Excerpts: “Zeglis the Zealot.”
- The AT&T Wireless network, jammed to capacity, struggles to keep the number of blocked calls under 6 million a day or 180 million a month. Add calls that are connected but then dropped and the botch rate is even higher. This, despite AT&T’s having spent $8.7 billion in two years on its network.
- But Zeglis the Zealot insists he can fix the flaws and open the way for futuristic features. He is borrowing like mad to fund a massive build-out. Last year AT&T Wireless spent $5 billion on new towers and other gear, a greater percentage of revenue than any other national carrier. It will up that to $5.3 billion this year. AT&T just issued $3 billion in bonds in April, raising total debt to $11.2 billion. Zeglis keeps borrowing because his spending binge exceeds annual cash flow by some $2.3 billion.
- By 1986 Zeglis had risen to general counsel, a job he held for a decade until the board named him president in 1997. Zeglis, with no experience running a business, got his first hands-on operating job running the wireless division. That left him sitting pretty when chief executive C. Michael Armstrong succumbed to investors in 2000 and set plans to spin off AT&T Wireless.
- He landed there just in time to see the boom years end. His stock price is down 72% in two years. Shares of AT&T’s publicly traded peers have fared slightly worse.
- Progress, to be sure, but 6% is still pathetic by regular phone standards, whereby a 0.001% failure rate has long been the benchmark. In some markets AT&T’s blocked-call problem exceeds the 6% mark during business hours, Slemons admits. Fixing that is the company’s next major goal. But, he argues legitimately, rivals often fare even worse.
- As one of cellular’s pioneers, AT&T made a bad bet on a second-generation standard known as TDMA. Now it must shore up TDMA even as it installs new gear based on the global GSM standard.
- In April AT&T introduced mMode, meant to duplicate the wild success of Docomo’s iMode phones in Japan.
- AT&T, Cingular and VoiceStream have all converged on GSM, making them obvious merger mates. But love triangles have losers, and each is suspicious that the other two will pair up and leave it partnerless. Cingular, with 22 million customers, or AT&T, with 19.5 million, could strike first with a bid for VoiceStream’s 7.5 million subscribers. But an AT&T-Cingular megadeal has the most obvious merits, says Blair Levin, an analyst at Legg Mason.
- It’s been a lousy year for telecom titans with big dreams, such as Global Crossing’s Gary Winnick, WorldCom’s Bernie J. Ebbers and Qwest’s Joseph Nacchio.