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AT&T from Apples to iPhones

Ed Whitacre rescued a couple of iconic American companies, but a few years too late for my family.

(originally published by Booz & Company)

My grandfather repaired switchboards in Manhattan for the Bell system. When he retired in the 1960s, he and my grandmother lit out for the wilds of western New Jersey, where they bought a couple of acres of apple trees and lived quite comfortably on his pension. My great-grandparents, a waiter and an embroiderer, lived on the dividends from the AT&T shares they had purchased through my grandfather’s employee stock plan. Those were the days.

My mother inherited that stock in 2000. A few months later, AT&T announced an 83 percent dividend cut. By 2005, the former blue chip had been written off. “AT&T was a stripped-down long distance company with twenty straight quarters of declining revenue,” recalls Ed Whitacre in his memoir cum management guide American Turnaround: Reinventing AT&T and GM and the Way We Do Business in the USA (with Leslie Cauley, Business Plus, 2013). “It was bleeding customers by the thousands, with no way to bring them back…a shell of a company with no future, a crummy balance sheet, and a tarnished brand name.”

Whitacre, then leader of SBC Communications, bought AT&T for US$21.5 billion. No one else on his management team wanted to acquire it. But, as he candidly says, “Ours was no democracy—I was in charge.”

I love this guy’s story: In 1963, as my grandfather was retiring, Whitacre got a summer job as a student engineer with Southwestern Bell—then one of AT&T’s regional operating companies. In 1984, when AT&T was forced to spin off its operating companies by government decree, Southwestern Bell was the smallest of the seven Baby Bells, and Whitacre was head of its Kansas division. In 1990, he was named chairman and CEO of Southwestern Bell. He changed the name of the company to SBC Communications and embarked on a run of acquisitions, including former parent AT&T, that transformed it into the world’s largest telecom company.

Whitcare revitalized the AT&T brand. He adopted the AT&T name and he OK’d the deal with Steve Jobs that gave AT&T exclusive access to the iPhone for three years with a two-year renewal clause. That sounds like a no-brainer now. But at the time, the only plus in the deal was hooking onto Jobs’s coattails. There was no phone—not a prototype or even a drawing. Worse, Jobs wanted a share of the revenues, something no telecom had ever granted an equipment maker. This created enormous downside: If the iPhone didn’t grow AT&T’s market share and instead simply enticed its existing customers to switch phones, it could have cost the company billions. “Looking back, I guess we were lucky,” says Whitacre. 

Whitacre retired from AT&T in 2007 and took on the biggest corporate challenge in recent memory: At President Obama’s behest, he served as chairman, and then chairman and CEO, of bailed-out GM. And he turned that company around, too.

Often, CEO memoirs are thinly veiled vanity projects, but American Turnaround doesn’t feel that way to me. In addition to good stories, Whitacre delivers a set of rules for leaders that are simple to grasp, even if they will require some effort to live up to. By the way, Whitacre talks about a couple of them in his introduction to this month’s Author’s Choice.

Theodore Kinni
Ted Kinni

Theodore Kinni is a contributing editor of strategy+business. He also blogs at Reading, Writing re: Management.



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