Qwest-watchers wait for vision
No details yet, Mueller says, but here are some things to
By Andy Vuong
Sunday, November 25, 2007
By year's end, Qwest chief executive Ed Mueller will unveil his
grand vision for the Denver-based telecommunications company he
took over in mid-August.
Don't expect drastic change.
Though specifics are still in the works, Mueller shed light on
some moves Qwest will or will not make during a recent interview
with The Denver Post:
- The company is not looking to buy a cellphone company,
even though the wireless business is generating plenty of cash
for its much larger peers, AT&T and Verizon Communications.
"We don't have wireless assets, and we're not going to go
acquire wireless assets," Mueller said.
- Qwest is not going to pursue a broad video play, either.
"We're not committing to a Verizon or AT&T whole video rollout,"
Mueller said. "We're not becoming a TV provider."
- Qwest will detail its expected returns for the
additional $200 million the company plans to spend next year to
boost broadband speeds. Those details may include which
markets will see the investments, with denser cities likely to
be at the top of the list.
- Down the road, Qwest may look to partner with
third-party companies to offer high-bandwidth applications and
content, such as video-on-demand, to leverage the faster speeds.
"We're just taking the whole company and looking at every part
of it," Mueller said of his strategic review. "A lot of it
is just getting me up to speed."
For some, the review is taking longer than expected.
"What are you attempting to bring to the table that's so
significant that it's worth taking this six-month period of not
talking to the market and going into a review mode and really
reassessing everything that the business is doing?" Bank of
America analyst David Barden said during Qwest's third-quarter
earnings call in October, according to a transcript.
Since Dick Notebaert announced his retirement as Qwest's CEO in
June, the company's future plans have been murky.
Qwest operates a nationwide fiber-optic communications network
and is the primary local phone service provider in 14 states,
including Colorado. It is facing heated
competition for residential customers from cable operators, such
Analysts pressed Mueller for more details during the call in
October, as Qwest's landlines continued their ongoing decline to
8.9 million, down 7 percent from a year ago.
Barden noted that Mueller is the only member of top management
who is new to Qwest.
Mueller held firm, saying it was "prudent" for him to take until
the end of the year to establish a plan.
The market hasn't reacted kindly to that approach. Qwest
shares are trading at 52-week lows amid the uncertainty about
the company's direction. The stock closed Friday at $6.58,
up 12 cents.
Todd Rosenbluth, an analyst with Standard & Poor's, defended
"You've got a new CEO who has a different energy and a different
philosophy on how to run a business than his predecessor,"
Rosenbluth said in an interview. "We never expected quick
decisions when he came in."
It was widely viewed that Notebaert, during his five-year
tenure, tried to dress Qwest up for a sale, or as one analyst
put it, "put lipstick on a pig." Without any buyers,
Mueller's job is to take the lipstick off and get the pig to
And while the charismatic Notebaert is a salesman by nature,
Mueller appears to be a numbers-crunching executive.
Driven by statistics
He is a champion of the so-called multivariable testing,
which uses statistical analyses and quantitative models to gauge
the effectiveness of ideas and plans. It is a tool he used
as head of San Francisco retailer
Williams-Sonoma and Chicago phone company Ameritech.
Though not directly tied to the strategic review, Mueller has
implemented multivariable testing into some divisions at Qwest.
"It's very disciplined," said Stephanie Comfort, whom Mueller
promoted from an investor relations position to the top strategy
role in September. "It's very statistically based, so
people in the organization can measure and see the effectiveness
of their ideas in black and white."
Analysts aren't expecting a groundbreaking plan when it's
finally announced. The company will continue to resell
Sprint Nextel wireless service and DirecTV satellite service as
part of its residential bundle, which limits revenue growth.
"We don't expect much on the revenue side, and we don't expect
much more on the cost side," Rosenbluth said.
Qwest returned to profitability under Notebaert's direction,
mostly through cost cuts and high-speed Internet growth.
"What I expect is for him to paint the broad outlines of a
strategy," said Donna Jaegers, an analyst with Janco Partners.
"But probably not to announce an acquisition right away."
Though Mueller said a cellular acquisition is not in the works,
he didn't completely shoot down the possibility of purchasing a
company to boost the enterprise business. The only
acquisition Qwest has made recently is its roughly $100 million
deal last year for OnFiber, a metro fiber company.
Jaegers said it could "make a lot of sense for Qwest" to
purchase a regional license when the Federal Communications
Commission auctions in January the 700-megahertz airwave
spectrum — considered to be prime real estate for wireless
She said Qwest could use the license for WiMax, a ubiquitous
wireless-broadband technology that offers faster download speeds
than traditional wireless fidelity, or WiFi, networks.
Though Mueller declined to comment about the auction, it is
clear high-speed Internet will be a key part of the company's
Qwest plans to spend up to an additional $200 million on top of
the $70 million to $100 million it had already earmarked for its
fiber-to-the-node deployment, where the company runs fiber-optic
cables to a neighborhood and uses copper loops to link homes to
The project, which will cover about 1.5 million homes, will give
customers speeds of up to 20 megabits per second. Mueller
said some homes may hit 40 mbps through parabonding, where the
company runs two copper loops instead of one to double the
Qwest's high-speed Internet speeds currently range from 1.5 mbps
to about 7 mbps.
The company is reviewing which markets it will target with the
Mueller said whether the company has a cable-TV franchise in a
certain market, such as
Portland, will not factor into the
decision. The company will look at deploying into areas
where it can also reach businesses.
"We'll obviously look at density, where we can get the most bang
for our dollar," Mueller said.
Andy Vuong: 303-954-1209 or