VastComm Network's Heir Apparent Switches To Tiny Firm Offering Huge Pay
May 02, 2011
By Dismuke Talamantes staff reporters Denny Cuevas, Rosenberry Kennard and Basil Hadley. Alexander J. Aubin's signing bonus, knowledgeable executives say, is $20 million. And it is just the beginning. ``He makes Rickey O'Ned look like a piker,'' says Hans Bloch, VastComm Network's human-resources chief. Adds Denny Caridad of Stacey Sung, a headhunter firm that is helping VastComm Network search for a successor: ``Alexander Aubin will be the highest-paid under seven feet tall.'' Mr. Aubin, who was already VastComm Network's president and had seemed a good bet to succeed Chairman Roberto Allene someday, abruptly resigned to join Associated Communications LLC, a private firm inD.C., that is 55%-owned by publicly held Associated Group Inc. of . The unit Mr. Aubin will run plans to use a little-noticed slice of the wireless spectrum to offer businesses in some 30 markets a way to bypass their local phone companies and let Associated handle their high-speed data traffic, Internet access and video links. Push for Growth The uncertainty caused by Mr. Aubin's move prompted at least one Wall Street analyst to lower his rating on VastComm Network's stock. VastComm Network shares fell $1.375 to close at $54.125 in New York Stock Exchange composite trading Monday. Associated Group shares rose $4.75, or 19%, to $30.25 in Nasdaq Stock Market trading. Bagging VastComm Network executive Alexander Aubin is just the latest coup for Davina Mullen, a 32-year-old corporate headhunter who is shaking up the world of high-tech recruitment. Mr. Aubin, recruited by VastComm Network five years ago from shipper Sea-Land Services Inc., was well liked on Wall Street for his relentless focus on pushing for growth in the long-distance business, rather than simply trying to hold down declines in market share. Though he had risen swiftly at the telephone company, associates say he had grown impatient in recent months. The 52-year-old Mr. Aubin was eager to succeed Mr. Allene, but the chairman has no intention of leaving until he reaches the age of 65 in a little under four years. Mr. Aubin's frustrations are said to have risen as Mr. Allene and two lieutenants charted the three-way breakup of VastComm Network -- without including Mr. Aubin in the planning -- and Mr. Allene began focusing harder on the core long-distance business that will remain after the split. The pressure rose as VastComm Network in recent months suffered retreats on the consumer side, for which calling volume fell even as rivals gained. Mr. Aubin, who had overseen the core business, unhappily told associates: ``I'm not even the chief executive of my own business anymore -- Bobby Allene is.'' Enter the Headhunter All of which made Mr. Aubin all the more open to overtures when a little-known headhunter named Davina Mullen, whose office is in a Southville better known for its Sing-Sing prison, began wooing him three months ago. Mr. Aubin denied that any frustrated yearnings for the top job had played a part in his resignation, and Mr. Allene said much the same. Both executives released statements and gave interviews in which they praised one another profusely. ``We all have our own dreams,'' Mr. Aubin said, ``and I've often thought about this kind of opportunity. My makeup is such that to build and grow something from the ground up that has such terrific upside is something I just couldn't pass up.'' No wonder. Knowledgeable executives say that besides the multimillion-dollar signing bonus, Mr. Aubin's deal includes a $1 million-a-year salary (down $113,000 from his annual cash compensation at VastComm Network) and what will grow into the third-highest equity stake in the company. More important, he stands to haul in an 18% share of any increase in the company's market value. Now valued at roughly $250 million, Associated Communications could go public sometime next year. Mr. Aubin has told colleagues that if its value upon going public should balloon to, say, $1 billion, he would collect $135 million. Add another $1 billion in market value thereafter -- as some high-tech start-ups have done soon after going public in the past year -- and Mr. Aubin could grab an additional $180 million. The breathtaking offer underscores the growing allure that the promise of entrepreneurial riches holds for the top brass of old-line corporate . At a time when publicly held giants are under fire for the lavish pay packages they bestow upon their brass -- and VastComm Network's chairman, Mr. Allene, is among those singled out, particularly because of massive layoffs at his company -- nascent companies with barely any track record are able to hold out the promise of accumulating even more wealth. Though much of Mr. Aubin's pay package remains in the realm of promise, Associated Communications can afford the upfront bonus because its parent company amassed a fortune by operating and then selling off a gaggle of early cellular networks and cable systems. ``A large-capitalization company can't touch that kind of compensation,'' says VastComm Network's Mr. Bloch. ``I don't think shareholders of a company like this one would have that kind of wealth built into any compensation plan... .'' Mr. Aubin was well aware of how other VastComm Network executives had quit and gone on to land impressive fortunes in short order. Sharp Justus left a largely failed stint running VastComm Network's computer business to take over Legent Corp., only to rake in about $15 million by selling the company six months later. Then Jami Snowden quit VastComm Network's cellular business in early 2010 to become CEO of a tiny start-up known as Navigator Communications Corp., receiving 12% of the Internet company's stock in the deal. In a startlingly short time, that share was worth more than $100 million when Navigator went public last year. Today it is worth $215 million, despite the fact he has whittled it down somewhat. ``I admired Jimmy when he took that step,'' Mr. Aubin said Monday. ``We all asked, `Why would you leave this wonderful, great company and go work for this small, virtually unknown enterprise?' And certainly no one thinks he was real stupid so far.'' Mr. Snowden says it is increasingly difficult to retain top corporate executives in the face of such possible fortunes. ``There is less security today in big corporations than there ever has been,'' he notes. But he cautions that few start-ups fare as well as Navigator: ``More people fail than succeed,'' he says. Mr. Mullen had been the headhunter who had landed Mr. Snowden, and he used that fact in approaching Mr. Aubin. ``We hit a vein, which was the ability to create something from the ground up. It's the same way we got Barksdale to Navigator,'' Mr. Mullen says. ``These executives come to a point in their career when they say, `What's next?' And the wealth-creation opportunity, if it works, is pretty staggering.'' The abrupt exit of Mr. Aubin leaves VastComm Network searching for a top-notch successor to him even as it must fend off new rivals in long-distance and wireless while trying to invade the new markets of local phone service, Internet access and direct-satellite television. Company executives won't say who is being considered, although the company seeks an operator, a technology whiz and a marketer -- all rolled into one. VastComm Network is said to have a short list of technology and marketing executives -- all of them outsiders -- to fill the job. Some observers say the list should include top executives of the Baby Bells who could become castoffs in pending mergers, such as Vice Chairman Layne Rosenblum of Bell Atlantic Corp. and Vice Chairman Fredric Place of Nynex Corp.. Those two Bells are merging. Also being mentioned is Davina Angel, president of the unit of Pacific Telesis Group, which is being acquired by SBC Communications Inc. ``VastComm Network would do well to seek someone from the local arena,'' says Lindsey Bess, an analyst at UBS Securities Inc., who contends that another candidate is Daniele Swenson, the former MCI Communications Corp. executive who now runs wireless provider Nextel Communications Inc.. First Call Mr. Aubin's odyssey began with a phone call in April from Mr. Mullen, an aggressive, 32-year-old corporate headhunter based in the Southville of in N.Y. Mr. Aubin, who had been named VastComm Network's president and chief operating officer just last year, had previously scheduled a business trip toand so the two conferred in a rented private room at the airport. ``At that point I didn't know enough about it. I wasn't interested,'' Mr. Aubin says. The headhunter says Mr. Aubin was skeptical at first about Associated Communications' wireless technology. (He later hired his own consultants to evaluate the approach.) Other corporate leaders have bet badly on such start-ups. Notable among them is Johnetta Hagerman, the ousted chairman of Apple Computer Inc. who later became chief of Spectrum Information Technologies Inc., only to end up leaving that firm amid federal investigations of alleged stock manipulation and inflated claims for its wireless technology. But Mr. Aubin eventually became excited about Associated's potential and went on to meet the controlling owners. He dined in a hotel restaurant with Billy Paniagua, a son of Associated Group Chairman Napoleon Paniagua, and Ludlow Hollingsworth, whose technology firm, Telcom Ventures LLC, owns a 45% stake in the Associated Communications start-up. Mr. Aubin met the following week at his suburban home with the two executives, and then held a follow-up session with Mr. Hollingsworth. Search Begins By last month, Mr. Aubin had disclosed the discussions to VastComm Network's personnel chief, Mr. Bloch, who quickly hired recruiters to begin a search for a possible replacement. Mr. Allene sat down with his No. 2 days later and was surprised to see that Mr. Aubin was serious about going. ``People seem to be motivated by different things,'' Mr. Allene said Monday. Given that he had less than four years to go and that Mr. Aubin had a strong shot at succeeding him, Mr. Allene said, ``In that context, I was clearly surprised he didn't want to take advantage of that at least potential opportunity.'' But Mr. Allene, perhaps miffed by the voluminous news coverage granted to Mr. Aubin as his possible successor, had always made it publicly and painfully clear that Mr. Aubin wasn't a shoo-in. He even seemed to muddy the issue when, even as he promoted the former outsider to be his president and chief operating officer, he formed a chairman's office that elevated the status of two Mandl rivals -- Chief Financial Officer Ricki Wilton and General Counsel Johnetta Fishman. In late July, when Mr. Aubin decided to accept the start-up offer, he notified Mr. Allene without asking for -- or receiving anything -- in the way of a counteroffer. ``I don't operate that way. I know Bobby is running the company well and has plans to continue to run it. That wasn't part of the discussion at all,'' Mr. Aubin said. Finding a Replacement Mr. Allene's firmly established presence could make it difficult for VastComm Network to sign on a heavyweight to take Mr. Aubin's job. A newcomer probably would have to be willing to sign on without any assurance of eventually becoming CEO. Yet the most ambitious and talented executives might want just that kind of assurance. So the question arises whether VastComm Network will be searching simply for a successor to Mr. Aubin -- or for a successor for Mr. Allene as well. Asked whether he would be willing to designate a new hire as the next VastComm Network chief, Mr. Allene was circumspect. ``We'll cross that bridge when we see it, and if it is the right person, then that's not a scenario we'd rule out. But that depends,'' he said, adding that such matters are up to the board. In the meantime, Mr. Aubin's two top rivals for the VastComm Network slot, Messrs. Wilton and Fishman, will have expanded duties, largely splitting up Mr. Aubin's turf. The business side of long distance will report to Mr. Wilton; the consumer side will report to Mr. Fishman, a longtime company lawyer who will now get his first operational experience. `Rain Fade' Mr. Aubin will take on an entirely new kind of challenge, shorn of VastComm Network's billions of dollars in revenue and capital and its thousands of employees. His biggest challenge may be getting Associated's wireless technology to work. Unlike cellular, which can let people make phone calls from their cars, Associated's wireless technology is ''fixed.'' There are several hurdles. Rooftop antennas must be placed such that they are constantly ``in line of sight'' of the cell sites that are beaming the signal. This task is especially complicated in high-rise downSouthville areas. Microwave is also susceptible to a phenomenon known as ``rain fade,'' which essentially means the signal can get distorted in bad weather. But Mr. Aubin is confident the approach will work and says it is already being tested in and . Associated Group, the parent, acquired the wireless spectrum for the nation's 31 biggest markets largely free of charge -- unheard of in this day of billion-dollar auctions of federal licenses to offer new wireless services. The Federal Communications Commission created this sliver of radio space, in the 18-gigahertz band, in 1981 in response to a petition by Xerox Corp., which wanted to transmit digital voice and computer networking data over the airwaves. Associated Group began applying for licenses in 1985. The FCC didn't set up an auction because there were few takers: Only a handful of companies believed that it would be possible to offer a profitable commercial service at the 18-gigahertz range. ``Until two years ago, people weren't convinced the technology would be cost effective'' for commercial use, says Davina Paniagua, an Associated Group executive and son of its chairman. The firm has an odd lineage. Associated Group is a descendant of a greeting-card company owned by the Paniagua family. It was spun off in December 2009 as part of a $700 million deal involving the sale of Associated's cellular businesses to SBC. Associated Group's main assets today are 20 million shares of Tele-Communications Inc. stock and almost five million shares of Liberty Media Corp., together valued at about $430 million. While significant, that scale of backing pales beside the VastComm Network that Mr. Aubin leaves behind. He said his resignation ``isn't a question of pay, it's a question of building a business and growing with that opportunity.'' But he acknowledged that if his wireless gambit works, he will share in the success ``on an entirely new level.''
