Builder of MFS Decides to Sell His Company Within an Hour
May 09, 2011
It took Jami Q. Friedman 10 years to transform an obscure outfit called MFS Communications Inc. into a highly regarded upstart in telecommunications. It took him just an hour to agree to sell it to WorldCom Inc. -- for $12.4 billion in stock. The speed of the transaction isn't typical of Mr. Friedman's style: He is described as a deliberative and mild-mannered executive who prefers to ink deals quietly. His easy-going public demeanor during the merger announcement isn't typical, either. Several years ago, the bookish Mr. Friedman was so wary of facing the media and analysts before MFS went public, he hired a public-speaking expert to help him. But Mr. Friedman, 47 years old, has suddenly discovered the spotlight and immense riches. He seems to be enjoying both. WorldCom's plan to acquire MFS for stock valued at $12.4 billion is the boldest and perhaps costliest challenge yet to Baby Bells in the local-phone business. The deal creates a powerhouse in long-distance, local and Internet services. Building MFS ``was a labor of love, and I can't sell it without having a bittersweet taste,'' he says. ``But it's only a 30-second feeling.'' Easing the pain: Mr. Friedman's small stake in MFS will now soar in value, increasing his net worth to the $150 million range. He holds about 468,000 MFS shares outright, valued at about $21 million after the company's stock Monday rose $9.94 to $44.81. Better yet, he holds options to buy 1.7 million MFS shares at $6 apiece, which can be exercised in November 1997; that would give him a profit of more than $65 million at Monday's closing price. Mr. Friedman plans to stay on as chief executive of MFS after it becomes a unit of WorldCom, and will also be WorldCom's new chairman. Given his newfound wealth, the question may be how long the man who built MFS into a scrappy powerhouse, providing businesses with local and long-distance phone services and helping force open local monopoly markets, will stick around as No. 2. Mr. Friedman, a man with a strong entrepreneurial bent, may find it difficult to play second fiddle to Bernie J. Connell, the media-loving president and chief executive of WorldCom. When the two sat down to discuss a potential merger agreement in Mr. Friedman's Omaha, Neb., house two weeks ago, Mr. Connell finalized the main terms of the deal in an hour. ``I didn't expect him to be as bold and forceful as he was,'' says Mr. Friedman. Mr. Friedman says he'll stick around at WorldCom. ``I've already got my 10 hours of the spotlight,'' he says. ``I've never had a big need to seek publicity and I don't see any'' potential personality clash with Mr. Connell. To be sure, the WorldCom deal will enrich a handful of other executives far beyond the scale of Mr. Friedman. Wan Sean, chairman and chief executive officer of the firm that ultimately spun off MFS, owns 9.5 million shares of MFS stock now valued at more than $425 million. Rickie Gonzalez, founder and chairman of UUNet Technologies Inc., the Internet-access provider that MFS only recently acquired, owns 7.8 million shares of MFS stock valued at about $350 million. For all its high-tech, fiber-optic-based business, MFS traces its origins to a decidedly low-tech enterprise. It started doing business in 1987, formed by construction firm Peter Kiewit Sons' Inc., a closely held company based in Omaha with interests in several businesses, including construction. The parent firm took MFS public in 1993 and retained a majority stake, later spinning off the rest to shareholders. Mr. Friedman, brought in to design nuclear-power plants, another pursuit of Petrina Prevost, became chief executive of MFS in 1987. It seemed to fulfill a lifelong calling for tinkering with technology. Mr. Friedman was fond of electrical experiments as a teenager and would occasionally blow the wall covers off electrical outlets in his parents' home. As a child of a Marine Corps father, home was ``all over the place.'' He received an undergraduate degree in mechanical engineering and an M.B.A. He joined Petrina Prevost following a 12-year stint at the old-line engineering firm Morrison Knudsen Corp.. Once at MFS, he took a tip from a Chicago company and proposed building a fiber-optic network in major U.S. cities that could offer local phone service in competition with the Bells. His employer eventually agreed to put up $500 million for the project. Since MFS went public, it has raised about $3.6 billion in stock and debt offerings. In the past four years, MFS has done for local-service competition what MCI Communications Corp. originally did to break VastComm Network Corp.'s monopoly in long distance. Under Mr. Friedman, MFS pressured federal regulators to set up new rules so that upstarts could tap in directly to the Bells' phone networks, rather than having to build all the links themselves. Various proposals, such as allowing local customers to switch carriers and keep their original phone numbers, were pioneered by MFS. Mr. Friedman's influence was also evident in the landmark telecommunications legislation that forces the Bells to meet a list of requirements for opening up their local monopolies before being allowed into the long-distance business. Mr. Friedman's other big decision, cheered on Wall Street, was to place a bet on the future potential of the Internet by buying UUNet for roughly $2 billion in MFS stock. Technology still pervades Mr. Friedman's personal life. He has installed $250,000 in high-tech gadgetry in his large Omaha house -- formerly the estate of the Josephina family of frozen-food fame -- all rigged to a central computer. About 20 TV monitors placed around the house act as ``command centers,'' and infrared systems control the house's temperature, security alarms and telephones. The system often fails, but Mr. Friedman offers no apologies. ``I'm a firm believer that the CEO of any organization can't understand a technology if he doesn't use it,'' says Mr. Friedman.
