News Column

Interview Transcript: Sol Trujillo

Page 8 of 1

HB From a career perspective, after US West was bought by Qwest and you stepped down, what was your game plan? What was going through your mind?

TRUJILLO My game plan was to retire, serve on some board, manage private investments, and enjoy life, because I'd been working ever since I was eight years old. So my game plan was to do what I've seen others do - maybe even take up golf! Physically, I wanted to move to Southern CaliforniTrujillo We owned this home. We liked the climate, the people, the lifestyle.

HB After coming out here, Orange was one of boards you served on, correct?

TRUJILLO Through my contacts, I knew the chairman of France Telecom. When they acquired a significant portion of this company [Orange], they decided to do an IPO and create an independent board of directors, which they needed to do. They had a couple of Europeans. He asked me if I would come on the board. His philosophy was, he wanted to Americanize the board. I said yes, because I knew him. He was a friend.

HB Was that Mr. [Thierry] Breton?

TRUJILLO No, at that time the chairman was Mr. Michael Bon.

HB "Americanize the board." Why? International acquisitions?

TRUJILLO Governance was a big deal in Europe. The structure and strictures of corporate governance were a few years ahead of the U.S. And in some ways, the U.S. was ahead in the sense of how boards engage the policy [of the corporation]. That's why he wanted me there, from my days in the U.S. leading a company, having implemented engaged work practices.

HB With subsequent events at Qwest, do you feel events have proved you right? He [former Qwest CEO Joe Nacchio] has resigned and [four] financial executives are under indictment now.

TRUJILLO No, I chose to retire when I did - and this was all public - because of a difference in values and beliefs and principles. Stories in The Wall Street Journal, USA Today. With the new leadership and ownership structure. As you'll recall, this is a fairly unique ownership structure for a large company like that, where you have one individual owning around 20 percent of the company. I decided it was best that I retire, because I had created a huge amount of value for the investors, employees, everybody there. We had a fairly impressive integration plan we put together before I left.

HB In your comeback story, you've now emerged on the world scene. You're leading a much more global company than US West. How do you think your Hispanic heritage figures into this?

TRUJILLO Let me go back to your statement about a comeback. I don't see this as a comeback in any way because I did what I desired to do career-wise prior to this. Actually, this is pursuing a situation where as a board member, I was asked by the new chairman of France Telecom and the board to take this on, given circumstances, so I agreed to do it.

More importantly, I agreed to do it because we have the opportunity to create a new model for this industry for the next decade. It's going to be fun doing that. So now I'm about doing things fun.

But to your question, Orange is a bigger company than even the merged company between US West and Qwest. In today's market, which in communications has fairly depressed values, it's an $18 billion top-line company with a market cap, depending on the day, of between $35 billion and $40 billion.
It's a huge company, and it operates in 20-plus countries. So it is a world stage, it is a company with a terrific brand. Hopefully, I'll make a difference in the next few years.

HB The fun part - I imagine that's something that attracted you to Graviton, the technology. It was voted one of the cool companies. Does it bear any similarities to Orange?

TRUJILLO Absolutely. If you travel to the U.K., you'll find Orange is one of the cool companies in the market. It has won J.D. Power awards, all kind of recognition awards as one of the most unique brands in Europe. So it is a fun company, but more importantly, it has a history early in its life of being an innovative company. That's what I like - creating new services for customers and a new experience.

I want to go back to your question about what does Hispanic heritage have to do with this. I've always said, since I took on a corporate career, I feel my heritage is an advantage. Because I'm a very competitive person, and when you have to work hard - in some cases work harder - for what you achieve, it builds a work ethic, so you always feel you have to work extra, give extra, give your customers extra, serve your investors more value.

It also helps me in the sense that I can relate [to people]. I've had lots of job offers over the last few years, to run a lot of different kinds of big companies in the U.S. and Europe. I had one European actually ask me, "Sol, would you be interested in running this company?" I said no. I told him, "I'm an American. You don't have a history of bringing in Americans. Why me?" He said, "You are unique." I said, "What do you mean?" He said, "You're not typical. You appreciate other cultures, you can move into other cultures, and you can deal with people differently than most other [executives] I've run into."

I attribute that to the fact that I've always believed in diversity, because of my own experience and what I've observed over the years. It is an advantage. So I can go into France, Switzerland, the U.K., Thailand - wherever we operate - and I look for people's best, as opposed to their limitations. That's an advantage when you try to lead a global company.

HB Why do you think France Telecom chose an American for what seems a very Euro-centric job?

TRUJILLO Clearly, Thierry Breton, the new CEO and chairman of France Telecom, knew me when he ran Thompson.

HB Is that a German company?

TRUJILLO No, it's French. But it's global because it sells a lot of electronics around the world. He asked me, and at first I said no, because I love it here. But he was fairly persuasive. He thought I would be the right person at the right time to work with the strong French culture, the strong U.K. culture, and the other cultures in the company.

I've learned since then that in France you need a special permit to be a CEO of French publicly traded company. When I got my permit, I found out I'm the first American to be CEO of a CAC 40 company. [Editor's note: The CAC 40 is an index for the Bourse de Paris, or Paris stock exchange, equivalent to the Dow-Jones Industrial Index in the U.S.]

HB The idea of an American leading a French company at this time - is it a challenge?

TRUJILLO I get this question almost every day.

HB I would imagine.

TRUJILLO I would say it's no different than at any other point in time. People in business are proud of their companies, they want their companies to succeed. And customers want the company that provides the best service, the best value, the best capabilities. Those core principles are the same whether it's during difficult geopolitical times or non-difficult times. I would say we're doing fine. I was looking for a little of that [anti-French sentiment], but I haven't seen one iotTrujillo Part of it may have to do with who I am and my personality.

HB Tell us about your work routine. Where will you live?

TRUJILLO Interestingly, I will live in both Paris and London.

HB You say "interestingly." I would say "exhaustingly."

TRUJILLO The modes of transportation are different than here. If you think about geographic distance between Paris and London, it's not the same as moving between Los Angeles and New York. They have high-speed trains between London and Paris. It's very convenient. You live in the city, you travel a short distance to the train station. You get a high-speed train through the Chunnel. And it's comfortable, you can work and spread out. So it's not as taxing as having to commute to an airport and wait and go through security, check in two hours in advance. That kind of stress isn't there. And secondly, traveling through the countryside, for an American in Europe, is interesting.

HB Of all the people France Telecom had on the table for this position, why did they choose you?

TRUJILLO A few reasons. First, the whole wireless industry around the world is at a crossroads. The first 20 years was a land grab. Twenty years ago, most people didn't have a cell phone, maybe even 10 years ago. Now essentially everybody has one. So the market has been penetrated. It's similar to the Homestead Act, where you could go out and claim land. Think about unclaimed market.
Until recently, the opportunities to penetrate the market were so great, companies played in that space. It was all about growth.

Guess what? Now around the world, the space is taken. Eighty percent penetration in some markets, 70 to 80 percent. So there's not a lot left. And those who don't have the service, either don't have the money or just won't use it, they don't have an interest. Now all of a sudden, the question is, "What do you do to grow?"

You're at a crossroads in terms of what's the next model. Given my CEO experience, that was an influencing factor. Also, I have a pretty good track record of creating value, and three, this notion that now it takes more innovation to achieve growth. I have some ideas on that, and I articulated them as a board member. I think that's what drove them to ask me to step in. The next few years will play out the next wave of how this [wireless] game gets played, how competitors compete and how customers get served.

HB I looked over the press clips on different [technical] systems - 2G and 3G. But now the big challenge is going to be continuing that growth, adding that value, and the cash flow. How do you balance that? You've got the integration with France Telecom, too.

TRUJILLO As an American in Europe, sometimes I use phrases from the U.S. that are so visual. One phrase I use is, "Now we have to walk and chew gum at the same time." For some, that's a challenge. As you say, we have to generate good financial performance - EBITDA growth, free cash generation. On the other hand, we have to generate top-line growth. How do you do both? That's the challenge for me. In the next few years, we'll show how it's done.

To your question about competing technologies, I think there are new technologies about to mature and be deployed. But as with all technologies, you have to do it smartly. And 3G is not a panacea for growth in the future, it's just another tool.

I have a phone here, and I want to show you how innovation is facilitated by simplicity. In all these devices today, there's a lot of processing power. There's more processing power in this [cell phone] than in the first Cray computer, by a large amount. Think about that, and what you use your cell phone for. You make calls and maybe do some short messaging, and in the U.S., that's about it. There's a thousand other things you could do, but you don't. Why? It's too complex. You have to read a manual, or someone has to train you for an hour or two.

What I want to show you is my Orange phone. Forget the passage - the handset. What I want to show you is how I can use this more, how my customers can use it more, which means more minutes of use, which means more revenue.

HB I read where Orange was the first Windows-powered phone. Is that right?

TRUJILLO Yes. Anyway, what I was going to show you. If you look at the icons on the screen, you see my [Internet] home page, just like on a PC desktop. Next to that is my contacts, messages, calendar, and over here is information like news, sports, and downloads. You can see my radio is off, because when I got here, I had to do my settings and I just turned it off. It has my calendar. If this were working right, I could scroll down to "Tennis lessons with Jason" or check my e-mail. The point is, I only have one button.

Today, most of us just make calls, so most of us spend about nine and half minutes of use [on the cell phone] per day. In Europe, they spend about five minutes of use per day.

The punch line is, if I could use this for more things, I'd spend more air-time. I use this for my calendar. I used to use a [Palm Pilot device]. I just scroll down and I can look at my calendar.

HB So all these plans now, they give you buckets of minutes. You're not extracting any more value. So this ...

TRUJILLO Right. Also, I can check ... The coverage isn't good along the coast. What you can see is that I can access news, weather, sports, I can check e-mail, I can send e-mail responses, I can check messages. Now you have a picture where instead of being on there five minutes a day, it might be 10 minutes, or 15 minutes.

Also, while you're driving, access traffic information with one button. Most [cellular] companies actually have that today, but you have to be a genius to figure it out. What if I made it just a screen icon? Wouldn't that be nice?

What about your contact list? I'm going through the process of moving my life from the U.S. to Europe. It's a nightmare, because my whole life is built around contacts - family, friends, business relationships, investments. All these things that you've built. Try to transfer that - it's at the center of your life at work, at home, on your PC and on the go.

Wouldn't it be nice if you could have all that information provided to you on a network-based application stored on a server? So when you turned on your PC, it would be there. When you turned on your cell phone, it would be there. Or at work - boom, it's there. And it's the way you want it. Life today is about what I program into this device.

In the Europe and U.S., if you have one of these devices, and it breaks or you lose it, guess what? You have to reprogram all those contacts.

HB It's pretty vulnerable.

TRUJILLO What I'm looking to do is create a new strategy that centers around embedding this intelligence on the network so it shows up on whatever device you have. So if you're sitting at home, and you decide to access it with a PC because it has a bigger screen, boom - it's there.

The network hosts the intelligence, the features all show up the way you want them. Or at work.

That's part of the transition. But also this idea: How do I make this one-button, one-screen, one-step possible? There are two things you have done in your life that you would have learned if you grew up in Nigeria, Thailand, New York City, or the beaches of Southern CaliforniTrujillo One, we've all learned to look at pictures and recognize their meaning and push on buttons to get what we want. You see the beginning of that on these screens.

The second thing - that isn't working well now, but I can assure you will be in the next two or three years - is to speak. So if you said "Give me my e-mail" when you wanted your e-mail to show up, wouldn't that be nice?

HB That would be great. And you can read it back also?

TRUJILLO Right. Or you may say, "Do text to voice." Then while you're driving home at night, you say do all your e-mail. You can say Delete, Store - and boom. And once you do it, you load your e-mails. And once you delete your e-mails, it's deleted everywhere.

Most places, you look at your e-mail, you delete it, and you think you deleted it, but then you see it at home and have to do it all over again. Why not make it simple? Why not integrate it? Why not have a single number for everything?
Why not have the same number for this device as your office extension?

HB In one of your statements on the Orange Web site, you said you want to integrate Orange into France Telecom.

TRUJILLO I want to integrate the companies, but not physically. The real essence is if you're a customer of France Telecom, why can't all this stuff work together? So you have a unique experience. So if you store all this intelligence in a server on the network, no matter what device you use, you'll get it the way you want it.

HB The network you refer to, is it the Internet or something you're going to build?

TRUJILLO It's the Orange network, but it's delivered by what you would call the Internet. Because the Internet is really capability delivered by a network. The backbone that connects different networks is what the Internet is about. But how you access it is a function of either a telephone company, a cable company in the U.S., or to a much lesser extent a satellite company. People like AOL and others give you access to information, but not physical access. You still need to be connected.

HB Right. That's the telephonic function. You're also talking about integrating consumer and business functions. I'll have my work extension on there and my work e-mail, but what about my personal e-mail on the same network?

TRUJILLO If that's what you want. I want to give you what you want. It's my job to give you what you want, but not to tell you what you want. And my job is to enable you, whether you're in Cannes, Paris, London, Switzerland - I don't care. My job is to make it easy for you. So if you live in London, it works the same as when you go to Geneva, Switzerland.

HB Well, how does it work? The Orange network is built out in Europe, but what about here? Do you ride on someone else's network?

TRUJILLO Yes. The analog is your telephone call. In this part of the world [in California], you have GTE or SBC as your telephone provider. When you call the East Coast, another phone company has the local loop. There's an interconnection. They mirror the passing of this digital signal onto their network, and there's transparency as to how it works. What has to happen is that the wireless world has to get like the telephone world, so there is transparency and seamlessness.

In the case of Orange, because we have networks in France and the U.K. and Switzerland and Belgium, we can make that all happen seamlessly on our network. And where we don't own physical networks, like, say, Spain, we work with Telefonica on an interconnection agreement, so when a customer goes there, these digital signals can be passed through and show up on a device like they do here.

HB Are the main challenges to that technical or political and economic?

TRUJILLO All of the above. Technically, that is hard work but solvable. Politically, it's a matter of another company wanting to let you create a good experience for a customer in their part of the world. My reaction is, "Well, they have customers who come into my part of the world." And if we make a reciprocal [agreement], the end of the day, it's a matter of who does a better job with their customers. Why make the customer go through pain because you're not as good as the competitor next door?

I'm not afraid of competing, because I know we'll out-compete, out-innovate, out-execute, out-do them. So I'm willing to execute that sort of [agreement]. Let's step in the ring. Let's not make the customers pay any price or penalty. If [the other company] is better and takes away my customers, that's life. But if I'm better and I take your customers, that's the way life is, too.

So we have to go through that. Then sometimes you have to look at costs, to your point about economics. We look to see what's fair compensation. For me, everything's about business. Not emotion. I mean, I get passionate about our customers, I get passionate about what we can do, but at the end of the day, you have to look at it as a business person - very objectively.

HB Getting back to the simplicity of the device. That's one side of it. What I've experienced is it's still a very slow connection. That gets back to the 3G technology. Are you still going to pursue that as a growth strategy and roll out that service?

TRUJILLO 3G is going to play out globally in the next three to four years.

HB Europe seems ahead of the U.S. on that.

TRUJILLO It is to an extent, but that doesn't mean it will be three years from now. There are early deployments in Europe, but actually Japan is ahead of the rest of the world.

NTT Docomo has deployed in Japan the first 3G network. They deployed about two years ago, and they have only a couple hundred thousand customers. They have a huge customer base.

What they experienced is that the technology was not quite ready. Most of us are used to stuff working really well when it comes to telephony, whether it's fixed-line or wireless. We've been spoiled. The people who manage technology in the telecommunications industry are the best in the world. So we've been spoiled as consumers. When 3G rolls out, it's not quite ready. Handsets don't work well. Hand-offs don't work out. If I have service from Docomo, will it work when I go somewhere else? The answer is no, not today.

A lot of that kind of stuff has to be worked out. It's going to take the next two or three years. But I can tell you in Europe, all the players have definitive plans for the next two or three years in terms of rolling it out. Then the game gets exciting again because the primary gain from 3G from a customer's standpoint is higher bandwidth. Higher speeds. Now you can add the video kind of services to your portfolio of capabilities.

I have people who work in my company today - young, married, in their 20s or early 30s - and they work hard. If you work in Orange, you work hard. We have picture messaging capability. Let's say you're here today at work, and you have a wife and young children, and one of your kids has a big soccer (football, they would say in Europe) match today. And you're not there because you're here.
Some of these people are so good with the technology that the spouse will attend the game and take photo images. The phones are simple - you point it like a camera and take a picture. Then you attach a short message and send it.
You couldn't get to the game, but you got the flavor of the game. And you could literally send a message [back] to the kids. "Sorry I can't be with you, I love you," that kind of thing.

I think about that. When my kids were small, I would have loved that. Because there were so many things I missed.

That's another application, and on a 3G network you can do a lot more of those things. But that doesn't mean you can't do them today on a 2-and-a-half G network or an EDG network that many companies have in place today.
The question is, could you do that in the U.S.? The answer is yes. You've seen ads about photo messaging. The problem is you don't know how to do it. And you don't want to take the manual out and spend an hour to learn. To my point about this device, we're creating the screen that gives you the icons of what's available in plain English for the U.K., or plain French for the French market. And you just click. If I do enough of that, and work on the human factors, and make it intuitive and simple, or turn it into voice commands, aren't you going to use it more?

HB Of course. So far you've discussed it from a consumer perspective. Tell us about the enterprise market - small business as well as huge organizations.

TRUJILLO Take a few applications that come to mind. Some business people aren't in the office very much. Well, they don't want to miss calls, and they don't want to give out the number to their cell phone because they don't want to get on lists. Wouldn't it be great if you had single-number capability, so if you don't answer your phone in the office, it automatically follows you to this device [cell phone]? If you have caller ID, you can choose whether to answer or not. Because sometimes it's dark or you're in a hurry, wouldn't it be nice with caller ID if an image popped up? So you'd know if your wife called, or your boss. You'd see that photo image and could respond. I saw a guy who had that. It's so cool.

Besides single-number [capability], there's single mailbox. I hate multiple mailboxes. Check this mailbox, check that mailbox, check my own mailbox. Wouldn't it be nice to have one? You could aggregate it. And then wouldn't it be nice to have voice-to-text? If you had 47 voice messages and didn't want to listen to them all, you could scroll down a list to see who called and click on the ones you wanted to hear. Or in the case of e-mail, you could check your e-mail while commuting. Then when you get home, you don't have to deal with it, and you haven't lost time driving like you normally do.

Now let me take it a step further. In a large company, you have fairly tight security in terms of accessing the intranet and all that. In the fixed-line business, over the last few years, we've offered VPM, virtual private network, so you have that security and remote access. Wouldn't you like to have VPM on this?

HB In the U.S. Hispanic market, but in the general market too, security is still a huge issue. A lot of people still won't use a credit card on the Internet.

TRUJILLO In Paris, we offer wireless VPM. Our corporate customers love it. Because if you work for [a large corporation], you want to stay in touch all the time and you want security or your company won't give you access to your information. With Orange, you can.

That's part of the integration. I have a thousand other ideas of what we can do, but we have to get the platform laid, then the applications environment laid. In this device you see a Microsoft OS [operating system]. But we just announced an agreement with Palm, and there's a third player called Symbion.

I don't care. Because I'm going to make it easy for all the players in the marketplace. That comes from my background, having thought about many of these problems in the fixed-line world. Now the wireless world is trying to catch up to the fixed-line world. And guess what? I've already seen the movie.

HB You're going to provide the network.

TRUJILLO The customer experience, that's how I like to describe it. Part of it's the actual network - the antennas and all that. Part of it is making the use of this device as easy and simple as possible. It's enabling the devices, not making the devices.
It's also making it easy for the customer to interact with you - billing, customer care, and updating the technology all the time so the customer's experience is always unique.

HB On a wireless VPM, would you have access to databases?

TRUJILLO Sure.

HB Is that available in many places?

TRUJILLO It's available in Paris today.

HB Is that an Orange first?

TRUJILLO Yes. I'm not aware of another company that has done it. We have unique capability in working with France Telecom, and that gets back to the integration. I ran a company in the U.S. [US West] that had a wireless business, an enterprise business, an Internet business, and a fixed-line business. And we made it all work together. So again, I've already seen part of this movie, and I know it's possible. But there's also part of the movie to play out. There are multiple endings. And multiple plots that can play out over the next few years. That's the fun for me.

This is a much bigger platform, and much bigger company. We have 40 million customers and growing. In three years, this business [Orange] will be bigger than France Telecom's fixed-line business. That how big it is - bigger than a country's fixed-line business. This is bigger than AT&T Wireless, Cingular, all the companies we have here [in the U.S.] in terms of size.

So for me, this is an interesting play-out, to build something. US West was a smaller company, without all the resources to play it the way we can here.

HB How much bigger do you think it can get? Any plans at this time for the U.S. market?

TRUJILLO Not at this time, simply because we have so much ahead of us where we already have a footprint. First, I want to build that [business] model, and then we can consider other things down the road.

But life and business is about focus. We've got to stay focused on our near-term opportunities, with an eye toward the longer-term as well.

HB Once you build the better mousetrap, it's fairly adaptable to other markets. But let me ask you: In the past, Orange has expanded by acquisition. They acquired [wireless] companies in Belgium and Luxembourg and elsewhere. Is that going to continue in the near-term, or are you slowing up and consolidating?

TRUJILLO I want to concentrate on our core portfolio, because there's a lot of growth there. In business, you always focus on your core first. You grow it, treat it well and serve it well. I'm looking at our footprint from a strategic perspective, and [judging] some properties where we're only a minority investor, like we had with WIN [a cellular operation] in Italy. We were a 26 percent owner. We didn't have control. We weren't going to be able to brand the company Orange. Why are we staying there? It's not a good use of our resources or cash, so let's sell it back to those people who want to control it. We'll take our cash and use it for other things.

In Sweden, we were in a situation where [the government] gave multiple 3G licenses. it was going to cost a fortune to play out, and then you're with four or five other [competitors]. No need to get into that kind of situation, so why not get out? Extricate yourself. Because strategically, it wasn't critical and it required a lot of cash.

Again, I want to use my cash where I can give my investors the best return on capital and my customers the best kind of experience, and protect my core businesses. So I'm going to try to get us stronger where we are, and stronger where we aren't in a partnering or acquisitive way, over the medium term.

But in the near term, we have more than enough to do. We don't need to acquire more properties, because those can be distracting.

HB That [acquiring] was popular during the land-grab phase you talked about.

TRUJILLO And there's a lot of dead bodies lying around in the telecommunications world. Companies that thought the future was about acquiring lots of things. The problem is you've got to make them work. You've got to integrate them. Almost all the [telecom] companies that got into bankruptcy or severe financial trouble didn't do that. They thought it was all about issuing press releases and buying things.

HB Getting back to what you said about the importance of diversity. Any plans to make Orange more diverse?

TRUJILLO I'm learning a new context for diversity in Europe. We have people of all races, colors, religions, et ceterTrujillo My challenge is to take advantage of all the people who are part of our constellation, whether men or women or French or English or from BotswanTrujillo My job is to take advantage of the resources, and have everybody think that they have a shot at my job, or making a difference. That was the philosophy I had here [in the U.S.]. I think it showed on almost any [diversity] ranking or survey, and our results were always better.

HB No more questions. Just what lessons your career teaches. Any philosophizing?

TRUJILLO Philosohically, I have always believed your integrity and ethics are critical. It's been borne out the last several years in the U.S. and in other countries. What you do is your brand - your personal brand. You ought to be aware of that in how you conduct your professional life. Sometimes it's easy to take shortcuts. You think you can get away with things. Taking the easy way out may not be the best way. So always try to do things in the highest ethical way possible.

Second, you lead by example. I don't think you'll find anyone who ever worked around me who doesn't say if I ask someone to do something, I won't do it twice as hard and twice as much.

Third, when you think about a career, and why somebody would ask me to go to another part of the world and run a business - along with a lot of other people who asked me and I said no. You have to ask why. At the end of the day, it's all about performance. In business, in sports, in any professional context, it's about results. What you do. You create your brand by what you do.

If you end up creating significant value for your investors, that's good. If you can be better than your competitors at serving your customers, that's good.

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