'The world has changed'
for Qwest CEO Stanoch
By Dave Beal, Business Columnist
St Paul Pioneer Press
Sunday, September 11, 2005
When John Stanoch got a crack at the job of chief executive for Minnesota operations at Qwest Communications International, family ties and opportunity made it an offer he couldn't refuse.
His mother had worked for the company when it was part of AT&T. So had three of his father's siblings.
He also took the job because, after 10 years in public service, he relished the opportunity to lead one of the state's major businesses.
That was in 2001, when the outlook seemed reasonably good. Stanoch could hardly imagine the saga ahead.
"The world has changed," he says.
Now cable companies are moving into a broad array of services. Aggressive new rivals are taking market share from Denver-based Qwest. And, most worrisome, competing voice-over-Internet services are burgeoning.
"I don't think anyone saw that it was going to move this quickly," Stanoch says.
One of the most telling examples: Last year, for the first time in Minnesota, wireless phones exceeded traditional land lines — the mainstay of Qwest's business for generations.
Many other changes have jarred Qwest, yet some have been for the better.
When Stanoch arrived, the company's stock was still above $30. Seven months later, it was trading at around $2.
Employees were depressed. Service was hitting new lows. Companywide losses, bloated by restatements, soared.
Struggling to stabilize its financial picture, Qwest had to sell off its biggest moneymaker — its coveted Dex Yellow Pages.
Today, Qwest's Minnesota payroll is down to 4,600 workers from 7,500 when Stanoch arrived.
And in what he describes as his most unsettling experience, Minnesota regulators slapped Qwest with a $26 million fine for improper agreements with two small phone companies. The company is appealing.
A cool and confident Stanoch emphasizes various measures of the company's improved service in Minnesota, higher employee morale and stronger management. Without disclosing numbers, he says Qwest is making significant progress in selling many services bundled in a single package.
While Qwest still faces enormous hurdles — some analysts question its capacity to survive as an independent entity — observers say Stanoch is one of its strongest assets. They praise him for his open management style and his savvy in dealing with Qwest's many regulatory issues.
"He's articulate, intelligent, thoughtful and a quick learner," says Tom Madison, who held Stanoch's job from 1979 to 1983. Stanoch, now 47, came to the job with little business experience; Madison has helped him learn the ropes.
"He's been a judge. He's worked in the (Minnesota) attorney general's office. He understands the regulatory and judicial processes," Madison says.
Qwest was the smallest of the Baby Bells created 21 years ago by the breakup of AT&T, yet it covers a sprawling 14-state territory. Stanoch is one of 14 CEOs put in place by the company's top management in Denver to function as the firm's "eyes and ears" in each state.
During Stanoch's first 18 months on the job, CEO Joseph Nacchio ran the company. Nacchio led the original Qwest, which gained its large presence in Minnesota in early 2000 by taking over US West and naming the combined company as Qwest.
Nacchio orchestrated that deal, but was forced out in mid-2002. Then, the company's directors recruited former Ameritech CEO Richard Notebaert to replace Nacchio.
Federal investigators are still targeting Qwest's accounting practices under Nacchio.
"The Nacchio days were a complete disaster, in my opinion," Madison says. "Nacchio was out only for himself."
Stanoch says he had only one private meeting with Nacchio in that period — when he interviewed for the job. Beyond that, he only saw him twice in group settings. There was minimal phone contact.
In contrast, he has met with Notebaert nearly 40 times, both individually and in groups. The 14 CEOs meet quarterly with Notebaert.
"Dick Notebaert has really energized the position I hold,'' Stanoch says. "When he came in, he opened up communications broadly. If there's something I need to discuss with him, I can call him anytime." In fact, "I've talked with him eight times this week."
Stanoch says Qwest's service quality has dramatically improved since Notebaert took charge.
Lillian Brion, a telecom analyst for the Minnesota Public Utilities Commission, says that while Qwest is "not out of the woods," its service has "improved steadily" in recent years.
The commission's most comprehensive gauge of Qwest's performance in Minnesota is the penalties the company has paid annually for not meeting service quality requirements. Penalties totaled $7.05 million in 1999-2001, but added up to just $320,000 in 2002-2004.
Just before then, Gov. Rudy Perpich left office in 1991, he appointed Stanoch as a Hennepin County District Court judge.
In 1999, Minnesota Attorney General Mike Hatch named Stanoch to the No. 2 job in his office.
Hatch says Stanoch displayed leadership in crises. "He knows how to call people, talk to them and get them focused."
Soon after Notebaert arrived, Qwest came up with a "Spirit of Service" marketing campaign that celebrated the work of its employees and the services they provide. It was a throwback to the culture that existed long before the Qwest takeover.
"The highest moment for me is not a specific event, but the process that's occurred over the last three years as our employees have rallied around the Spirit of Service to turn this company around," Stanoch says.
In particular, he cherishes the backing management received at a state hearing in November 2002. "We had a roomful of employees and retirees there to support the company. They turned out in droves."
Many union workers and retirees at Qwest have been concerned by the company's cutbacks in jobs and benefits.
Yet Tim Lovaasen, president of the State Council of Communications Workers of America, which represents more than 3,000 Qwest employees in Minnesota, hails Stanoch.
"When he came, union guys asked me about him," says Lovaasen, whose friendship with Stanoch goes back years. "You're not gonna believe this," Lovaasen told them. "He married us when he was a judge."
Dave Beal can be reached at email@example.com or 651-228-5429.