Behind the Fall of AT&T Wireless

In February 2004, the nation's third-largest cellular company and one of the Seattle area's largest businesses -- Redmond, Wash.-based AT&T Wireless Services Inc. -- announced it would sell itself to competitor Cingular Wireless LLC in the biggest-ever all-cash offer for a company.

Analysts lauded Chairman and Chief Executive John Zeglis for his brilliant execution of a $41 billion deal that would bring a 27 percent premium to shareholders who had bought after the shares plummeted in value in spring 2000.

And Zeglis would be well rewarded, grossing about $11.5 million for his shares in the company.

But the deal only came about because AT&T Wireless, once the undisputed industry leader, rapidly lost ground to aggressive competitors. The cellular carrier, which had deep roots in Seattle's pioneering telecommunications industry, hemorrhaged customers fed up with years of bad customer service, dropped calls and fast-busy signals.

With consolidation widely believed to be inevitable, AT&T Wireless apparently decided to sell itself rather than build itself up and position itself as a buyer.

That phenomenon piqued my interest and that of assistant business editor Michael Wann. We wanted to tell the story of how the company met its demise.

What spurred us was the realization that even though the merger might help the industry as a whole and some shareholders, it would also do a lot of damage.

It likely meant widespread layoffs among AT&T Wireless's 31,000 workers, many of whom had been with the company since its founding as McCaw Cellular, a Seattle company that was the country's first nationwide cellular company. About 5,700 of these workers lived and worked in the Seattle area.

Thousands of shareholders who had purchased stock when it was priced well above the selling price -- many employees, among them -- would see no money from the deal and would lock in losses forever.

And customers would likely endure a painful integration process as the two wireless behemoths took on the difficult task of melding networks, billing apparatus and customer service departments.

Michael and I understood the importance and scope of the story, both to our community and the nation. This wasn't a story just about a company. It was a story about workers, investors and customers. It affected an enormous number of people.

We took a two-tiered approach to the coverage.

First I chronicled the acquisition as it progressed through negotiations to finalization. Then I used more in-depth reporting to produce a heavily illustrated, front-page story bearing down into the deal and informing readers of what really happened.

Writing these stories, especially the big one, was a major challenge.

I have had years of experience covering the computer industry. I've taught myself programming, I am fascinated by computer science, I relish technical details and I pride myself in my ability to simplify the complex.

But I had not encountered acronyms and technological intricacies like those of the cellular industry. And the relationships among the companies in the massive industry -- which seemed to constantly merge, split and recombine like paramecia over the 10-year period I had master -- were equally complicated.

I also had to delve deeply into corporate governance, shareholder responsibility and finance. And because the in-depth story would be highly critical of AT&T Wireless, it had to bear up under intense scrutiny.

It took eight months to produce "The Fall of AT&T Wireless," which ran in September 2004, just days before regulatory approval and the deal was signed. In the piece, I explained how the once-dominant McCaw Cellular -- a vibrant company founded by cellular pioneer and Seattle native Craig McCaw -- came to be eclipsed by competitors through the inept and uninspired leadership of conservative, risk-averse executives from AT&T Corp., who weren't accustomed to the rigors of the emerging, highly competitive wireless industry.

I conducted nearly 100 interviews, including current and past employees, executives, customers and competitors of AT&T Wireless, going all the way back to the founding of McCaw Cellular. Motivated by unhappiness over the company's current course, some people, including high-ranking executives, freely supplied the names and phone numbers of many other potential sources.

Current employees, also unhappy with the company, often contacted me by phone and e-mail after each smaller story appeared while the deal was coming together. I carefully saved all names, numbers and e-mail addresses, then contacted those people as I wrote the bigger story.

I also spoke with analysts, academics, accountants, trade associations and state and federal government officials.

Because of the story's enormity, it was essential to be highly organized. I typed my notes into a single Word document, broken down into numerous sections by topic, and then alphabetized by interview subject. I taped my interviews -- always with permission, as required by state law -- and transcribed them to be sure I had the quotes verbatim and the facts straight. My notes on the story fill 149 pages of a Word document.

I made a table of contents at the top of the file, allowing me to more easily locate sources. I highlighted text in different colors to denote key points, key quotes and facts to check. I backed up that file daily to a Zip disk and carried the disk with me, even though the file was also backed up nightly by our IT department.

Many people would speak only on a not-for-attribution basis. Some of them were current AT&T Wireless employees who feared reprisal if they spoke for attribution. Others had recently left the company and feared speaking, for attribution would violate the nondisclosure agreements they had signed. Still others had no affiliation with AT&T Wireless but didn't want to alienate colleagues within the industry.

I returned to each of these sources at least twice to read them their quotes and to try to persuade them to allow the use of their names. A few agreed.

Facts from unnamed sources had to be verified by at least two such sources. It was painful to jettison compelling accounts that would have illuminated important points for readers. But out they went if they couldn't be properly verified, no matter how trustworthy the source.

It was important to remain as dispassionate as possible. Clearly, hearing and reporting AT&T Wireless's point of view was vital to writing a fair story.

Doing so was hindered by the company's reluctance to cooperate. Three executives from AT&T Wireless eventually agreed to speak to me for the story, but Zeglis did not, despite repeated requests. The story is poorer for his absence.

After the story appeared, e-mails from AT&T Wireless customers and employees flooded my inbox. They were furious -- not with the story, but with the company. About 65 people called or e-mailed within a week after the story was printed. Each said it was accurate and necessary.

Only AT&T Wireless had issues with the story, mainly protesting its tone.

If I were to do the story again, I would talk more to my business and investigative colleagues during the reporting and writing process about how to stop feeling guilty about writing a very negative story.

I would also seek help in psyching myself up when approaching AT&T Wireless for comment. I felt very nervous doing so. P-I investigative reporter Eric Nalder frequently points out to groups he addresses that calling on colleagues for help -- in reporting technique, subject-matter expertise and structuring stories -- is a huge and underused resource.