Whitacre Hands Over AT&T Reins

Ed Whitacre, one of the most influential and polarizing figures in telecom history, planned to retire from his post as AT&T Inc.s chairman and CEO in early June. The 65-year-old spent nearly two decades at the helm of SBC Communications Inc., a once poorly regarded regional Bell that Whitacre has transformed into a powerhouse.

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. Thats 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.

Whitacres long-time protégé, COO Randall Stephenson, will be his successor.

Whitacres 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. If there is one word that repeatedly crops up among analysts to describe Whitacre, it is tough.

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.

SBC was formed from the mergers of Southwestern Bell, Pacific Telesis, SNET and Ameritech. The Ameritech purchase in 1998 was the most brilliant of Whitacres career, Schnee says, because of Ameritechs strength and earning power in its five-state region: Indiana, Illinois, Ohio, Michigan and Wisconsin. The acquisition simultaneously increased SBCs 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.

Terry Barnich, founder, president and CEO of New Paradigm Resources Group (NPRG), was chairman of the Illinois Commerce Commission from 1989 to 1993. Make no mistake Ed Whitacre is one tough cowboy and he competes like a Texan: tough, thorough and unyielding, Barnich says.

Indeed, Whitacre didnt get SBC to the top of the heap without stepping on, or maybe even crushing, 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, Whitacres off-thecuff remarks to Business Week in late 2005 ignited the net neutrality debate that consumed Congressional committees all last year. Indeed, Whitacres 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 Whitacres business acumen and political connections overrode most criticisms. Never was that 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 Whitacres term. Congress tried to step in. Numerous trade and consumer groups petitioned the FCC and Department of Justice to reject the deals. In the end, however, SBC won.

Whitacre worked for the now-AT&T for 43 years. Leaving now makes sense, say analysts, because Whitacre has overseen all of the big acquisitions AT&T can make. Whitacre was appointed chairman and CEO in 1990 and leaves a complicated legacy. History will probably remember him as the person who took AT&T and the Bell system and to some degree put it back together again, says Brian Washburn, senior analyst for Current Analysis.

Whitacre now hands over the reins to 47-year-old COO Stephenson. Stephenson 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. 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.