|FEATURES Spring 2003|
Alumnus Alan Bender turned a little start-up into a giant in the telecommunications industry, T-Mobile.
To talk with Alan Bender about his life's work is to hear the story of a tiny telecommunications company that couldgrowing from a fledgling enterprise in the early 1990s to a global powerhouse at the start of the new century.
Bender first helped small start-up General Cellular become the regional bellwether Western Wireless, which in turn spun off the successful PCS underdog VoiceStream. VoiceStream eventually grew to become the worldwide heavy-hitter T-Mobile USA, Inc., after it was sold to the German telecommunications giant Deutsche Telecom in 2001 in a record-breaking deal. But before you can hear the story of Bender as the executive vice president of T-Mobile, you have to hear about some pretty humble beginnings.
In the 1980s, the U.S. government announced it would use a lottery to give away spectrum rightsthe rights that would eventually spawn a nationwide network for cellular telephones. "You too can own a piece of the American spectrum!" boomed an announcer on late-night TV commercials. Investors could get in on the ground floor with just $200 to $300 by partnering with other applicants from around the country. With little market for cellular at the time, though, these lofty promises seemed more like "pie-in-the-sky" than the next big thing.
By the early 1990s, Bender, who studied political science at Washington University in the Class of 1976 before earning a law degree in 1979 from Duke University, had worked at a number of prestigious law firms in New York City and Washington, D.C. He'd recently moved with his wife, Joyce, and daughter, Mallory (now 16), to San Francisco to take another legal position. But, he also had begun to feel dissatisfied. Working with business clients, he notes, "You get to the deal after it's been hatched. Often, you get to the deal after it's gone awry."
A brief stint in the mid-1980s as in-house counsel at a securities firm gave him a taste of what it's like to work in business rather than for business. So when a colleague introduced him to a group of people trying to start up a wireless cell telephone company, he was ready to take the chance.
Working from a small office in San Francisco's financial district, Bender and his four partners threw themselves into building General Cellular by piecing together networks and buying out mom-and-pop license holders. They worked with little capital in a cash-intensive business. By 1991 General Cellular was not in good shape, and very nearly had to close its doors. "You have to acquire licenses, assemble systems, build the switches, construct the towers, and you have to have a sales force," he says.
Bender recalls the difficult time: "The war was breaking out in the Persian Gulf. No banks were lending money to companies without positive cash flow. The junk bond market had collapsed. Milken was going to jail. The savings and loan crisis had come. The real estate market had collapsed.
"And yet these valuable licenses existedand you had to have a license to be in business," he says. "We had assets, we had a business plan that was going to work, but we didn't have the capital."
Bender, with a background in corporate finance, arranged an innovative deal by which an investment firm would purchase the company's debt, exchange it for equity, and become shareholders through a Chapter 11 reorganization process. Such deals are commonplace today, but, at the time, it took a lot of talking to convince everyone of the plan's viability.
"There were many days when I believed that it wasn't going to happen," Bender says. "I really do believe that when you have nothing to lose, you become the best, toughest, brightest negotiator you can bebecause your back's against the wall."
With the reorganization came a new chairman of the boardJohn Stanton, who also ran a cellular company in the Seattle area. Because each company controlled different regional markets, it soon became clear that the two should merge. General Cellular became Western Wireless in 1994, and Bender left the San Francisco Bay area to move with his family, which by that time included a son, Adam (now 13), to the company's new headquarters in Seattle.
"I really do believe that when you have nothing to lose, you become the best, toughest, brightest negotiator you can bebecause your back's against the wall."
In 1994, the Federal Communications Commission announced it would auction off more spectrum rights, and Western Wireless took the challenge, raising $150 million from its shareholders to purchase six licenses for PCS (Personal Communications Service), which at the time was an untried, undeveloped technology.
Bender admits now that his wife was skeptical at times. "I was getting a lot of quizzical looks at home," he recalls. "Yet I put Joyce's IRA and my IRA totally into this, as well as other substantial savings."
Though consumer behavior had begun to shift by 1994more people than ever were using mobile phones as increased competition brought lower ratesit wasn't yet clear whether PCS with its intense infrastructure requirements would ever win out over cellular.
Not only that, but there were three PCS protocols available (the protocol defines the steps taken during call setups). Western Wireless went with the GSM protocol, even though CDMA and TDMA were emerging as more popular protocols in most major U.S. cities. But while GSM was immediately available for development in Western Wireless' target markets of moderate-sized cities, other protocols would not be ready for an uncertain period of time.
"The big companies like Verizon and Sprint could wait," Bender says. "But, being the small dogs, we had to get out there first. We had to build a name, grab market share in order to compete."
The company's primary investor, Hong Kong-based Hutchison Whampoa, supported the decision because GSM had already emerged as the standard in Europe and Asia. "They kept saying, 'People are going to want to go from Paris to New York to Hong Kong without having to change their phones.' You can do it on GSM, but you can't do it on CDMA and you can't do it on TDMA."
In May 1999, Western Wireless spun off its PCS division as VoiceStream. Hindsight is 20/20, but VoiceStream managed to get a glimpse early on that it was headed for something big when in October 1999just five months after going publicthe company joined the Nasdaq 100. (Bender got the honor of introducing the company on the Nasdaq floor.)
"All of a sudden, you owned about $600 for every little share of $10 General Cellular stock that you owned when the company came out of bankruptcy in 1991," recalls Bender. "So you've got a lot of smiling faces." (With some of the return on his personal investment, Bender was able to fulfill a fantasyhe became a part owner of the Seattle Supersonics basketball team.)
Soon afterward, the company caught the attention of Deutsche Telecom, which purchased the company in 2001 in a record-busting $52 billion deal. Now known as T-Mobile, the company has 19,000 employees and 10 million customers in the United States (and 72 million customers worldwide), making it one of the top three global wireless carriers. (Spokesperson Catherine Zeta-Jones exhorts customers to "Get More from Life" in television and print ads.)
"What was attractive for us is that Deutsche Telecom had the capital, they had resources to deploy," Bender says, "and we needed an organization that could build the business even further."
Now that the little company he helped found has all but grown up, Bender is looking forward to spending more time with his family and becoming more involved in community developmentgetting more from life overall!