Ed Whitacre, one of the most influential and polarizing figures in telecom history, this month steps down from his post as AT&T Inc.’s chairman and CEO. The 65-year-old spent nearly two decades at the helm of the company formerly known as SBC Communications Inc., during which time he transformed the former RBOC into the communications powerhouse that is “the new AT&T.”
“Just like the Texan he is, Whitacre rode AT&T from the smallest to the largest of the Baby Bells,” says telecom analyst Jeff Kagan.
As a testament to that success, AT&T will reward Whitacre with one of the largest retirement packages ever doled out in the United States. His pension will total more than $158.5 million. That’s not including the additional $3 million he will make as a consultant to the company, and the $122,000 annually for lifetime perks such as country club membership and health insurance.
Whitacre’s long-time protégé, COO Randall Stephenson, is his successor.
The timing of this change in leadership makes sense, says Brian Washburn, senior analyst for Current Analysis Inc. “The big deals have all been done. There are no other big acquisitions for AT&T to vie for.”
Whitacre’s 17-year tenure marks the longest of any CEO in telecom. But there is much more than his longevity as chief that defines his legacy. Whitacre possesses a “terrific deals instinct” that helped him transform SBC from a “middling performer” into an empire, says Victor Schnee, co-founder of investment research firm Probe Financial Associates Inc.
“If you were handicapping who’s going to come out of this race 15 to 20 years from now as the biggest company of the group and highly profitable and so on, I don’t think a lot of people would have picked SBC,” says Schnee. “Regardless of what else anyone may think of [Whitacre], you have to give him the credit for that, and I think that’s what he’s going to be remembered for.”
SBC was formed from the mergers of Ameritech, Pacific Telesis, SNET DG and Southwestern Bell. The Ameritech purchase in 1998 was the most brilliant of Whitacre’s career, Schnee says, because of Ameritech’s strength and earning power in its five-state region: Illinois, Indiana, Michigan, Ohio and Wisconsin. “A lot of the earning power of SBC for years after that merger came from Ameritech,” Schnee says.
The acquisition simultaneously increased SBC’s muscle and quashed the pro-competitive policies championed by Ameritech, which was the most aggressive of the Bells in opening its markets to local competitors as prescribed in the Telecommunications Act of 1996. SBC arguably was the least cooperative in opening its local footprint to competitors.
Whitacre didn’t get SBC to the top of the heap without stepping on a few toes. “He always played tough,” Schnee says. “SBC was always a tough company on regulatory policy — they hurt a lot of other people.”
The effects of that approach remain substantial. Even though the furor has died down, Whitacre’s off-the-cuff remarks to Business Week in late 2005 ignited the net neutrality debate that consumed Congressional committees all last year.
Indeed, Whitacre’s personal style is Texan to the core — hard-talking, often blunt and brusque. He was known to “unload” at the wrong times, Schnee says.
But Whitacre’s business acumen and political connections won him accolades in different circles. Never were these strengths more apparent than when SBC sought to gobble up long-distance carrier AT&T Corp. and fellow RBOC BellSouth Corp., joint owner of Cingular Wireless LLC. Those two mergers marked the most controversial and contested of Whitacre’s term. Congress tried to step in and numerous trade and consumer groups petitioned the FCC and Department of Justice to reject the deals. In the end, however, SBC won.
“There were a lot of things that were done in the legal/regulatory field that were very objectionable, and SBC was always one of the ones leading the charge,” says Schnee.
Changing of the Guard
So who is Randall Stephenson and what can we expect from him going forward? Stephenson, the 47-year-old who up until this month occupied the position of COO, began his career at Southwestern Bell in Oklahoma City in 1982 in the IT department. By 1996, he had worked his way into the position of controller for SBC.
AT&T’s Randall Stephenson (left) and Ed Whitacre (right) |
Before becoming COO, Stephenson was senior executive vice president and CFO for SBC. The company credited Stephenson with reducing its net debt from $30 billion to “near zero” by early 2004. Once the balance sheets were cleared, SBC began its merger frenzy.
In 2005, Stephenson was appointed to the new AT&T’s board of directors. He also served on the Cingular Wireless board of directors from 2001 to 2006, and as chairman in 2003 and 2004.
He also sits on the board of directors of Emerson Electric Co. and serves as vice chairman of the White House’s National Security Telecommunications Advisory Committee.
According to one analyst, Stephenson is expected to continue in the direction that retiring chairman and CEO Ed Whitacre has set out for AT&T and perhaps push the communications behemoth into IPTV faster than his predecessor would have.
“My sense is that there’s going to be significant continuity with regard to where Whitacre had been taking AT&T,” says Alfred Boschulte, Probe Financial Associate’s co-founder and a former Bell executive.
Boschulte also predicts Stephenson will take Whitacre’s IPTV initiatives even further than Whitacre himself might have intended. “My expectation is he may be even stronger … in the video world,” Boschulte says, explaining that Stephenson is part of a younger and more tech-saavy generation than was Whitacre and that he has worked more on triple- and quadruple-play technologies.
