Qwest Names Edward Mueller CEO

Qwest Communications International Inc. has chosen Edward Mueller as successor to CEO Dick Notebaert and, due to a dearth of internal candidates, the appointee does not come from the Bell company.

The carriers board on Friday named Mueller, 60, CEO after examining internal and external candidates globally.

Notebaert on June 8 said he would retire after five years at Qwest. No obvious replacemements came to analysts minds on the news. Typically, a CFO or operations executive would step in, Donna Jaegers, a telecom analyst for Janco Partners Inc. in Colorado, told PHONE+ in June. But Oren Shaffer, vice chairman and CFO, resigned in April, and Barry Allen, executive vice president of operations, retired on June 29. Internally, that left Dan Yost, executive vice president of product, who came to Qwest from Allegiance Telecom Inc. in 2004. Other than that, theres not a whole lot of other internal candidates that spring to mind, Jaegers said.

Mueller has held a number of positions in telecom and was Notebaerts top recommendation. Mueller whose name is pronounced as Miller has served on the VeriSign Inc. board of directors since March 2005, presiding as chairman since May of this year. He also was president and CEO of Ameritech from 2000 to 2002; vice president of SBC International Operations from 1999 to 2000; and president and CEO of Pacific Bell from 1997 to 1999. From 2003 to 2006, Mueller did a stint as CEO of Williams-Sonoma Inc.

Mueller has signed a three-year employment contract with Qwest, as well as an agreement for equity compensation. The three-year deal will automatically renew for one-year terms unless Mueller or Qwest cancels. Mueller will be paid a base salary of $1.2 million and a bonus of up to 20 percent. Both the salary and bonus can increase annually. For the remainder of 2007, Mueller will receive $947,000.

Mueller also is able to buy 2.083 million shares of Qwest common stock for $8.37 per share; the board also granted a restricted stock award of 896,000 shares.

Qwest has given Mueller other perks as well. For example, hell receive an annual flexible benefit of $75,000 in cash, which Qwest positions as a payment made in lieu of various other perks often given to executives. Qwest also will pay Muellers moving and temporary housing expenses and cover the costs of a home security system. And if Mueller isnt able to sell his current home by March 31, 2008, Qwest will buy the residence.

Mueller and Qwest also negotiated several terms in case Mueller is asked to resign before the three-year agreement comes due.

In the meantime, Notebaert has agreed to remain a Qwest employee until Aug. 15 to help Mueller with the transition.

Notebaert will leave with a plush severance package. His base salary will double, from $1.1 million to $2.2 million. Hell also 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, 2007, 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 Inc., 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 a turbulent time for the industry and for the carrier. The board of the cashstrapped company had just fired CEO Nacchio, who was under fire for accounting fraud. A federal jury in mid-April of this year found Nacchio guilty on 19 of 42 counts of illegal insider trading. He has been sentenced to six years in prison; he is expected to appeal.

Amidst the tumult, 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, Jaegers told PHONE+ in June. 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.

Qwest Communications International Inc. www.qwest.com