Alltel CEO Scott Ford and Talk Business host Roby Brock sat down for an extensive and exclusive interview late Thursday afternoon in the Alltel corporate board room at the company’s Little Rock headquarters. On June 5, Alltel announced it had been acquired by Verizon Wireless for $28.1 billion, less than 8 months after the close of its go-private deal. Here is the complete transcript of the discussion which airs on Sunday and Monday statewide in the Little Rock, Fort Smith/Fayetteville and Jonesboro media markets.
Roby Brock: Let’s talk about how you have had a chance to at least catch your breath since the whirlwind announcement of about 2 weeks ago that Verizon is going to acquire Alltel. Tell me what was going on behind the scenes. You were up for about 3 or 4 days before the formal announcement.
Scott Ford: Yeah, those are brutal experiences, and I’ve got to tell you, it’s more brutal being on the selling side than the buying side because on the buying side at some juncture you say, ‘I’ll fix that later,’ and on the selling side, you have to stay at the table and fight, because there is no fixing it later. You know, there is no changing it later once you get your contract sent.
So you know for about a month it had gotten pretty hot and heavy, and it had been, you know, ‘Maybe this weekend, maybe this weekend,’ you know. They’d kind of been in and out, and as the seller, you’re not in control of the timing and the tempo and the pace of it, so you have to stay in response mode.
And if you’re a practiced buyer, you find where people’s threshold is and you use that. And so they’re practiced buyers. So we were on the backside of about a month of, ‘Maybe it will be tomorrow.’ So of course you sleep when it’s ‘Maybe tomorrow’ is when it goes from ‘We’re working on it,’ to ‘Let’s get it done,’ you know that that’s going to be a 48-hour march, maybe a 72-hour march, and it was every day, ‘Maybe tomorrow, maybe tomorrow.’
So by the time you get there, we’d been about three hours sleep a night for about a month. Rick Massey probably hadn’t slept at all for a couple of days, and you’re fighting constantly. You’re trying to be polite and you’re being civil and you’ve all got to live with each other at least for a while on the backside. That’s a grueling experience.
Roby: What are you fighting for? Are you fighting for price or are you fighting for control of the way, the direction that it goes?
Ford: There’s 8 million things. Everything from ‘What are the terms that you’ll live with if the government imposes X versus Y? What are their rights under the kind, or what are your rights independent of the deal?’ Price is one of them, but price is normally fairly easy, you know. You’ll either do it or you won’t at a certain price, both as a buyer and a seller, and normally people find that. It’s the 8 million other elements of the contract, each one of which has to be negotiated.
Some people like to do that in a ‘Let’s sit down and work something out,’ which has always been our style. And then some people like to do that as kind of you know, running combat.
Roby: Are you going to tell me what this was?
Ford: Oh, closer to the latter.
Roby: Well, for 7 months you got to be a private company…
Ford: Was that all it was?
Roby: What was that like?
Ford: You know, we had a good experience. I mean, I don’t think I’ve tried to mix any metaphors. I’m disappointed it didn’t last longer. But it was a good experience for us and I think the thing that we learned the most at the end of the day was, you know, this was a really good business and a really good team apart from me. I mean, you know, you could cut me off and it wouldn’t matter. The team here does a really fine job, and when compared against other companies in the TPG and Goldman Sachs portfolio around the country, around the world really, this team came back and was an A-plus grade. In fact, we were told we were the premier operating business in any of the portfolios - which was a great compliment to the operating team.
So it was good experience. We did the right thing last year and you can look at the markets. They just, you could feel it starting to fall apart. And our board made a decision to push through and get that sale done. They absolutely made the right decision, and I think history showed that to be true. You know, history will have to discern should we have stayed in it or should we have taken the price Verizon offered here? History will have to be the judge of that over time. But I do know that the whole going private experience reinforced this operating team. They’re as good as anybody in the world and they’re a great group.
Roby: What did you not get to do that you wanted to do?
Ford: I didn’t get to buy one of the national businesses, which is what I had hoped to be able to do and was something that we had tried in our old [business], back when we were a public business. I won’t go into the details of it, but we tried to buy Sprint three times, we tried to buy AT&T Wireless, we tried to buy T-Mobile. Some of these times we went with partners, some of these times we didn’t. We were doing everything we could to get to a national platform.
I knew we had a great team. I didn’t know they were as good as anybody was going to find in the world, but I knew we had a great team, and I wanted to get them to a national platform. The economies of our industry dictate you have to have a national platform, I mean, I can’t do anything about that. Long term, you’ve got to be a national player or you’re going to get not only suboptimal returns, you’re going to get in some instances negative returns. There are companies that are experiencing that. So we were doing everything we could to get to a national platform, and I had hoped that we would get to a place where we could get, you know, Sprint or T-mobile. And the credit markets fell apart and Sprint fell in the tank almost right on cue, they fell so totally apart that there wasn’t really an opportunity to go get them either.
Roby: There were a lot of things that…
Ford: And I hadn’t said that publicly.
Roby: I’m aware of that. I think that that will be newsworthy…Tell me, what there were a lot of things that changed between the time that the go-private sale closed and the announcement of Verizon. They were obviously very opportunistic about coming in and doing that. You’ve made no bones about that in your public statements, but you had the credit markets fall apart, you had the 700 MHz auction come and go and you guys didn’t get anything and Verizon and AT&T did, and you also have the regulatory climate becoming a little bit in turmoil because you’ve got a presidential election coming up too.
Ford: Yeah, true.
Roby: Were any of those three factors more dominant in this decision coming out or were they all kind of working in unison?
Ford: Ah, well you’ve done a nice job of articulating the primary issues. I could guess but I’d just be guessing. You’d have to ask Ivan Seidenberg, the CEO of Verizon, and his team really what were the, what did you attribute more to fueling the process. They’ve laid most of it at the credit market and the feet of the credit market issue. I think the 700 MHz auction was very important too. You know, we had lobbied to try and get to a place where regional smaller carriers could maybe get access to that. Historically, there’s been some spectrum set aside for non-national players. We fought to try and get that brought about. It didn’t surprise me and from a public interest perspective, I can’t tell you that it was wrong for the FCC to make it all national licenses. Except for the fact they didn’t. They then carved this other one up for public safety, and historically they carved them up for really small companies.
If we had gotten our way in the spectrum auction, where we didn’t have to compete with AT&T and Verizon for any spectrum that we could have hoped to get, it would have changed the playing field.
When the rules came out that showed AT&T and Verizon - we call them, lovingly we call them the twins - when the twins were going to be able to bid for all of it and we were going to have to fight with both twins on all fronts at all times for any spectrum we bought, we knew were weren’t going to be in it but for 24 hours and check the box because we knew we weren’t going to be able to run with them.
I think that was material because any time previously that AT&T or Verizon had said, you know, ‘If you don’t do what we want you to do,’ of course, it’s always more subtle than this, but you know, effectively, ‘If you don’t negotiate something that we like, we’ll overbuild you.’
Anytime they have 1.9 spectrum, you don’t have to overreact to that because 1.9, or 1900 spectrum, doesn’t propagate nearly as well as 850, which is what Alltel has, what Verizon mostly has, what AT&T mostly has. Sprint, AT&T, T-Mobile are 1900, and it just doesn’t cover as broad a footprint no matter how much cell site equipment you put out there. So we knew that was a little bit of a hollow threat.
When they owned the 700 MHz across the spectrum, which propagates like 850, the game had changed, and we figured that there’d be something that we might end up doing, something with one of the four in the three to five year time frame, irrespective of the spectrum acquisitions, but it worked out so well for them that they decided to accelerate it.
And you know as you pointed out, I have all sorts of mixed emotions and mixed thoughts but just from a pure analytical sense, what they did was very, very smart.
Roby: Alltel has been a synonymous name in Arkansas for, well this is the 25th anniversary of the Alltel name…
Ford: It sure is…
Roby: …even though the company goes back further than that. Have you thought about what the legacy of Alltel’s going to be, and maybe, I mean, and I know you’re analytical about this, but emotionally, how do you feel about the fact that that Arkansas pride, that Alltel name, it’s not going to be there?
Ford: Yeah, oh I hate it. I got asked that at the press conference. But of course the press conference, as much at that juncture, A.) You’re exhausted and B.) It’s a legal happening. I mean, you have to make an announcement. You have to make the world aware of it. You still have publicly traded securities. You have a duty to discharge the information and that’s what you’re there for in that moment in time.
I saw you in the crowd there…
Roby: I was the guy that asked that question.
Ford: Oh you were? You were? (laughing) But it’s not the place for me to expound. I didn’t think it was the place for me to expound on that stuff.
I mean there’s no running from the fact that I hate it. I’m very proud, mostly grateful. You know, I think pride’s vastly overestimated. Mostly, we were just, we’re very thankful to have been associated with the business. We didn’t own it, it’s not a family business. You know, we represented other people's interests because it was other people's money that built most of the business. And at the end of the day, like I said in the press conference, at the end of the day, that’s the legal obligation. You know, your customers are always in front of you, and so you personally connect with them. Your employees are always in front of you, so you personally connect with them. Your community is always in front of you, so you personally connect with them. Your shareholders are twice removed, you know, and they’re not going to send you a thank you note, and they’re not going to say, ‘Well done.’ But you do owe them the duty. That’s the hardest part of it.
That’s frankly what most CEO's don’t get right. Now a lot of people in this town wish I’d not gotten that right. I understand that and there’s part of me, just you know, private citizen, that looks at it and says, ‘You know, this is a terrible loss for Little Rock, if we lose 1,000 jobs or 1,500 jobs and a corporate headquarters. That’s a real blow.’ And I hate that. I hate that as much or more as anybody.
But at the same time, you now, you can only wallow there for so long before you have to say, ‘You know, there is a duty beyond that,’ and I think we did exactly the right thing, and if I had the same set of cards to play from a ultimate responsibility perspective, I’d do the same thing, but obviously I hate it. You know, this a group I’ve been with, a lot of them, 20 years. We worked together at Stephens, we worked together outside of Alltel, a lot of us have come in together, Frank O’Mara and I went to college together, Jeff Fox and I worked together since New York, Rick Massey and I have worked together since Jack Stephens introduced us and we bought the Capital Hotel back in 1985.
Roby: Lot of history.
Ford: Lot of history.
Roby: Is there anything you can update on since the press conference two weeks ago in terms of the status of this infrastructure and the human resources that are here?
Ford: Yeah. Not really. We’re going to have a face-to-face. The antitrust lawyers. Once you get the deal signed you have to go through the announcement process, and then people basically have to step back and then get a game plan of how you’re going to approach the government and go through that. So we’ve been doing that. Then you have to sit in with the game plan and work out your transition. Those meetings will take place; the first ones will take place, first face-to-face in the next couple of weeks. Then we will map out what does the next month look like, what does the month after, when are we going to deal with certain topics, from what groups of employees might be affected, but we’re still probably a few months away from getting to those questions, because the government doesn’t let you get to them until they kind of get through with you first.
Roby: And really, Verizon does not get the opportunity to come in until the end of that process.
Ford: Right.
Roby: I think some people don’t understand that sensitivity.
Ford: Oh yeah, the federal government has strict rules about ‘We’re competitors still.’ So if you’re an Alltel customer, nothing’s going to happen to your phone. We’re going to continue to be in service. If you’re an Alltel employee, we’re going to continue to work right up until the day of close. Somewhere between what the government's approving, the combination and the actual date of close, we’ll work all of those issues out about what group’s going to do what. And a lot of them won’t be dealt with until the deal’s been closed a year down the road. So it’s our group, our employees know that. It’s hard to explain that to the community that doesn’t go through merger integration for a living. This group all has and they know the drill.
Roby: You have the management challenge of having to keep employees on track number one, number two to, I guess, continue to try to grow your subscriber, your customer base. How do you go about staying focused on that when you know there is this pending day of finality?
Ford: Well, that’s always a challenge. Right? I mean, you’re going to run the whole gambit of emotions. The grief process has to run its way through. I mean, a company is nothing more than a group of individuals who go to work at the same place, so they all have to process their own grieving or feelings of, you know, their life being disturbed. And at the same time, as the leadership team, our job is to help people get the information they need to process, to allow them the room to process and also, you know, to call us up. We do have a duty beyond our own feelings and that’s not very popular in America. But the fact is we do. And so, process your feelings. I’ve had to process mine and I got an eight-week head start on most people. But everybody’s got to get through that and we do have a duty to do. We have to continue to perform.
The great news is our business is continuing to perform way ahead of plan. We’re delighted with that. Sales folks are staying in the seat, they’re making sales, they’re taking care of customers, they’re servicing them. Folks in the call center are taking calls, they’ve gotten right back into it. You know, it’s a real group of professionals, and it’s really the ultimate test of an employee base. It's easy to manage and do your job when things are going good and you’re the buyer. How do you do when things are tough and frankly, because it feels like we lost. Right? It’s what it feels like. I told somebody, I said ‘You know, if Robert E. Lee had had to watch videos of his surrender to Grant, he’d have died sooner than the five years after the war ended than he did. It’s a miserable experience, but you’ve got to get on with it, and you’ve got to do what you’ve got to do the next day. And this group knows how to do that and my hat’s off to them because they are.
Roby: What’s next for Scott Ford?
Ford: I don’t know. You know, I’ve had a couple of people reach out and say, ‘I know you don’t want to talk right now, you’ve got your hands full, but please don’t do anything else until we talk,’ but you know, I don’t really know. One of the things I’m working on is I would love to see this event not be just a negative for Little Rock. I’m not going anywhere. I’ve met with the governor. After we got the announcement made, I got on his calendar to go down and see him and talked through frankly what I’m talking to you about, plus a lot more about what was possible and how we might be able to collectively make this as good of an experience for the community as we can.
But, you know, I’m working on some ideas, and I don’t know if they’ll be able to pan out or not, of ways that we can put some of this workforce back together. It’s a great technical workforce, and if Verizon needs them, great, that’s first. If Verizon doesn’t need them over the next 12, and 18, and 24 months, as people rotate out of Verizon, it would be a great place if you are an entrepreneur and you needed talented IT, marketing, finance, engineering people. This would be a great place to have a shop set up so you can tap into that resource pool. If we can bring some venture capital, almost is the concept, into this employee base and you could get companies that do businesses on the coast that need this skill set. They can attract them to the coast, but I don’t want to see that happen. Just as a citizen of the town, I don’t want to see that happen. I’d like to see the capital come here and put the people to work here rather than pull the people to where the capital is. How we do that if we can do that is actually, I’ve actually taken a couple days off since the announcement and worked on just that because I’d like to see that happen. No promises. I don’t know if it will come about or not, but that's one of the things I’m working on.
Roby: A little step in that direction occurred this week with the Hewlett Packard announcement up in Conway. Any thoughts on that because that’s what you’re talking about?
Ford: Yeah, absolutely. Fantastic! Even if the Verizon deal hadn’t happened, that would be great. People used to ask me, ‘How do you feel about competing with Acxiom?’ I said, ‘It’s great.’ It’s great for the town. I’d always rather pay somebody 50 cents more an hour, a dollar more an hour, because there’s competition in the market than see people leave. Our community needs high-tech jobs. High-tech generally follows capital. This is not the most capital-friendly state in the union. You know, we have to basically spot most of the states around us 7 percent just off the top of the bat. I’m not complaining, I pay my state taxes, I’m going to pay them, I’m going to stay right here, and I’m going to pay them until I die. I’m O.K. with it. But we can’t be just blind to the fact that people that aren’t from here look at that and go, ‘I can live in Tennessee or Texas or Florida and I don’t have to pay 7 percent income tax, and if I move to Arkansas I do? Mmm, I think I’ll take my capital to Dallas. Well, Dallas has a vibrant venture capital community. I think I’ll take my money to Tennessee. Nashville has a vibrant venture capital community.’
But we can’t fix everything. But we can at least take this group of people, some of these folks, and try to attract capital. Right now, because we’ve done the right thing for our shareholders, we have the ability to raise some money. People would bet on our management team. I’d like to see that bet. They may all spread to the four winds, I don’t know. But I’d like to see if there’s something we could do to put some people back to work here in this community.
Roby: What else have you not said to employees and to the community at large that you wish you could say? I will give you the open mic to say it.
Ford: Oh you know, I, it depends on the topic. What we did say a lot more to the employees than we did publicly, the day after the press conference, we had every employee in Little Rock come into the Stephens Center and we did two one-hour presentations where we just told them the history and what was going on and what they should expect.
We did a Q & A so that everybody could go through. And we videotaped it and put it on the website so all the employees across the country could go through and see that. And we dealt with the employee issues there. I mean, you don’t deal with that publicly. It’s like a family; you deal with family issues inside the four walls of your house. You deal with the public in the public. So they know where we are and they know where our heart is.
They also know that at the end of the day, I can’t tell you how many wonderful notes from our employees I’ve gotten over the last two weeks. My favorite one was ‘We’ll miss you.’
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Talk Business airs on Fox 16 in Central Arkansas Sundays 10pm; Fox 24 in NW Arkansas Sundays 9am; and Sudden Link Channel 22 in Jonesboro Mondays 6pm & 10pm.
