Qwest CEO to Step Down When Successor Found

Jun 12, 05:00 AM

Current Headlines: By Leslie Cauley

Richard Notebaert, Qwest's chairman and CEO, will retire as soon as a successor is found, the company said Monday.

Notebaert's retirement marks the end of an era at Qwest, the dominant local phone company in 14 Rocky Mountain, Great Plains and Northwestern states. Qwest is an amalgam of US West, one of the original Baby Bells, and Qwest, a long-distance carrier.

Notebaert, who turns 60 in August, said in a statement that he plans to "spend more time with family and focus on other commitments."

Notebaert arrived five years ago as Qwest was reeling from the forced resignation of former CEO Joe Nacchio, who was recently convicted on 19 counts of inside trading and is appealing. The company also was the subject of an SEC accounting investigation.

Richard Klugman, a longtime telecommunications analyst, gives Notebaert high marks for his leadership. When he arrived, Klugman says, Qwest's financial house was a mess and its image was in tatters. The carrier had a crushing debt load of $26 billion and no growth engines -- such as wireless or video -- to ensure its future.

Investor confidence was also shot. Within two months of Notebaert's arrival, Qwest's stock price nosedived to $1.11, a record low.

"Clearly, the concern was that this company was in trouble," Klugman says.

To get Qwest back on track, Notebaert sold assets to pare debt and made major improvements in customer service.

Notebaert also let investors know that Qwest was not a company to be taken lightly. His message arrived in the form of an unsolicited offer for MCI in early 2005. The move shocked the long-distance giant, which had just announced plans to merge with Verizon.

Notebaert's brashness riveted Wall Street. A bidding war with Verizon ensued. Verizon ultimately prevailed, but it had to pony up more billions to beat back its much smaller rival.

Frank Popoff, a board member of Denver-based Qwest, says the episode let people know "that we were not sitting in Denver watching the paint dry."

Popoff says Notebaert used the limelight during that period to talk about Qwest's credit lines, investors and other specifics related to the carrier's financial health. As a result, he says, investors started taking Qwest more seriously.

Even though Qwest was sorry to lose, "We looked at MCI as a win-win proposition," recalls Popoff, a former CEO and chairman of Dow Chemical. He says Notebaert kept Qwest moving forward. "He had one eye out for opportunity while focusing on the tough job of operational improvements."

Unclear, however, is what will happen to Qwest in the long term. The carrier still has no growth engines, and its core land-line phone business is under attack by a crush of rivals.

Still, Klugman says Notebaert deserves a lot of credit. When Qwest's stock hit $10 last week, Klugman says, he called Notebaert to offer his personal congratulations. "I don't normally do that sort of thing. But he really ought to be commended for taking this stock from the brink." (c) Copyright 2005 USA TODAY, a division of Gannett Co. Inc.