Nextel is running out of minutes
For the millions of customers that remained loyal to the brand, it will be a time of transition. For those of us who joined Nextel early and helped build it, it’s a bittersweet time as we reflect on what we helped create. It’s also time for many of us to celebrate not just the fact that the company thrived for many years — but in fact that the company managed to survive at all against what seemed to be impossible odds.
In the early years, not a month went by when we didn’t wonder if the company would make payroll. Lining up financing was a constant battle. And surviving the breakup of a planned affiliation with MCI seemed at the time to be almost too much to deal with. Our founders, two entrepreneurs named Morgan O’Brien and Brian McAuley, simply wouldn’t fail. When faced with seemingly insurmountable odds, including a failed IPO and later a crashing stock price, their response was clear: “We’re in this, and we’re staying in. The only way through is forward.” That was an answer that stuck with me. Years later, when I was sworn in as Governor and handed the largest single budget shortfall in state history, my response was the same: “Too late to turn back now. We’ve already been sworn in.”
At the beginning, Nextel’s ambitions were modest. It’s true that O’Brien wrote out the original business plan without including a single number because he was (correctly) convinced of the strength of his vision. It fell to co-founder (and CPA) McAuley to chart the fiscal path forward, which was one of hundreds of ways that they made a compelling and complementary leadership team.
The original name — FleetCall — reflected our original purpose. A corporate attorney with a communications background, O’Brien looked out and saw in the fragmented world of Specialized Mobile Radio (SMR) an opportunity to do a traditional corporate roll-up through acquisitions, professional marketing and economies of scale. In short, he sought to build a compelling national business providing radio dispatch services to plumbers, taxis and the like. It meant buying mom and pop companies and making them part of a national enterprise.
Somewhere along the way, driven by O’Brien’s and McAuley’s vision, a terrific supporting team, the insight and support of my friend and now Senator Mark Warner and the explosive growth of new technology, it became clear that we needed to dream and deliver on a much larger scale. Instead of a tool to serve fleets of plumbers, construction workers and first responders, O’Brien in particular realized that the company could create the next generation of telephone services — hence the name Nextel.
His initial motivation was somewhat defensive. Since SMR operators used frequencies similar to those used by cellular, O’Brien realized that eventually cellular operators would deploy digital technologies and compete for FleetCall’s business. Before they came into our space, he realized, we could go on an acquisition spree of our own, buying up the spectrum and technical capacity to compete with the cellular providers. The idea was to compete not just on their turf but also through value-added services for which Nextel became famous, like the “push to talk” feature. The Federal Communications Commission, to its credit and despite significant opposition, recognized the value of the additional competition and unanimously approved our proposal.
Unlike some of today’s startups that have to trumpet loudly their smallest successes to attract interest from venture capital, we were in the odd position of having to raise hundreds of millions of dollars while keeping our heads down. We couldn’t afford a bidding war over spectrum against bigger companies with deeper pockets.
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In my current job, I often hear about the damage that needless regulations can to do to small business. We’ve actually launched a statewide drive in Delaware that will require every state agency to hold a public meeting in every county to look for regulations we can eliminate to help small business succeed.
But at the time, crisscrossing the country, acquisition after acquisition, I was grateful for the 90 day window the FCC made us wait for their review between the time we would finish a deal and the time they would let it go forward. That window gave us the time we needed to raise the money to cover the cost of the deal. More than once, I was at the offices of the company we were acquiring waiting for McAuley to finish the loan documentation with our lenders so that the money could be wired to complete the deal.
Acquistion by acquisition, we slowly knit together a national network. It wasn’t glamorous. One of my favorite stories was back in 1989 when one of our newest and youngest employees, John Willmoth, literally knocked on dozens of doors in Rockford, Illinois, asking homeowners to allow us to transmit radio signals from their basements. He had a day to complete his work; otherwise, we would have lost $25,000 and a radio license we had purchased.
Although we had a very supportive board of directors, led by a team from Madison Dearborn Partners, there were plenty of people trying to stop our progress. Days before our planned IPO in December, 1991, our deal had been oversubscribed by a decent margin. But just one day before the planned offering, an analyst covering the cellular industry wrote a report criticizing the Motorola technology at the heart of the Fleet Call system by saying that the only people who would use our radios were “blind taxi drivers.”
The deal fell apart and in what was the ultimate insult, at the very time we were supposed to have been celebrating with a post-IPO dinner, McAuley slipped in the Merrill Lynch basement at the World Financial Center and broke his leg. Incredibly, six weeks later, thanks to terrific work by underwriters Merrill Lynch and Salomon Brothers, our IPO succeeded and, at the traditional “closing dinner”, not only did we make it through the meal without breaking any bones, we received token gifts — jackets with “Blind Taxi Drivers Association” logos.
Over the next couple years, we raised additional funds ($1 billion in high yield bonds and a total of about $200 million in strategic investments by Comcast, NTT and Matsushita), built out the first digital 800 MHZ system in Los Angeles, and cemented a partnership with Craig McCaw, widely regarded as the father of the cellular industry and one of the great entrepreneurs of our time. McCaw helped validate the company’s asset position and technology approach. The company that had twelve people when I joined had grown to several thousand when I decided to leave, and grew even larger before it was acquired becoming, in the process, one of the giants we so joyfully competed against.
I often think back to those early days, when O’Brien and McAuley were joined by hundreds of associates who thought Nextel was the best employer they ever had, because they were free to solve customer problems with little bureaucracy to rein them in. And the fact that we were underdogs helped a lot too.
After I had left the company and entered public service, and after Nextel was acquired by Sprint, I remember going to a NASCAR race at Dover Downs. There were tens of thousands of race fans. Like any elected official, I knew enough to be able to share my thoughts about the drivers. But more than Petty, Earnhart, Stewart or (DuPont’s own) Gordon, the name I was must struck by was Nextel. Because, as the lead sponsor of the NASCAR Sprint Cup, the name we came up with in some forgotten suburban office park, was everywhere — on hats, shirts, signs, cars.
Nextel’s network may be set to disappear. But it’s one more story about how a couple of entrepreneurs fueled by huge dreams can create tens of thousands of jobs and tens of billions in value. And that’s worth celebrating.
Governor Jack Markell of Delaware took office in 2009, after serving three terms as State Treasurer. A leader in promoting policies to help all people achieve their economic potential, Governor Markell has won President Obama’s Race to the Top competition for progress in public school reform and signed new laws to drive improvements in the economy, education and environment. Governor Markell began his career as senior vice president for corporate development at Nextel. He later held a senior management position at Comcast and worked as a consultant with McKinsey & Company and as a banker at First Chicago Corporation. He currently serves as vice chair of the National Governors Association and is chairman of Jobs for America’s Graduates and a Henry Crown Fellow and a Rodel Fellow at the Aspen Institute. Governor Markell holds a degree in economics and development studies from Brown University and an MBA from the University of Chicago.