Kelly Teal, Contributing Editor

June 11, 2007

3 Min Read
Notebaert Announces Retirement Plans

Folks used to say that the RBOCs moved in lockstep. So its interesting timing that just two months after Ed Whitacre announced his retirement, Qwest Communications International Inc.’s Chairman and CEO Dick Notebaert has done the same.

The mild-mannered head of Qwest, a long-time fixture on the RBOC scene, on June 8 told the board he would retire to spend more time with family and focus on other commitments. Qwest made the announcement on Monday.

The 59-year-old expects to leave once a successor is chosen, although no obvious candidates came to analysts minds. Typically a CFO or operations executive would step in, said Donna Jaegers, a telecom analyst for Janco Partners Inc. in Colorado. But Oren Shaffer, vice chairman and CFO, resigned in April and Barry Allen, executive vice president of operations said last week hell retire on June 29.

Internally, that leaves Dan Yost, executive vice president of product, Jaegers said. Yost came to Qwest from Allegiance Telecom Inc. in 2004, so he knows the Bell and competitive carrier systems. Other than that, theres not a whole lot of other internal candidates that spring to mind, said Jaegers.

Outside of Qwest, former BellSouth and SBC Corp. executives probably will vie for Notebaerts job, Jaegers said. Whats paramount is that the next CEO must know Bell culture and systems. You dont want another mismatch in there like [Joe] Nacchio, running roughshod, Jaegers said.

Plus, Qwest, the nations third-largest Bell, needs a leader to help it increase market share in the enterprise and wholesale markets, as well as execute on an IPTV strategy. Qwest is up against Comcast Corp. in 55 percent of its households, and Comcast is putting up a fight with a smoking triple-play deal. So Qwest faces that competition, as well as flatlining out-of-region sales. And the video question remains. Qwest still is reselling DirecTV but has made moves recently to roll out IPTV. Still, nothing has been articulated and the next Qwest head has to be ready to tackle the issues, Jaegers said.

Notebaert will leave with a plush severance package. His base salary will double, from $1.1 million to $2.2 million; hell receive a $4.4 million bonus, as well as a $2.2 million prorated bonus for 2007. There also is $140,000 in lifelong health benefits and an unspecified amount for an executive assistant, phone services and computer and other office equipment for the rest of his life, according to a March 29 proxy statement filed with the SEC. The overall package totals more than $14.45 million.

Notebaert came to Qwest in 2002 from equipment provider Tellabs, where he had served as president and CEO for two years. Before that, he was with Ameritech Corp. for 30 years; his last position there was as chairman and CEO. He took the top post at Qwest during an extremely turbulent time for the industry and for the carrier.

The board of the cash-strapped company had just fired CEO Joe Nacchio, who was under fire for accounting fraud. A federal jury in mid-April found Nacchio guilty on 19 of 42 counts of illegal insider trading. Nacchio has since asked for a new trial.

Amidst the tumult, and around the time WorldCom was facing its own scandals, Qwests board appointed Notebaert as its chairman and CEO. A number of people doubted Notebaert had the chutzpah to turn Qwest around but he has done just that. The company posted $194 million in profits for the fourth quarter of 2006 and nearly tripled its net income in the first quarter of 2007.

Notebaert departs Qwest likely feeling he has done what he set out to do, says Jaegers. Qwests balance sheets are repaired (the company in 2006 was profitable for the first time) and Standard & Poors now rates Qwest as investment-grade. I think he feels like his work in fixing up the company is complete.

Paula Bernier contributed to this report

Qwest Communications International Inc. www.qwest.com

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About the Author(s)

Kelly Teal

Contributing Editor, Channel Futures

Kelly Teal has more than 20 years’ experience as a journalist, editor and analyst, with longtime expertise in the indirect channel. She worked on the Channel Partners magazine staff for 11 years. Kelly now is principal of Kreativ Energy LLC.

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