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Telecom Testosterone

Risk-averse Robert Annunziata is not. The first time the CEO of Global Crossing walked away from a management post at …

Risk-averse Robert Annunziata is not. The first time the CEO of Global Crossing walked away from a management post at telecom titan AT&T, it was to join industry upstart Teleport in 1983. After building the fledgling local service carrier from ground zero into a $12 billion firm, he sold it to AT&T in 1998, rejoining his former employer to head its $22 million business services arm in the bargain.

But not for long. Having successfully steered a telecom start-up on terra firma, Annunziata is now testing his sea legs-this time abandoning AT&T to captain “wet bandwidth” provider Global Crossing, a two-year-old entrant in the burgeoning undersea cable market. “It was the same as when I was approached by Teleport,” recounts Annunziata. “It took me six seconds to recognize a great opportunity then, and it took me another six with Global Crossing-to recognize that here is a niche and a chance for me to run my own company again.”

Spawned by the growing demand for global bandwidth, the niche this time around is submarine fiber optic cable capacity-a market Global Crossing, along with several other subsea carrier start-ups, is scrambling to lock up. With data traffic expected to capture 99.3 percent of transatlantic and transpacific subsea capacity by 2004 and existing undersea fiberoptic lines ill-equipped to provide the requisite capacity, it’s a high-stakes race.

When Annunziata climbed aboard in February, the Hamilton, Bermuda-based company already had a head start. Its Atlantic Crossing cable between the U.S. and the U.K. was providing capacity to a carrier client base of more than 60 telecoms, including Cable & Wireless, Sprint, Deutsche Telekom, Qwest, and MCl/WorldCom. What’s more, while competitors like Project Oxygen were still struggling to finance construction, Global Crossing’s Pacific, Mid-Atlantic, and Pan European crossings were already in the works, thanks to deep pockets and a hefty market capitalization of $20 billion.

Not a bad place to be-but not good enough for Annunziata. Just 17 days after taking the helm in February, the firm’s new CEO announced the $10.8 billion acquisition of Frontier Corp., the No. 5 long distance carrier in the U.S. and a leading provider of Internet services. Last month, before the ink had even dried on the Frontier deal, Annunziata announced an even bolder play, a merger between Global Crossing and US West-the smallest of the regional Bell phone companies-in a stock swap valued at $37 billion.

“What we’ve just done with the US West merger is create a new paradigm as a global service provider,” says Annunziata. “Global Crossing connects the continents together, Frontier brings the U.S. long-haul network, as well as some web hosting capabilities; and now with US West’s proficiency in DSL technology, we have the data excellence.”

Connecting the dots between the three entities will also extend Global Crossing’s customer base into the retail market. “It’s a combination wholesale-retail approach,” explains Annunziata. “On the wholesale side, our clients are the carriers. Frontier’s target is medium to small businesses. We think we can take that up the value chain into multinationals.”

Though it catapulted Global Crossing into the big leagues alongside powerhouses like MCIWorldCom, AT&T, British Telecom, and Qwest, the US West deal got a lukewarm reception from investors. After the announcement, Global Crossing’s stock price slipped from $60 3/4 to $48, and US West’s slid from $62 to $52 3/4.

Still, industry observers greeted the daring deal-making with guarded admiration. “With Frontier and US West, Bob added a series of interesting assets to form a company that will have a lot more potential than Global had on its own,” says William Rouhana, Jr., chairman and CEO of Winstar Communications. “They’ve brought together a lot of the pieces for a future broadband network-US West’s extensive data enterprise business, as well as their heavy focus on using application software in connection with a telecom network; Frontier’s GlobalCenter, an excellent data business and broadband network across the U.S., and Global Crossing’s broadband network under the ocean. Their biggest challenge now will be digesting these deals and integrating the pieces. It will be a gigantic job.”

At issue as well is the prevailing sentiment that Global Crossing is far from finished with its buying spree. “I don’t think all the pieces are together yet,” says Stuart Conrad, managing director at Deutsche Bank. “The transformation the company plans to pursue is pretty significant. US West gives them a foothold in certain U.S. cities, but they don’t have great distribution to other key cities. They could do some interesting combinations of a global nature to enhance distribution and leverage the Global Crossing network.”

The gaps in Global’s gameplan raise the question of whether firms such as Global TeleSystems are on the telecom’s shopping list. “We know where we want to go,” shrugs Annunziata. “We’ve got to plan how to get there. We’ll analyze the time to market in that part of the world and decide whether we’ll do it with an acquisition.”

Of equal importance is the task of gaining entry to the most coveted telecom clients-namely the Fortune 1000 firms expected to be the prinicipal consumers of high-speed global bandwidth. “In the long run, networks and pricing don’t define winners and losers in the telecom world,” Conrad points out. “Management’s ability to package and sell products effectively will ultimately differentiate the players in this global sandbox.”

Annunziata, who did just that at Teleport which had a mere six employees when he took charge-leads a formidable line-up this time around. Even before he took the helm, Global Crossing didn’t lack for management talent. In fact, its “telecom dream team” was already under fire for being top heavy, with a roster that included Gary Winnick–founder of Global Crossing and former colleague of deposed junk bond king Michael Milken-and Lodwrick Cook, retired CEO of Atlantic Richfield, as well as two vice chairmen: former Motorola executive John Scanlon, whom Annunziata replaced as CEO of Global Crossing, and Thomas Casey, former president of Pacific Capital Group. And each acquisition adds new talent. Frontier CEO Joseph Clayton will be a third vice chairman; and U.S. West CEO Solomon Trujillo will share the CEO and chairman titles with Annunziata.

Having so many high-ranking officers on deck has some wondering who’s really steering the boat. “They have a lot of talented and strong-willed people,” says Rouhana. “That can go one of two ways-it can either work incredibly well or be a complete disaster.”

It’s a concern Annunziata addresses with diplomacy. “We’re not worried about titles; we’re worried about building a company,” he says. “Egos are always there to deal with, but what’s the most important thing? Success. When I ran Teleport, I wasn’t a dictator; we talked things out. But at the end of the day, if we couldn’t reach an agreement, we all went with what I felt was the best thing to do.”

Right now the team is united on the mission at hand, he adds. “If the marketplace is going to $1 trillion in 2005, and AT&T is only doing $53 billion, there’s a lot of room for growth-and we know how to grow.”


BOB ANNUNZIATA

Chief Executive

Global Crossing Ltd.

‘We’re not worried about titles, we’re worried about building a company.’

Age: 50

Birthplace: Franklin Square, NY

Family: Wife: Patty; Children: two sons, one daughter, one stepson.

Bad Career Moment: World Trade Center bombing. “At Teleport we had people on the 51st floor and on level B6, six floors below the ground. It was a very terrible time.”

Big Career Challenge: “The bombing happened on a Friday. We built a whole power plant on the sidewalk working around the clock in freezing weather over the weekend and got 99 percent of the service back by Monday.” Business Motto: “Whatever It Takes.” Pastimes: Golf, boating.

Boats: Assorted powerboats and Wave Runners. “No sailboats-can you imagine me trying to wait for the wind?”

About Jennifer Pellet

As editor-at-large at Chief Executive magazine, Jennifer Pellet writes feature stories and CEO roundtable coverage and also edits various sections of the publication.