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More than sixty years ago, a reporter is supposed to have asked the St. Louis Cardinals' future Hall of Fame pitcher Dizzy Dean why he bragged so much. Dean is supposed to have replied, "If you can do it, it ain't braggin'."
But depending on how badly you can't do it, there might be cause for more than humility. In the case of telecom service provider ICG Communications Inc. the result has been an exodus of key executives, a cratered stock price and about a dozen law firms lining up clients for class-action shareholder lawsuits against the Englewood, Colo.-based company.
After flying high for much of the past several years, shares of the competitive telecom services provider were trading around 25 cents per share at press time-down from its 52-week high of about $39 in late March and from the $5 level it held as recently as mid-September.
Disclosures about significant service quality problems and earnings shortfalls were the most immediate cause of the late-summer meltdown, about which nobody wants to say much publicly. Company spokespeople are professionally silent; company directors (present and former) and the two most recent CEOs are unavailable. Most stock analysts, usually ready with a quote about companies, insist on anonymity when speaking of ICG. "I don't want to be quoted on a company that's about to go bankrupt," says one.
And yet, this is a company that was able to talk Hicks Muse Tate & Furst, Gleacher & Co. and Liberty Media Corp. into a $750 million equity investment earlier this year. This is a company that as recently as May was garnering hometown media coverage that made it sound as if a springtime management shake-up was the work of a creative, daring, market-savvy CEO. Some stock analysts actually were upgrading ICG's shares.
Clearly, ICG knew how to sell its prospects. Hicks Muse, Gleacher and Liberty Media are not organizations known to be riddled with fools. Asked what his firm would do about its own $500 million stake in ICG, a spokesman replies, after a deep sigh, "That's a serious question." Asked why his company rated ICG relatively well until recently, a stock analyst groped a bit, then replied, "When I write my reports, I rely on people to be honest and honorable with me and tell me what is going on."
What went wrong here, and when did it happen? It appears that J. Shelby Bryan, president and CEO from 1995 until this August, and chairman of the board until August, could not do it, a la Dizzy Dean. Bryan did not respond to Broadband Week's requests for an interview.
Bryan is a Texan who lives in New York City. He is a major fund raiser for the Democratic Party, and a man with what might be called a colorful personal life. Over the past year or so, the stories of his split from his wife, Katherine, and his liaison with Vogue Magazine editor Anna Wintour have been a staple of the New York tabloids, which usually describe Bryan as a "phone mogul."
Anybody might be distracted by that sort of whirlwind and people knowledgeable about ICG say that Bryan has been distracted for a long time. Reportedly, he has spent much of his time in New York, where he has acted out his domestic melodrama, raised money for the Democrats (including Vice President Al Gore), and tried unsuccessfully to win approval to buy a $10 million co-op apartment on exclusive Sutton Place.
In the meantime, ICG couldn't roll out its Internet remote access service (IRAS) without what its own press release describes as "network outages, equipment failures and technical difficulties." Other people who follow the company say ICG did not respond to customer complaints about these problems.
"They didn't quite have five 9's of reliability," says an analyst who follows the company and spoke on condition of anonymity. "For them, it was more like five 7's of reliability."
Then there was reciprocal compensation. ICG, involved in a drawn-out dispute before Colorado regulators, first against the former U.S. West Inc., and then with its acquirer, Qwest Communications International Inc., lost that battle on Aug. 2.
"We think they relied too heavily on reciprocal compensation, booked to many revenues that we didn't think they were going to get," says Nancy Bedard, telecom analyst at The Yankee Group. "That boosted their results. A lot of other CLECs have taken a more conservative approach to reciprocal compensation."
On August 10, ICG executives cited that issue to financial analysts in their second-quarter earnings conference call. Twelve days later, Bryan, who had led the company as CEO since 1995 and had just recently been named chairman of the board, resigned in favor of Carl Vogel, chief operating officer of Liberty Media and a telecom veteran whose resume includes top executive posts at Echostar Communications and AT&T Broadband. Vogel left on Sept. 18, along with board members from Liberty and Hicks Muse. Neither Vogel nor Thomas Hicks, CEO of Hicks Muse and that firm's member of the ICG board, can be reached for comment.
On Sept. 18, ICG announced its IRAS problems, and also that its EBIDTA would fall way short of previous expectations. On that news, and plans for a revised business plans that included sharply curtailed spending on new initiatives such as a DSL service, the company's already falling shares began to plummet, tumbling by about a third on that day.
On Sept. 26, the company announced the appointment of Randall E. Curran as CEO. Curran had been CEO of Thermadyne Holdings Corp., a St. Louis-based maker of welding products.
Curran got creditors to agree to waive defaults under ICG's $200 million secured credit facility until Nov. 29 while the company tries to stabilize itself. Only the next few months will tell whether he eventually will have a company to brag about.
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