Maverick strategy is paying off big for VoiceStream founder
BELLEVUE NATIVE'S shrewd maneuvering results in $50.7 billion deal.
For John Stanton, GSM is more than one of those many tech-world abbreviations that eyes glaze over.
Stanton, a Bellevue native who grew up to take on the world, recognized that the technology GSM represented had global significance - and not only because it stands for global standard for mobile communications.
Instead, Stanton bet on GSM as a wireless transmission technology around which he would build a company. After all, much of the wireless world outside the U.S. is based on GSM.
He may have just won the bet.
The German telecommunications giant Deutsche Telekom this week said it is acquiring his company, VoiceStream Wireless, for an astonishing $50.7 billion. In four years, Stanton formed a cellular-phone company and built it into a digital wireless enterprise that is the talk of the business world.
"VoiceStream is a perfect fit for us," Deutsche Telekom Chairman Ron Sommer said during a news conference yesterday. "We'll become the first and only global GSM operator."
To those who know the 44-year-old Stanton, it was no surprise that the chief executive officer took a maverick strategy - traveling a road not taken by other U.S. wireless companies - and made it work.
"When you are the smallest player in the U.S., you kind of have to turn the table upside down a little bit," Stanton said. "We are the smallest of companies that aspire to be the national. So we think global."
Steve Hooper, who worked with Stanton at McCaw Cellular Communications and is now vice chairman of Nextlink Communications, said Stanton is "a big risk taker. (GSM) was a very valuable piece of global strategy."
Friends and former colleagues marvel at Stanton's business acumen smothered with a personable style that blinks at no one.
"I always thought John would succeed," said Tom Alberg, managing director of Seattle's Madrona Venture Group, another ex-colleague at McCaw. "No one imagined that it would reach this scale. He started off buying a paging company."
Alberg got an early glimpse of Stanton in action. Not long after joining McCaw in the late '80s, Alberg accompanied Stanton to New York to entice further investment from a giant company, British Telecommunications (BT).
"We were going to ask them for all this money," Alberg said. "It was a ridiculous valuation. It was hard to do it even with a straight face."
Stanton gave a "brilliant presentation," Alberg said, and managed to attract more money from BT, though not quite the terms they were looking for.
Said Alberg: "My point is his ability to marshal argument in front of a difficult case - his ability to deal with people seemingly more experienced - it doesn't faze him a bit."
Stanton, who stands to make more than $1 billion from the Voice Stream acquisition, will have ample opportunities to employ the bravado as he heads Deutsche Telekom's North American wireless operation. With about 2.3 million customers right now, VoiceStream and Deutsche Telekom are lining up to battle against AT&T Wireless (12 million customers) and Verizon Wireless (23 million customers).
Starting small, though, is an old hat for Stanton. He is considered one of Craig McCaw's key aides who helped persuade the reclusive entrepreneur to abandon a cable strategy to pursue the wireless industry. McCaw Cellular Communications, the wireless industry pioneer, was later sold to AT&T for about $11 billion.
A graduate of Bellevue's Newport High School and Whitman College in Walla Walla, Stanton joined McCaw after a consulting gig at Ernst & Whinney's telecom practice.
The Harvard Business School graduate's career since has been dedicated to wireless technology, so much so that his office at the company's Bellevue headquarters is a minimuseum of cellular phones, including some early models so clunky it's hard to imagine them as being mobile.
In his new book, "Money From Thin Air," Seattle Times editorial writer O. Casey Corr discusses how Stanton impressed McCaw people during an early interview with an idea for an esoteric lending practice that would mask the company's lack of profit.
"Stanton was a restless, driven, and brilliant personality who seized upon a task and worked straight through, often without sleep," Corr writes. "He could be charming and charismatic or abrasive. He pushed others to match his pace, but few could. He ran complex calculations in his head. `John's idea of rounding is four decimal points,' says Wayne Perry (another key McCaw executive)."
After taking some time off from McCaw, Stanton resurfaced in 1994 by starting General Cellular and Pacific Northwest Cellular. He and his wife, Theresa Gillespie, merged the two entities to found Western Wireless, also based in Bellevue. Western Wireless, in Federal Communications Commission auctions, aggressively bought rights to use parts of the wireless spectrum known as PCS starting in 1995.
Having taken a leading role in McCaw Cellular's initial public offering in 1987, Stanton took Western Wireless public in 1996 and raised $600 million.
Signs of Stanton's propensity for global outlook appeared as early as then, when he took interests in wireless licenses in Latvia, Georgia and Ghana.
To partake in the conversion of the cellular technology from analog to digital, Western Wireless formed VoiceStream Wireless in 1996 with service in medium-size cities such as Honolulu and Salt Lake City. By 1997, it became one of the fastest-growing, and possibly least known, of the major cellular companies in the U.S., with about 130,000 subscribers.
By the end of 1998, Voice Stream's subscriber base grew to 322,400, thanks to a $325 million investment by Hutchison Whampoa.
Last year, Stanton seized on the hot stock market, spinning off about 80 percent of VoiceStream to the public in May. Its shares zoomed, giving it ammunition to go on a buying spree that included two rival GSM carriers, Omnipoint and Aerial.
Analysts marvel at Stanton's streak of luck and shrewd maneuvering: buying of PCS licenses that others didn't. Selecting GSM as a standard. Buying Omnipoint and Aerial to give VoiceStream a broader, national footprint. Parlaying these moves to turn a division of a small company into a $50.7 billion acquisition in just four years.
Is the entrepreneurial Stanton's greatest challenge over? Will he have the appetite to serve his German bosses?
"We're staying put," Stanton said.