Craig McCaw: Cellular Telephone Industry Giant Shuns the Spotlight
Recent editions of “Who’s Who in the West” and “Who’s Who of Emerging Leaders In America” describe the achievements of a son of the late J. Elroy McCaw, a Seattle entrepreneur who built a communications empire.
Surprisingly, though, the listing is for Elroy’s first-born son, an insurance executive, and not Craig O. McCaw, the second son, who has jolted the big regional phone companies by becoming the undisputed leader of the hot new cellular telephone industry. After starting out with a small cable television concern inherited by the four McCaw sons, 39-year-old Craig McCaw has led the way into building Kirkland, Wash.,-based McCaw Cellular Communications into the nation’s largest cellular company.
The “Who’s Who” omission reflects McCaw’s almost reclusive style. Despite his role as an industry powerhouse, he is little-known outside of the cellular business.
He rarely grants interviews and declined to be interviewed or photographed for this story. In fact, McCaw has asked other people not to discuss his family with reporters. His photograph has never been in the company’s annual reports. “We ap proach our work with humility and determination to achieve excellence,” McCaw said in the 1988 chairman’s letter.
Becoming a corporate giant appears to be a major goal, too. On June 6, McCaw Cellular proposed a $5.8-billion tender offer for the 91% of New York-based Lin Broadcasting that McCaw Cellular doesn’t already own. The acquisition would give the company, among other things, Lin’s important 35% stake in Los Angeles Cellular Telephone Co. and cement its No. 1 position in an industry some believe will eventually rival traditional phone service.
Principle Passion
When McCaw emerges in public, it is usually to sing the praises of the cellular industry. “He is a very good speaker. He’s very knowledgeable about the industry,” said Robert W. Maher, president of the Cellular Telephone Industry Assn.
“He’s a great believer in this industry. He is very confident that this is a good business and that there is potential growth to make this a very big industry,” Maher added.
Thomas W. Friedberg, a Seattle-based telecommunications analyst for Piper Jaffray & Hopwood, said the cellular business is McCaw’s “principal and consuming interest.”
McCaw’s other passions are yachting and flying, according to associates. He lives near Seattle’s Lake Washington and frequently pilots a seaplane and a Lear jet.
Known as an extremely aggressive and tough competitor, McCaw is also said to be likable, though quiet, socially. “I think he is a very bright and engaging person. I enjoy talking to him. He likes to talk about his business,” said C. Lee Cox, president and chief executive of PacTel Corp., the holding company for Pacific Telesis Group’s cellular operations and other unregulated businesses.
McCaw is said to have likened himself to the Wizard of Oz at a company retreat about a year ago. Not many in the industry would deny that he is a wizard of a sort. He defied assumptions just a few years ago that the so-called Baby Bell telephone companies, created after the 1986 breakup of American Telephone & Telegraph, would dominate new cellular business because of their financial and marketing strength.
McCaw Cellular now has interests in cellular systems serving an estimated 57 million “pops”--an industry market share measure calculated by multiplying the number of people in a market area by the percent a firm owns of a company serving the area. (If a company owns 50% of a firm serving a market with 10 million people, it has 5 million pops.) By that standard, McCaw Cellular is almost twice as big as Pacific Telesis, the industry’s No. 2 company.
To stay ahead of its rivals, McCaw has taken on a staggering amount of debt--about $1.8 billion, according to Security and Exchange Commission filings--in part to finance acquisitions. Most of McCaw’s debt is in “junk bonds” arranged by investment bankers Drexel Burnham Lambert.
The borrowing hasn’t yet paid off; interest expenses contributed to the company’s loss of $297 million last year on revenue of $310.8 million.
Family Involvement
“He’s a pretty aggressive guy,” said Bradford L. Peery, an independent analyst in San Francisco. McCaw is “willing to bet the store” to dominate the industry, he said.
His style resembles that of his father, who also tended to keep his own counsel. Although the elder McCaw assembled a radio and television empire, many of the operations were sold to pay debts after he died in 1969. All that was left for the four McCaw sons was a 7,000-subscriber Centralia, Wash., cable TV system.
Today, all of the sons are officers and directors of the firm that grew out of that cable operation. Together, they own about 46% of McCaw Cellular, although Craig McCaw controls a crucial block of shares.
The eldest, 42-year-old Bruce R. McCaw, is a vice president. He’s also chairman of Westar Insurance Group. John E. McCaw Jr., 38, is executive vice president for acquisitions. The youngest brother, 34-year-old Keith W. McCaw, is a vice president.
Craig McCaw attended Seattle’s Lakeside School, where officials declined to talk about him at McCaw’s request, and later studied history at Stanford University.
After taking over the cable television franchise, Craig McCaw bought other cable properties and a telephone paging service. In 1982, though, he began pursuing cellular licenses and soon acquired interests in partnerships serving a number of areas, including Seattle and Portland.
In 1987, the firm sold its cable interests to Jack Kent Cooke, owner of the Washington Redskins and the Woodland Hills-based Daily News, and went public.
With a presence in 127 markets today, McCaw now has its eye on Lin Broadcasting partnerships in New York, Philadelphia, Dallas and Houston, along with Los Angeles. If McCaw proceeds with its proposed tender offer and completes the acquisition, analysts say, McCaw cellular would truly become an industry juggernaut.
For now, McCaw Cellular is biding its time before launching a proposed $120-a-share tender offer, possibly waiting for the price of Lin’s stock to come down. Lin’s stock price shot up to $129.50 after McCaw Cellular disclosed its plans, apparently on speculation that another bidder would emerge. None has, however, and the stock closed Friday at $122.50.
