It appears that since Dan Hesse’s appointment as president and chief executive officer of AT&T Corp.’s wireless business three years ago, AT&T has had a tenuous relationship with the man.
Financial analysts last week were wondering why the man who had brought AT&T Wireless Services Inc. to the forefront of the wireless industry through the wildly popular Digital One Rate plan isn’t the one who will head the new wireless group when it goes public this spring.
“It’s clear to most analysts that Hesse should be given the credit for the success AT&T Wireless has gotten to date,” said one analyst, who declined to be identified. “It’s not clear what Dan’s role is going forward … There’s some concern that his operational role will be diminished somewhat.”
AT&T announced last week plans to create a new wireless company, AT&T Wireless Group, and a new class of AT&T common stock that will track the company’s mobile and fixed-wireless business. The wireless division became one of AT&T’s primary revenue growth engines following DOR’s introduction in May 1998. The business could raise between $8 billion and $10 billion in an initial public offering this spring.
AT&T Chairman and Chief Executive Officer Michael Armstrong appointed current AT&T President John Zeglis to head the new group, while Hesse will remain president and CEO of AT&T Wireless Services, the new mobility unit. Michael Keith will be responsible for the fixed wireless side of the business.
While some analysts predict Hesse’s departure within six months, others believe he will end up on top after the IPO. The more charismatic Zeglis, they say, may be better-equipped to take the company public even though he has no experience running a wireless business.
AT&T insiders insist AT&T management has given Hesse much credit for the wireless division’s success during the last year. Hesse, a 22-year veteran of AT&T, has CEO experience, having led AT&T’s international equipment business five years prior to the corporation’s spinoff of Lucent Technologies Inc. in 1996 and later being appointed CEO and president of AT&T Wireless.
Amid eroding subscriber numbers caused by intense competition from personal communications services operators, AT&T in 1998 had planned to fold the wireless division into the corporation and move Hesse to head up AT&T’s customer-care units on the consumer side of the business. AT&T management, however, reportedly became so pleased with the success of the DOR plan and Hesse, it decided to leave the wireless division as a separate business.
While DOR has driven up the wireless division’s financials considerably, AT&T Wireless has received some bad press this year over the company’s capacity problems in major markets, primarily New York. Net additions were down in the third quarter because the carrier stopped advertising the DOR plan in some markets because of capacity. Handset shortages also limited additions, the company said.
People close to AT&T suggest Zeglis is grooming Hesse to head this new wireless group, helping him hone his CEO skills for a public company. And while Zeglis’ new position appears to be a step down from president of the corporation, Zeglis, 52, may be next to replace the 61-year-old Armstrong when he retires.
