Richard Notebaert and Ivan Seidenberg both know how to win. The question is: Do they know when to quit?
Notebaert, chief executive of Qwest, and Seidenberg, CEO of Verizon, are fighting over MCI, the nation’s second-biggest long-distance company.
But the stakes for the two men are different.
Verizon, the nation’s biggest phone company, could survive without MCI. But would Seidenberg allow his company to be beaten by Notebaert, who runs the smallest and most financially troubled of the Baby Bells?
For Notebaert, it’s a matter of survival. The options for Qwest if it loses MCI are grim.
If the battle for MCI is a chess game, Seidenberg moved a big piece two weeks ago, buying out MCI’s biggest shareholder, Carlos Slim Helu, for $1 billion.
Notebaert on Thursday countered Verizon’s move, upping Qwest’s bid for MCI to $30 per share, 30 percent higher than Verizon’s $23.10cq-a-share offer.
Entering the weekend, checkmate had so far eluded both men.
“I wouldn’t rule Dick out,” said Reed Hundt, former Federal Communications Commission chairman.
The heyday of AT&T
Notebaert, 57, and Seidenberg, 58, are baby boomers who cut their teeth in the regimented environs of American Telephone & Telegraph Co.
Seidenberg grew up in the Bronx. In 1966, he joined New York Telephone Co., which later became Nynex, as an assistant cable splicer.
After a stint in Vietnam, Seidenberg returned to the phone company and climbed steadily through the ranks, becoming CEO of Nynex in 1994. After helping to hammer together a $23 billion deal that led Bell Atlantic to acquire Nynex in 1997, Seidenberg agreed to the No. 2 role behind new CEO Ray Smith, who was then Bell Atlantic’s chairman.
Seidenberg knew the merger was crucial for his company’s survival in the fast-changing telecom world. He didn’t let ego drive his decision.
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CEO BATTLE
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“Nynex had to do what it had to do,” Peter Price, then president of Liberty Cable Television and a friend of Seidenberg’s, told The Wall Street Journal at the time. “That’s Ivan Seidenberg.”
In 2000, after Smith’s retirement, Seidenberg was at Bell Atlantic’s helm when the company purchased GTE and renamed itself Verizon.
Notebaert also worked his way up.
He held two jobs in the 1960s, one as a gas-station mechanic and the other washing trucks for Wisconsin Bell, to put himself through college.
Wisconsin Bell offered him a job managing a local office when he graduated. He moved ahead through marketing and sales. The company eventually became part of Chicago-based Baby Bell Ameritech.
By the early 1990s, Notebaert had grabbed the attention of Ameritech chief William Weiss.
“He understands the nature and needs of the industry. … Not just the old phone industry, but cable, wireless and the computer industries,” Weiss said in a 1995 Chicago Tribune article.
That story said that in February 1992 Weiss gathered 30 of his top executives at the Breakers Hotel in Palm Beach, Fla., to talk about the company’s future. Notebaert’s candid assessment of Ameritech’s challenges and enthusiastic embrace of change impressed Weiss.
“It was Notebaert who was picked to bring that change about. It was a really radical restructuring of the company; it was cutting edge,” said an up-and-coming executive at the time who later worked for Notebaert as president of Ameritech Illinois.
Notebaert became CEO of Ameritech in 1994. In 1999, as a wave of consolidation swept through the industry, he put his stockholders’ interest first by selling the company for $72 billion to San Antonio-based SBC.
Fierce and cordial rivals
Neither Notebaert nor Seidenberg has minced words in the brawl for Ashburn, Va.-based MCI and its coveted roster of corporate clients.
Seidenberg attacked as “modern fiction” the projected $14.8 billion in cost savings that Notebaert said would result from a Qwest-MCI merger.
He summarily dismissed Qwest’s ability to compete against New York-based Verizon for MCI in a comment to analysts in mid-February:
“I am not particularly concerned about somebody coming in over the top,” he said. “There is a very high hurdle for them to meet to make that happen.”
Notebaert hammered Seidenberg for trying to win MCI with a low-ball bid, and complained that allowing those two companies to merge would create a telecommunications “duopoly” of Verizon-MCI and SBC-AT&T in the business services market.
Notebaert also castigated Verizon for attacking Qwest’s ability to create value in the future from a merged Qwest-MCI.
“Verizon … continues in its shrill attempt to change the focus away from delivering maximum value to MCI shareholders,” he wrote in a regulatory filing.
Despite some testy exchanges, the two men have a cordial business relationship.
Qwest completed its $418 million sale of some wireless towers and other assets to Verizon even as the fight for MCI was in full fury.
“We do a lot of business with them. They do a lot of business with us. We have common interests in the regulatory climate,” Notebaert said in an interview in mid-March.
Neither Notebaert nor Seidenberg would comment for this report.
Notebaert, whose quick smile is a staple of Qwest’s “Spirit of Service” TV commercials, is outgoing, personable, never at a loss for words. He can be blunt.
“Sometimes people like to muddle around and not get to the point, and sometimes you walk away from a conversation without knowing what the person really meant to say. I can guarantee that won’t happen with Dick,” said Carl Grivner, who worked with Notebaert at Ameritech and now heads XO Communications.
Seidenberg is described by those who know him as a more private person, but just as candid and charming as Notebaert.
His flight to Mexico to woo Slim is an example of his ability to take quick, decisive action.
“This is not a smart guy in an ivory tower who moves soldiers around the board. He is the soldier; he is a field commander,” said Price, now head of the National Academy of Television Arts and Sciences.
Explaining Qwest’s drive
Seidenberg appears to have more firepower than Notebaert. Verizon is valued at $94 billion, while Qwest’s market capitalization is $6.45 billion.
Qwest, which carries about $17 billion in debt, has the most to lose. Its growth prospects are extremely limited without MCI.
That may explain why Notebaert has been so aggressive. But some analysts question whether his $30-a-share bid is sensible.
“I think they are paying too much,” said Donna Jaegers, an analyst with Denver-based Janco Partners.
Yet Grivner, who fought and won a bidding war against Qwest for bankrupt Allegiance Telecom last year, said Notebaert showed discipline in pursing Allegiance. He walked away when the price got too high.
Those who know Seidenberg say he also is a shrewd player who won’t lock Verizon into a deal that won’t pay off.
In fact, losing a bidding war to Qwest could ultimately work to Seidenberg’s long-term advantage. If Notebaert overpays, and the combined Qwest-MCI later falters, Seidenberg could end up buying it at a fire-sale price.
Staff writer Tom McGhee can be reached at 303-820-1671 or tmcghee@denverpost.com .
