Qwest Finds Itself On Hold

Richard Notebaert is trying to make peace with Qwest's troubled past -- and lead the company into the future.

Who Richard Notebaert
Title Chairman and CEO, Qwest Communications International Inc.
Where Denver, Colorado
Challenge Turn around a company that three years ago sported a market capitalization of $80 billion -- and now is suffering the down-turn and battling federal investigations that threaten to scuttle its future.

When Qwest chairman and CEO Richard Notebaert invites guests into his office, which faces the Rocky Mountains' massive peaks, he dismisses the imposing view. "I don't look at it very often," he says. Instead, he spends much of his workday with his head down, cleaning up a messy past that continues to haunt Qwest. When Notebaert, 55, arrived at Qwest in June 2002, the Securities and Exchange Commission was investigating the company and its ex-CEO Joseph Nacchio for inflating revenue in 2001 and 2002 to keep Wall Street happy. Qwest was awash in $27 billion of red ink, and employee morale was bottoming out, as people watched the stock drop more than 90% and their 401(k)s vaporize.

Unfortunately for Notebaert, not much has changed in the past year. In May, the SEC widened its probe. Earlier this year, the U.S. Department of Justice opened its own investigation. More worrisome for Notebaert: The bad news isn't just about what was. Now it's about what's next. Notebaert must find some way to make Qwest relevant in an increasingly wireless world, even though it's burdened with millions of miles of fiber-optic cable that took billions of dollars to install. We put him in the Hot Seat to find out if he can make peace with Qwest's past -- and lead the company into the future.

How do you keep your people focused when the SEC and the Justice Department are investigating Qwest?

I tell people all the time, "I hear the noise. I understand the distractions." But we have to move forward. We never talk about the past around here. Other people do.

How do you learn from the past if you never talk about it?

We learn as we go, and we try to avoid "analysis paralysis."

Your rallying cry for Qwest is, "Spirit of Service." But "Spirit of Service" is not the experience most of us have when we call the phone company. Isn't this an empty slogan?

I disagree. Last month, the University of Michigan's American Customer Satisfaction Index showed that Qwest's score moved up more than 10% over last year's survey, the largest improvement of any telecom company. We're headed in the right direction.

How do you get demoralized employees to give great customer service?

"Spirit of Service" is not something we teach -- it's part of our DNA. This "spirit" drives us every day; it has provided the right amount of motivation for all of us.

What are you doing to address the fact that Qwest's business is built on landlines when the world is increasingly wireless?

We're creating service bundles that are more attractive to customers. We believe that if you can offer customers a package of local, long-distance, data, wireless, and video services, they are more likely to pick you as their full-service provider.

Given the investigations, the precipitous drop in Qwest's stock, and the fact that giant companies like AT&T are muscling in on your territory, why do you believe that Qwest should continue to operate as a stand-alone company?

I'm not in a position to speculate about future M&A activity. But we think that our unique blend of local and long-haul assets have us well positioned for future growth.

What is your impression of Joe Nacchio?

Remember -- no rearview mirror.

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