Qwest CEO Resigns Amid Company's Financial Woes

Nacchio resigned voluntarily, the company said in a statement. But The New York Times and The Wall Street Journal reported that the Qwest board of directors requested Nacchio's resignation.

Nacchio is being replaced by Richard C. Notebaert, former chairman of Ameritech and the president and CEO of Tellabs, a telecommunications network provider based in Naperville, Ill.

Qwest is the local phone company for most of the Northwest and Rocky Mountain regions. It acquired US West, the Baby Bell which was once part of national Bell monopoly under AT&T Corp., in 2000.

Qwest stock has plunged from a high of $64 in March 2000 to below $5 a share recently. Its shares were up 88 cents, to $5.03, in morning trading Monday on the New York Stock Exchange.

Its credit rating was downgraded to below investment-grade rating in May, effectively boosting its future borrowing costs.

Qwest is also under investigation by the Securities and Exchange Commission for its accounting practices.

Regulators have questioned deals Qwest made with KMC Telecom Holdings that helped boost its revenue reports. Over the past two years, Qwest sold $450 million in equipment to KMC and agreed to pay hundreds of millions of dollars for Internet services on that equipment.

Qwest says it used standard accounting principles to record the deals and described them as conventional take-or-pay commitments rather than transactions involving off-balance-sheet debt.

Off-balance-sheet items have come under increased scrutiny since the collapse of Enron.

In a conference call Monday, Qwest board member Frank Popoff said it is time to bring in an experienced leader like Notebaert, who was chairman and CEO of the regional phone company Ameritech from 1994 to 1999 before joining Tellabs.

"Joe Nacchio has taken Qwest a long, long way in the past five years... The board is deeply appreciative of his considerable contribution to the company's growth and successful strategic evolution and we wish him very, very well indeed," Popoff says.

He says Notebaert is "well-respected throughout the industry for his operations and his marketing expertise."

In the conference call, Notebaert said the company is poised to thrive.

"I think as our economic model and our industry goes through its structural change, I look at the unique set of assets that Qwest has and I believe we are well on our way," he says.

Notebaert says he plans to meet with employees and regulators as the company tries to return to the long distance market. Qwest was barred from selling long distance in its 14-state region when it combined with U S West.

"I am a firm believer in communicating directly, openly and often," Notebaert says. "The door is always open and that has served us very well in the past, and I will continue in the future."

"People's concerns were that Mr. Nacchio was aggressive and sometimes unresponsive to interests of investors," says analyst Michael Balhoff of Legg Mason. "Mr. Notebaert has a history of being candid and straightforward."

Angry shareholders and other critics at Qwest's annual meeting the first week in June in Dublin, Ohio, criticized Nacchio's bonuses and salary in the wake of the company's billions of dollars in losses and plummeting stock price.

Nacchio received a $1.5 million bonus last year, down from a $2.3 million bonus the year before. He also received $24.4 million in long-term incentives last year.

Nacchio, whose contract earlier this year was extended until 2005, made $1.2 million in base salary in 2001 and got a raise to $1.5 million for this year.

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