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AT&T; Chief Stays Focused on Strategy Down the Line

Times Staff Writer

Regulations are the bane of Edward E. Whitacre Jr., and he has complained loudly about how they hinder the telecommunications industry.

But the chairman of AT&T; Inc. has built the nation’s biggest telecom empire with little worry that his plans will be foiled.

“Ed would say that I didn’t pass the right rules and that my successors didn’t pass the right rules,” said Reed Hundt, former chairman of the Federal Communications Commission. “But the vagaries of regulation have not gotten in the way of his dream, and he’s made his business dream come true.”

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AT&T;'s planned acquisition of BellSouth Corp. for $67 billion worth of stock -- in a deal announced Sunday -- would be the crowning achievement of a 45-year career that has seen the 6-foot-4-inch Texan transform the smallest regional phone company into a global power.

“Ed is a visionary. He has a very long-term point of view and he knows exactly what he believes in,” said Roger C. Altman, Treasury secretary in the Clinton administration. “You don’t meet many people who are as sure in what they believe in, long-term, as Ed does.”

With protests mounting that he is re-stitching the old Ma Bell monopoly that the government broke up in 1984, Whitacre would have to assure regulators that the combined company wouldn’t hinder customers’ abilities to choose other phone services or use their high-speed Internet connections for other services, such as downloading movies.

That could be a challenge for a man who said last fall that Internet portals such as Google and Internet telephone companies were going to have to pay for using the broadband piped into his customers’ homes -- even though subscribers already pay AT&T; for that access.

Whitacre has earned a reputation for being pugnacious, stubborn and willing to fight to the end, but those who deal with him see a person who is low-key, direct and self-effacing.

“He’s very self-confident, but not in a forward, ostentatious way,” said Carl W. Wood, a former California Public Utilities Commission member. “You definitely get the feeling that you’re meeting with someone who has a lot of power and influence.”

Wood, who considered himself the consumers’ commissioner, was at odds with Whitacre when Wood, among other things, sought to keep wholesale rates low for competitors seeking to lease lines from Whitacre’s company.

Whitacre complained that those rates were below cost. Along with BellSouth and Verizon Communications Inc. executives, he fought in court and at regulatory agencies -- and won.

Whitacre, the son of a railroad worker and union activist, took over the helm at SBC Communications Inc. in 1990 when the San Antonio company was the smallest of seven Baby Bells created by the AT&T; breakup. Ma Bell took the long-distance network, leaving the local networks to its former subsidiaries.

Although well known among telecom executives, he could go unrecognized elsewhere, Hundt said.

One day, Hundt said, a tall, well-fit man sat alone outside his FCC office soon after Congress passed the Telecommunications Act of 1996, which was designed to spur phone competition.

“He was so low-key, the secretary didn’t even recognize him,” Hundt said. “After a while, he sent in a note saying that Ed Whitacre was waiting to talk with me.”

Shortly after that, Whitacre announced a deal to buy Pacific Bell and its parent company, Pacific Telesis. It was the first acquisition among the Baby Bells. He later picked up Ameritech, which covered five Midwestern states, and Southern New England Telephone in Connecticut.

“He has a real conviction as to how the telecom market and technology are going to evolve, and a real conviction on what his company needs to do to remain competitive,” said Altman, who as head of investment firm Evercore Partners in New York has helped Whitacre put together deals over the last five years.

In early 2004, he snatched AT&T; Wireless, a separately owned and traded company, from rival bidder Vodafone Group in England, with an offer at 2:30 a.m. Eastern time while Vodafone executives thought the bidding was over and they had won. Vodafone’s board declined to match the bid.

By the end of 2004, the old AT&T; as well as MCI Inc., the nation’s two largest long-distance carriers, were facing declining growth.

SBC reached a deal in late January 2005 to buy its former parent company. Two weeks later, Verizon Communications Inc., then the nation’s largest phone company, agreed to buy MCI.

Both deals won federal and state approvals over protests from consumers, corporate customers and smaller phone companies.

Whitacre was expected to retire in November, when he turns 65, but the AT&T; board recently extended his contract to 2008.

Whitacre had developed close friendships with key people, including BellSouth Chairman Duane Ackerman. Altman said the latest deal came about largely because of that friendship. The two telecom bosses agreed to the concept while bird hunting in late January. Their respective boards concurred.

To Whitacre, the purchase of BellSouth is not re-creating the Ma Bell monopoly. The landscape is far different from 1984, a time before wireless, before the Internet grew and before any high-speed access existed.

With cellphones, Internet telephony, cable phone service and fast Internet service and the coming broadband technologies -- high-speed wireless and broadband over power lines -- Whitacre doubted in an interview last year that competition would be squelched.

“Consumers have more choices than they’ve ever had before,” he said.

However Whitacre answers critics or pushes the boundaries, his chances of getting what he wants are good.

“Ten years and one month after Congress passed the Telecom Act, Ed’s become the biggest winner so far,” Hundt said. “That’s a long time to build a company, and I don’t think he’s made a bad acquisition along the line, while almost everyone else has.”

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(BEGIN TEXT OF INFOBOX)

Sizing up the competition

The playmaker

Edward E. Whitacre Jr.

Title: Chairman and chief executive of AT&T;

Age: 64

Hometown: Ennis, Texas

Education: Bachelor’s degree in industrial engineering, Texas

Tech, 1964

Pay: $17.1 million in salary, bonus and other compensation in 2005

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The companies

*--* AT&T;, BellSouth, Cingular combined Verizon Qwest Headquarters: San Antonio New York Denver Employees: 300,000+ 35,000 40,000 CEO: Edward E. Ivan G. Richard C. Whitacre Jr. Seidenberg Notebaert Phone customers: 69 million 48.8 million 14.7 million Wireless customers: 54 million 51.3 million 770,000 Internet subscribers: 10 million 5.1 million 1.5 million 2005 revenue: $95 billion $75 billion $13.9 billion 2005 profit/loss: $8.4 billion $7.4 billion -$779 million

*--*

Sources: The companies, the Associated Press, analyst reports. Graphics reporting by Scott J. Wilson


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