Liars on the Line

While US West delayed service for months, the company stockpiled millions.

US West was created after the federal government broke up the former Bell system monopoly in 1984. The new company -- which incorporated Colorado's longtime telephone provider, Mountain Bell -- was given a vast territory that stretched from the Pacific Northwest to the cornfields of Iowa. Meanwhile, new technology was transforming telecommunications and bringing fierce competition to the once stodgy local telephone world. Cellular-phone networks and the swift rise of the Internet brought new challenges to regional phone companies like US West. One by one, the other successors to the Baby Bells merged or were bought out by larger companies -- Bell Atlantic and Nynex merged to create a colossus in the Northeast, and three others -- SBC, Pacific Telesis and Ameritech -- are in the midst of joining forces to form a company that will extend from Chicago to Houston to Los Angeles. In addition, long-distance companies MCI and WorldCom have already joined together to form a huge telecom pipeline company, and AT&T has announced it will make local telephone service available over its cable television lines in the next few years.

That left US West increasingly isolated in a relatively remote area of the country. This year the company got serious about finding a partner that would allow it to play with the big boys in telecommunications. In May, US West agreed to a $37 billion merger with Global Crossing Ltd., a Bermuda-based company that's raised billions for an ambitious endeavor to lay fiber-optic lines linking several continents. That company was seen as an odd choice for US West, since it had just 200 employees and no real experience with customer service.

There was widespread speculation on Wall Street that Denver-based Qwest Communications might make a hostile bid to the US West-Global Crossing deal, and that was exactly what happened in June. Qwest, which was created in 1988 by Denver billionaire Philip Anschutz as a spinoff from the Southern Pacific railroad, had grown rapidly to become the country's fourth-largest long-distance provider. (Anschutz sold the railroad in 1996, but Qwest kept the right to lay its fiber-optic cables on the railroad's right-of-way.)

False front: For years US West claimed that there was nothing it could do about service problems.
False front: For years US West claimed that there was nothing it could do about service problems.
False front: For years US West claimed that there was nothing it could do about service problems.
Jonathan Castner
False front: For years US West claimed that there was nothing it could do about service problems.

Details


Previous Westword article

"Bells Are Ringing,"
August 12, 1999
US West put service on the line so it could make the deal.

"Disconnected,"
April 8, 1999
As US West pulls strings at the legislature, it could cut the lines to competition.

"Calling to Collect,"
October 23, 1997
The City of Denver declares war on the state legislature over a telephone bill.

"Circling the Wagons,"
November 7, 1996
Consumer groups are banding together to fight off US West's rate hikes.

"Hide and Seek,"
October 3, 1996.
US West's game: keep its service record hidden from public view while charging the public more money.

"Dial 'M' for Monopoly,"
July 7, 1996
In the brave new world of telecommunications, US West has an ace up its sleeve: the residential phone customer.

Qwest had become a Wall Street favorite, and its stock price rose so quickly that Anschutz's billion-dollar fortune grew exponentially. Earlier this year he was ranked as the fifth-richest man in the world, with an estimated $16.5 billion in holdings.

Anschutz played a pivotal role in striking the deal between Qwest and US West. To pacify Global Crossing, he said that the company could merge with Frontier Corporation, a major long-distance operator that was being pursued by both Qwest and Global Crossing. In a July 14 dinner at the Brown Palace Hotel, Anschutz, Trujillo and Qwest chief executive Joseph Nacchio hashed out the final $45.2 billion deal. They agreed that Trujillo would become president of the new company's local phone and wireless business and would be a "co-chairman" of Qwest along with Anschutz and Nacchio. Many doubt this unusual leadership structure will endure, and they speculate that Trujillo may be out the door after the merger is finalized next year.

But no one is shedding tears for Trujillo or his friends in the executive suites at US West. Last week's approval by shareholders of the merger between US West and Qwest will make Trujillo and his colleagues extraordinarily wealthy. Trujillo has claimed that the merger is necessary for US West to survive in the fast-changing telecommunications world. He told the Denver Post that the merger was the best thing for both companies. "When I initiated this, I believed in the value of this, and our shareholders are saying, 'Yup, I agree,'" Trujillo told the newspaper.

Whatever value the merger will have for shareholders, it has an enormous value for Trujillo, who began his US West career more than twenty years ago in his native Wyoming, where he dug ditches and spliced lines as an entry-level employee. After working his way through the University of Wyoming and earning a business degree, Trujillo became a US West success story, rising through the company's power structure until he finally stepped into the CEO position in 1995 at age 43. His 1.6 million shares of US West stock will be worth an estimated $97.5 million after the merger is finalized. At that time, he'll also receive a cash bonus of $2.7 million plus a lump sum payment equal to three times his last annual bonus of $650,000, or another $1.95 million. The deal also calls for Trujillo to receive about $1.2 million under the "long-term incentive" plan the executives who drew up the merger created for themselves. That same agreement calls for the merged company to pay all of the taxes on these payments as well. Finally, Trujillo will enjoy an annual pension of between $592,000 and $684,300 when he retires. During his tenure as CEO, Trujillo -- whose base salary is a mere $900,000 per year -- had already collected more than $54 million worth of stock, with the option to buy millions more at a discount.

Several other executives at the company will divvy up $11.9 million, as well as stock options totaling 950,000 shares.

Qwest's Nacchio has said that US West's investments in high-speed Internet technology and other endeavors that have little to do with local telephone service were what made the company attractive to Qwest ("Bells Are Ringing," August 12).

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