This Knee Doesn't Jerk at Every Deal
New York Times
Saturday, May 20, 2006
Yet Richard C. Notebaert, Qwest's chief executive, has been
anything but idle. He has cut costs and debt, added
broadband and wireless customers and, in the first quarter,
turned a profit without relying on one-time gains.
While Mr. Notebaert has not gone after anyone the size of
MCI, Qwest has sought smaller, complementary companies,
including OnFiber Communications, which provides high-speed
data connections for companies and the government.
Qwest also made headlines last week when its former chief
executive, Joseph P. Nacchio, said that he denied a
government request in 2001 to hand over customer records.
That came after USA Today reported that
AT&T, Verizon and
BellSouth had cooperated. The paper also said that Mr.
Notebaert continued Mr. Nacchio's policy after he took over
for him in 2002.
Mr. Notebaert will not comment on national security issues.
But, in an interview last week, he did discuss other
challenges facing Qwest. Following are excerpts:
Q. You said
on your most recent earnings call that Qwest had turned a
corner. What corner?
A. We don't
talk about turning the corner because I don't think you ever
do. But we had a number of milestones. For example,
revenue in 2002 was declining at nearly 8 percent and now
we're positive. We've had negative cash flow. Last year we
did $904 million of cash flow adjusted and this year we'll
do $450 million to $600 million more. Then getting all that
litigation with the government squared away. And now, to
hit profitability, without any adjustments, that feels very
good to everybody.
been consolidation in the industry, but Qwest has not really
found a partner in the big dance. Does Qwest need to do a
A. We have
two filters that we run everything through. Whether you're
a buyer or a seller, you run it through the same filter.
What is the strategic complement of what you're going to
do? And then, secondly, what's your price point?
We are constantly looking at all the companies that you
would think of and some you probably are not. For example,
a systems integrator or hosting companies as well as
traditional people in the communications business. We're
very, very, very disciplined. We have lots of organic
growth opportunity just doing what we do. So we don't have
to knee-jerk into anything.
Q. Might you
be more of an acquisition target?
A. If I
looked at it as a consultant or an adviser, I would look at
Qwest today and say most of the things that made me
uncomfortable before are gone. Again, the government — at
every level we're O.K. The debt load's down,
profitability's up. Everything's squared away and there's
no threat of bankruptcy, which you might have thought about
a few years ago. And the company has solid performance
characteristics . And it's throwing off good cash. It's
profitable. And it's got a wonderful group of employees.
So I don't think we're unattractive.
Q. On the
wireless side, you resell
Sprint. A huge portion of the profits at Verizon come
Wireless. Would it make sense to own your own wireless
A. Well, it
doesn't matter. We don't. You play the hand you're dealt.
Q. There are
midtier wireless operators that are increasingly national.
A. There's a
company like U.S. Cellular that's outstanding. To go out
and buy them would be challenging to say the least.
Q. You resell
DirecTV, but given what AT&T and Verizon are doing with
television and the enormous capital that involves, do you
see Qwest going down that road?
A. You still
have to push high bandwidth out to the customer. The key is
to do it in a very disciplined way so that your return on
invested capital is there. About 35 percent of our capital
investment this year will be bandwidth improvements.
Street compares you with Verizon and AT&T, which have video
projects. Do you think you're viewed negatively because you
A. There is
nothing wrong with being a fast follower. In fact, there
are a lot of advantages to being a fast follower versus the
bleeding edge. Instead of generic 2.0, I'll be at 2.5.