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Transition at BellSouth: John Clendenin retires as president, CEO

July 13, 1992 - Interview with John L. Clendenin, BellSouth Chairman. (Nick Arroyo/AJC Staff)
July 13, 1992 - Interview with John L. Clendenin, BellSouth Chairman. (Nick Arroyo/AJC Staff)

Credit: NICK ARROYO

Credit: NICK ARROYO

Clendenin hands the reins to his hand-picked successor, F. Duane Ackerman

When John L. Clendenin started working, there was only Ma Bell.

In 1955, to say "the phone company" almost always meant a reference to the national Bell System connected by AT&T, an arrangement that lasted until legal action against the massive monopoly led to its breakup in 1984.

Left in the wake of that great divestiture was AT&T, now the master of long-distance, and seven regional phone companies ---the Baby Bells, including Atlanta-based BellSouth Corp.

During that transition, Wallace Dunn briefly held the top job at BellSouth, passing the baton to Clendenin within months. Since then, every other Baby Bell has seen turnover at the top. Now, during another kind of transition, Clendenin, too, will give way to his hand-picked successor, F. Duane Ackerman.

Clendenin retires Wednesday as president and chief executive officer after guiding BellSouth to a muscular maturity. He will remain chairman for another year.

The largest of the Bells ---at least until several mergers are completed ---BellSouth is a strong and independent player at the brink of a battle that is largely an intrafamily fight.

"One of the most difficult things is taking a company that is a monopoly, a highly regulated business, and creating a business that stands on its own ---all the while resisting the temptation to diversify," said W. Mark Dunkel, an analyst for Robinson-Humphrey.

"Virtually all the other Bell companies floundered around in all kinds of businesses," he said. "But BellSouth kept its focus. I think he has exhibited extraordinary leadership over that period of time."'

Yet Clendenin's true legacy may not be clear for some time ---not until it can be seen how BellSouth copes with the coming competition, Dunkel said. "It's like football. You may have practiced a lot, but there's nothing like a real game situation."'

The core of BellSouth's business has been a nine-state, virtual monopoly in local telephone service. But changes in federal and state laws have set the stage for telecommunications companies to enter each others' markets. BellSouth's fate largely will be determined by how well it has prepared for the future.

"I think that as far as the future goes, you've only begun to see the changes," Clendenin said in an interview. "The technological change, the globalization ... taking us into the information age. The speed at which the change has taken place is breathtaking."

Clendenin, a longtime friend of U.S. House Speaker Newt Gingrich (R- Ga.), was a key figure in forging the Telecommunications Act in behind- the-scenes talks with many members of Congress. He helped kill one bill and was instrumental in reviving the law that last year set the rules for the new competition.

July 13, 1992 - Interview with John L. Clendenin, BellSouth Chairman. (Nick Arroyo/AJC Staff)
July 13, 1992 - Interview with John L. Clendenin, BellSouth Chairman. (Nick Arroyo/AJC Staff)

Credit: NICK ARROYO

Credit: NICK ARROYO

Always on the go

A native Texan, the son of a teacher, Clendenin went from an El Paso high school to Swarthmore College, then to Northwestern University, where he was Phi Beta Kappa.

His climb to the top of a multibillion-dollar corporation displayed versatility as well as near-continual mobility. Between July 1955 and November 1982 he held 25 phone company jobs ---from his start as a salesman in Joliet, Ill., rising gradually but steadily to become vice president in AT&T's Basking Ridge, N.J., central office and then to president of Southern Bell Telephone in 1981.

As a man, Clendenin can seem a study in contrasts.

Taking time off only to serve as a bomber pilot for the Strategic Air Command in the late 1950s ---flying B-47s out of Guam and Alaska at the height of the Cold War ---he is still known as someone who may never use profanity. Despite his sales background and the kind of spectacular corporate success that demands smooth politicking, he is not known as a backslapper and often rides the elevator in silence with employees. He is a golfer, a connoisseur of antique cars, but most of all a devoted grandfather who says his free time now will go first to his 10 grandchildren.

As a corporate leader, Clendenin's accomplishments are clear: He took a sleepy regional monopoly and steered it into the uncertain waters of competition.

For example, AT&T and MCI now have permission to compete in local service in Georgia, as do other smaller players. BellSouth plans to ask federal officials for the right to compete in long-distance service.

The competition also will come in areas besides phone service, with new offerings such as the Internet and cable television. Until now, BellSouth's strength came from concentrating on its nine-state region, branching out in only a few calculated ways. Now, though, that local focus also could hold vulnerability.

International expansion

In a world where trade agreements and technology are destroying national boundaries and erasing distances, telecommunications eventually will be a global game. Successful companies are expected to offer a wide range of services customers can use around the planet. And BellSouth no longer looks quite so large in a lineup next to $50 billion AT&T, the $40 billion combination of MCI-British Telecom or even the $26 billion company to be created by the Bell Atlantic-Nynex merger.

BellSouth occasionally has missed opportunities. For instance, the company dropped out of the bidding war for Paramount and passed up a chance to buy McCaw Cellular before the company and its national wireless presence was snapped up by AT&T.

Still, without question, Clendenin has shepherded BellSouth to a position of strength by virtually any measure. Annual revenue has climbed from $9.5 billion in 1984 to more than $18 billion this year. And local phone service, measured in the number of access lines, has grown from 14 million to about 22 million.

The company has moved into the international arena, wireless and Internet services as well as cable TV, yet has run a tight fiscal ship --- all while attempting to reshape itself into a better marketer to prepare for all-out competition.

"The company is really recognized as being one of the best run of the (Bells), in terms of cost control, in terms of strategy," said Monish Bahl, an analyst for Parker/Hunter Inc. "I think (Clendenin) has left a great legacy."

Change has not come without cost, however.

In an effort to become more efficient, BellSouth has cut its work force from a 1990 peak of 103,152 to about 81,000, even as revenue has grown from $14.3 billion to more than $18 billion. BellSouth, to be sure, has also added some jobs in new areas, like Internet services, but not enough to offset the downsizing. Plans call for the company to end 1997 with fewer than 60,000 positions.

May 16, 1985 - John Clendenin speaks to the annual shareholders meeting of BellSouth. (Nick Arroyo/AJC Staff)
May 16, 1985 - John Clendenin speaks to the annual shareholders meeting of BellSouth. (Nick Arroyo/AJC Staff)

Credit: NICK ARROYO

Credit: NICK ARROYO

A good investment

Through his tenure, Clendenin has had to answer to his board and to shareholders ---and has won kudos from both corners.

Acceptance from Wall Street has been grudging ---but sincere in the way that moving large sums of money can be. BellSouth often has been disparaged as too cautious, unwilling to take the bold gamble that brings huge rewards. During the past five years, BellSouth earnings have grown 7.8 percent per year, behind the phone company average of 9.2 percent and the Standard & Poor's 500's average growth of 12 percent.

But over the longer term, BellSouth has proved to be a good investment. A purchase of $100 in BellSouth stock the first day of trading in 1984 would be worth $788 as of last week, a 688 percent gain, assuming reinvested dividends. During that same period, the S&P 500 rose 354 percent.

Clendenin also has been rewarded well. A national ranking of CEO pay this year put his total compensation of $4.8 million, including salary of $1.6 million, behind 37 other men. Among telecommunications executives, Clendenin ranked behind only AT&T's Robert Allen, who had $5.8 million in total compensation, and SBC Communications CEO Edward Whitacre Jr., with $4.9 million.

As of last week, BellSouth was rated a "buy" by Dillon Read, Edward Jones and Parker/Hunter, a "strong buy" by Cowen & Co. Janney Montgomery and a "hold" by Normura Research.

An analysts' consensus predicts BellSouth's earnings will grow at 8.2 percent per year over the next five years.

The image of corporate dullness ---the tendency to pass up dramatic deals ---actually has worked to the company's benefit, said Marshall M. Criser, chairman of a Jacksonville law firm and a BellSouth board member since the company's creation.

"The company has not made any megadeals, but it's made a number of good deals that have paid off," he said.

BellSouth has purchased a host of licenses for wireless phones and has pursued international deals aggressively. The company holds the controlling stake in telecommunications companies in five Latin American countries and is bidding for a sixth.

Stumping for education 

Rueben V. Anderson, partner in a Jackson, Miss., law firm and a BellSouth board member since 1994, said Clendenin has been an outstanding executive, but that his most impressive assets are not those he uses in business.

"He is a caring, honest, straight-shooting man," Anderson said. "The most impressive thing I know about him is his commitment to this country, to young people, to disadvantaged people. That is his strong suit."

Often, Clendenin's most public stances were taken in support of education as he stumped for improvements in the region's schools. Clendenin's resume is crammed with memberships on boards ---the well-paid corporate kind as well as those of educational and civic groups.

"He is committed to all of them," Anderson said. "He can sit down and tell you about Spelman (College) or Millsaps (College) or Junior Achievement and the direction they are going."

C. Dixon Spangler, president of the University of North Carolina and a BellSouth board member since 1987, said Clendenin has had two diametrically opposite roles: To run a cautious business with an eye on the books while planning for a dramatically different landscape.

"He fought mightily to understand what the future was about," Spangler said. "I don't think that anyone could take a company from where it was 15 years ago to where it is now without being a visionary or something of that sort."

BellSouth's future, like that of all telecommunications companies, is uncertain. But the company comes to the new epoch as the strongest of the Bells, and while there have been times when BellSouth could have done more, the company has never stumbled, Spangler said. "There just have been no failures.''