Q&A with Qwest CEO Richard Notebaert

In an interview with BusinessWeek's Bruce Meyerson, the departing CEO talks about just how close the telecom came to disaster

Richard Notebaert is concluding his five-year tenure as chief executive officer of Qwest Communciations International (Q). It was a dramatic run that started with an emergency salvage operation in which the phone company narrowly skirted bankruptcy amid financial scandal and government probes. Today, Qwest is again profitable and respectable, its shares trading at the highest level since early 2002.

On Aug. 1, following what's expected to be his last quarterly earnings report, Notebaert offered some reflections on what Qwest has been through, as well as what the future might hold for the company and himself:

When can investors expect to see your successor announced? Has the field of candidates been whittled down to a few leading names?My expectation is that it would happen sooner than later, with lots of "o"s in that "sooner." But it's a board decision so I can't get any closer on timing. The board has done an outstanding job [in the search].

When you started as CEO in the summer of 2002, Qwest was besieged by revelations of misleading financial reports, government probes, and a $26 billion debt load. You immediately set out to renegotiate billions of dollars in debt terms and persuade lenders to let you borrow $750 million for cash flow. How close did you come to bankruptcy?About 10 weeks. It was pretty ugly. Had we not executed our plan, that's how close we came [to filing Chapter 11]. I got here at the end of June, and if we had not executed that plan in July or August, by mid-September we would not have been here. Everyone thinks that selling [Qwest's phone-book business] was what saved us. We sold DEX at the end of September. We wouldn't have made it to September if we hadn't renegotiated our covenants and borrowed cash.

Your latest quarterly earnings report was met with disappointment in the stock market, with your shares dropping 1.5%. Is there trouble ahead as you head for the exit?The only number that people might have felt a little uncomfortable with, and it's hard to understand why, is that the profit margin is down, and we told everybody it wouldn't be a straight line [from quarter to quarter]. Now that we're a normal company earning profits and positive cash flow, the one thing that has adversely affected us is that the market hates uncertainty, and any time you have a change in the CEO role, the sooner we settle that situation the better off our shareholders are.

In an industry as fiercely competitive as telecommunications, is Qwest a likely takeover target, or positioned as one? Can it remain an independent phone company?We didn't come here to sell the place; we came here to run and execute. We have a fiduciary responsibility to consider [a potential offer] at a board level. [But] I don't have any expectation on that. I would expect to see ongoing acquisitions (in the industry), but as far as Qwest being purchased it's a question of whether you can create more shareholder value. But you need to execute as if you're going to be independent forever because then the value continues.

Your predecessor as Qwest CEO, Joe Nacchio, was sentenced on July 27 to six years in federal prison for insider trading amid the company's financial tailspin. He also was ordered to pay a $19 million fine and forfeit $52 million in stock profits. Is this just?We respect the court's decision.

You've been mentioned as a possible candidate for another salvage operation: replacing Ed Zander as CEO of Motorola (MOT). We know you won't tell us if Motorola has contacted you, and we know you were recently elected chairman of the board of trustees at Notre Dame University. But in general, are you open to the possibility of another CEO post?That's not something I would be comfortable answering. I have a corporate CEO job: I am the CEO at Qwest, and that's the only thing on my plate.

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