News Column

Valor on the Front Lines

October 2001

By Jonathan J. Higuera, HISPANIC BUSINESS® magazine

Since joining forces with three New York equity firms to buy 540,000 local telephone lines in 1999, the 12 Hispanic investors in Valor Telecom have gotten a taste of the ups and downs of starting a company from scratch. "There is no such thing as a 'can't miss,'" summarizes Andy Ramirez, one of the investors and owner of a Texas-based consulting firm. "But we have an excellent staff running the company who have a lot of experience in this arena. That is what you look for."

The Hispanic investors, who include former New Mexico Governor Toney Anaya and former Secretary of the Interior Manuel Lujan, were part of a partnership that paid between $1.1 billion and $1.4 billion to buy the phone lines from Verizon, formerly called GTE (see "The First Hispanic Phone Company," November 1999). The privately held company would not divulge financial information, but the company is meeting its projections, according to CEO Anne K. Bingaman. "We are meeting business targets and commitments to our investors," she says. "We're doing everything we thought we could do."

During its first year and a half of existence, Valor has gone on a frenetic hiring binge, bringing in some 900 workers in the last seven months alone. The most important recruits to date include Ms. Bingaman, a former antitrust lawyer in the Clinton administration and wife of New Mexico Senator Jeff Bingaman, and Kenneth Cole, a veteran telecommunications executive from Louisiana, who serves as president and COO.

The company started offering service in Oklahoma on July 1, 2000, and two months later introduced service in Texas and New Mexico. About 60 percent of the company's phone lines are in Texas, although Broken Arrow, Oklahoma, is its single largest market.

"You're creating an operation from start-up," notes Cynthia Cruz, vice-president of corporate communications. "As you're staffing and putting together your departments, processes, and procedures, you're serving customers. There isn't a lot of time to prepare."

From the start, the company has focused on serving rural customers. Verizon sold the rural lines so it could focus on more lucrative areas, according to company officials. With urging from the Rev. Jesse Jackson and the Hispanic Association on Corporate Responsibility, Verizon agreed to sell the lines to the current investors.

"We wanted rural, and that's all we wanted," says Ms. Bingaman.

Valor officials recently wrapped up a 25-city tour in its region in an effort to better understand rural customers' service needs, and the company announced plans to open four retail centers in New Mexico and three walk-in payment centers in Texas by the end of August.

                                                                                    Anne K. Bingaman, CEO of Valor Telecom
Now Valor is poised for its second phase of growth by rolling out new products and services for its customers. "Our goal is to give our rural customers the same advanced options that customers have in any urban community," says Ms. Bingaman. That means they will eventually have access to Valor long distance service, voice mail, call waiting, caller ID, dial-up Internet access, and digital subscriber lines for high-speed Internet access. Already the company has gained about 40,000 long-distance customers.

As part of the original sale, about 600 former GTE (Verizon) workers became Valor employees. But since selling the lines, Verizon has played little role in the company's fortunes. "They very much don't want to stay involved," says Ms. Bingaman. "They sold the lines, got the cash, and invested in their own projects. But they did a great thing here, and they were a terrific partner."

Valor is now the 13th-largest local exchange company in the country. The original 12 Hispanic investors sit on the board of directors, and "they have a major and continuing role, as do the New York investors," Ms. Bingaman says.

Besides assembling its management team and strategy, Valor has established a physical presence in its target market by opening call centers in Texarkana, Texas; Carlsbad, New Mexico; and Española, New Mexico. The company also moved its headquarters from Washington, D.C., to Irving, Texas. "We wanted to bring jobs back to the communities we serve," explains Ms. Bingaman. "We had a chance to outsource – but we didn't."

Source: HISPANIC BUSINESS magazine

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