UPDATE: Qwest replaces Nacchio with former Tellabs CEO

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Qwest Communications International Inc. Chief Executive Officer (CEO) Joseph P. Nacchio has resigned and will be replaced by Richard C. Notebaert, formerly president and CEO of Tellabs Inc., the companies announced Monday.

Notebaert had been CEO and president of network equipment maker Tellabs since 2000 and before that was chairman and CEO of regional U.S. phone company Ameritech Corp.

Notebaert, in a conference call with reporters, said he would work on "increasing Qwest's credibility with Wall Street" and go "out to meet with customers to make those relationships stronger." Working with the U.S. Federal Communications Commission (FCC) is also a high priority, Notebaert said.

Qwest, based in Denver, last week filed an application with the FCC for authority to provide long-distance phone service in five Western U.S. states and said it plans to file similar applications for the nine other states where it provides local phone service.

Qwest, like many of its competitors, is beset with financial problems. Credit rating agencies have downgraded the company's rating and its accounting practices are being investigated by the U.S. Securities and Exchange Commission. Qwest has about US$26.2 billion in debt.

Nacchio voluntarily resigned from his post and will serve as a consultant to the company for up to two years, Qwest said. Philip F. Anschutz, nonexecutive chairman of the board, also resigned his post at Qwest. Anschutz remains director and chairman of the board's executive committee, Qwest said.

"This management change does not reflect a change in Qwest strategy or operations," said Frank Popoff, a Qwest board member also on the conference call. "Sale of nonstrategic assets and associated debt reduction is proceeding as planned."

Nacchio's replacement doesn't come as a surprise, especially after the high-profile departure of Bernard Ebbers at WorldCom Inc. in late April, said Maribel Dolinov, a senior telecom analyst with Forrester Research Inc. in Cambridge, Massachusetts.

"Service providers are desperately trying to gain credibility in the financial markets. One way to do that is change top management," she said, adding that she expects more heads to roll.

Notebaert's plan to meet with customers is key for Qwest, although the changes that are needed at Qwest -- reduction of debt, staff, and capital expenditure -- are not customer issues, Dolinov said.

"Most critical for all service providers, in a market where there is not the demand that they expected, is to maintain the customers they have. Every customer in the telecom environment is scared and looking at their options. Do they stay with their provider or do they change?" she said.

Tellabs Chairman Michael J. Birck will take Notebaert's place as CEO and president of the Naperville, Illinois company.

Shares in Qwest (Q.N) were up 19.76 percent at US$4.97 in late morning trading on the Nasdaq.

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