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Executive Exodus At Canada's Telus
By James Careless
WirelessWeek - October 11, 1999

OTTAWA--What's going on at BCT.Telus? That's one of two questions analysts are asking about the western Canadian phone company and its wireless subsidiary, Telus Mobility, following the unexpected departure of CEO George Petty, Vice President George Addy and Executive Vice President Harry Truderung.

The other question: Did these executives and two others who've resigned in the past three months leave voluntarily, or were they pushed?

Certainly Petty's resignation, announced by a news release Sept. 14, caught the Canadian industry by surprise. After all, the 25-year AT&T veteran had spent the last few years taking Canada by storm--first by negotiating the merger between Alberta's Telus and British Columbia's BC TEL, then by declaring a competitive war with Bell Canada and Bell Mobility.

So what happened? Why did George Petty leave just months after the BCT.Telus merger, and before achieving his goal of confronting Bell Canada?

Ask Petty and Telus' board of directors, and you get widely differing stories, except for one point: It's related to Petty's proposed acquisitions of Clearnet Communications Inc. and Call-Net. Clearnet is a Canadian nationwide PCS carrier using the CDMA standard--the same used by Telus Mobility. Call-Net is the parent of Sprint Canada, the nationwide long-distance operator that competes with Bell Canada.

While costly, such a strategy would have given Telus a nationwide telecom package. It was a bold move in keeping with George Petty's management style. That's why he made the proposal to Telus' directors.

"My job is to bring alternatives to the board," Petty told reporters during a conference call. "I would never bring anything to the board that I didn't feel would work."

However, Telus Chairman Brian Canfield subsequently disputed Petty's story. In his own conference call, he said, "I don't deny for a moment that we've had those discussions. What I am denying is that any of this ever got to a vote. And so, therefore, George was never turned down."

Confusing? Yes. But the next fact is not in doubt: Having announced Sept. 14 that Petty would stay on while his successor was sought, Telus then replaced him with Canfield Sept. 22.

Some wonder if the about-face was to punish Petty for going public. According to Telus spokesman Doug Strachan, that's not why it happened. He says Canfield was appointed as interim CEO to provide "continuity" until a permanent CEO takes over.

Which brings us back to the second question: Were Petty and his cohorts pushed? No, says Strachan. "The executives that have left have done so because of exercising options that they had."

Those "options" were both financially generous and time-sensitive, says Toronto telecom analyst Ian Angus. "All of Telus' executives--the old Telus from before the merger--had contracts which allowed them to leave the company within six months following a change of control and get very substantial payouts," he explains. By leaving now, "George Petty gets three times his annual compensation. The others get two-and-a-half times."

So what's the truth? The closest we'll likely ever get to it is that George Petty may have been considering whether to resign and cash in when he proposed the Clearnet/Call-Net acquisitions, then did so when the Telus board didn't back him. Now that he's gone, it's clear that the company will continue to move eastward gradually, rather than in one fell swoop.

In a strange twist to Petty's departure, on Oct. 6 Call-Net announced Telus had floated a possible takeover offer.

Dogged by an $85 million loss in the second quarter, Call-Net chair Lawrence Tapp responded in a publicly-released letter, saying, "Should you be interested in providing us with a proposal for the acquisition of all or part of Call-Net, Call-Net would be prepared to discuss your interest at any time."

At press time, Telus had not issued any comment explaining its apparent about-face.

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Executive Exodus At Canada's Telus(2)
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