been very consistent (in saying) that our space is comfortable for three to four."
This needs to be debated now, he said, because once regulators approve a merger, it can't be undone.
A House committee held a hearing last week on the issue, and a Senate committee hearing is scheduled for next week.
Qwest, in a regulatory filing Wednesday, said its proposed buyout of MCI would be "in the best interest of the telecommunications industry".
Said Notebaert, "We feel very strongly that our acquisition on MCI would be good for our company, our shareowners, would be great for employees, would be good for the city of Denver - hello - and would be good for the state of Colorado."