Tim Donahue

President and Chief Executive Officer of Nextel Communications

Born Timothy M. Donahue, c. 1950; married Jayne. Education: John Carroll University, Cleveland, OH, B.A., 1971.

Addresses:

Office—Nextel Communications Inc., 2001 Edmund Halley Dr., Reston VA 20191–3421.

Career

Began career as owner and operator of Ben Franklin craft stores; joined MCI Communications Corp., 1984; president, paging division, McCaw Cellular Communications, 1986–89; president, U.S. central region, McCaw Cellular Communications, 1989–91; president/general manager, AT&T Wireless of N.Y. and N.J. and also president/general manager, AT&T Wireless, northeast operations, 1991–96; president and chief operating officer, Nextel Communications, 1996–99; president and chief executive officer, Nextel Communications, 1999—.

Member:

Board member, Eastman Kodak Co., 2001—.

Awards:

Ernst & Young Entrepreneur of the Year, Networking and Communications division, 2003; Ernst & Young's Greater Washington Master Entrepreneur of the Year, 2003.

Sidelights

In the competitive and sometimes cutthroat world of telecommunications, one business leader has put his company in front of the pack. That person is Tim Donahue, president and chief executive officer (CEO) of Nextel Communications. In 2003, the Reston, Virginia–based wireless carrier enjoyed its best year ever, adding 2.3 million subscribers. That year, Nextel also had earnings of $1.47 billion, leaving other cell–phone service providers scrambling to copy the company's business practices. Under the direction of Donahue, Nextel has shed its underdog status. In an article posted on http://The Street.com, Scott Moritz summed it up best when he wrote that Nextel had "rebounded from being the wireless industry's David to the Goliath of business services."

One of the people behind Nextel's success is Donahue, who earned a bachelor of arts degree in English literature in 1971 from John Carroll University, located in Cleveland, Ohio. Donahue began his career in the business world as an owner and operator of retail outlets in the Ben Franklin craft–store chain. While working at Ben Franklin, Donahue realized that customer satisfaction was the key to any successful business venture. In time, Donahue transferred that knowledge to the communications field, joining MCI Communications Corp. in 1984. In 1986, MCI sold its paging division, where Donahue worked, to McCaw Cellular Communications and Donahue became president of the paging division at McCaw. In 1989, Donahue was named McCaw Cellular's president for the U.S. central region. However, in 1991, AT&T bought McCaw and renamed its new acquisition AT&T Wireless. Donahue stayed on, becoming president and general manager of AT&T's New York and New Jersey wireless services. In time, Donahue was named president and general manager of northeast operations for AT&T Wireless.

In 1995, Craig McCaw, the man who pioneered McCaw Cellular, hooked up with Nextel and by 1996 hired Donahue, his former employee, to be president and chief operating officer. By 1999, Donahue was Nextel's president and CEO. At the time, Donahue took over what some considered a sinking ship. The company had yet to turn a profit. With a clear vision of what Nextel could become, Donahue initiated a new concept for the company—"Be first, Be better, Be different"—which drove every business decision. Instead of trying to copy what his competitors were doing, Donahue charted a new path. "In an industry overrun with competition, Chief Executive Timothy Donahue figured he had little to lose by being different," business writer Scott Woolley remarked in Forbes.

Under Donahue's direction, Nextel positioned itself as a different kind of wireless carrier, eager to launch services others did not provide. Nextel turned its phones into walkie–talkies, allowing customers to connect to business associates, friends, or family who were also Nextel users without placing a phone call. Nextel was also the first to offer packages with no roaming fees outside a customer's home area and also began rounding bills to the nearest second instead of rounding up to the next minute, a practice most carriers at the time used but which made customers feel cheated. Nextel was also the first wireless carrier to release Internet–ready phones, which allowed customers access anytime, anywhere, to e–mail, wireless–enabled Internet sites, and company databases. Another unique Nextel feature was eDispatch.com, which allowed business customers to use their phones to connect to their corporate website so they could find out things such as if a delivery had been made on time.

Nextel was also ahead of the pack when it released a new wireless phone in 2000 that could be used in 65 countries. The phone gave jet–setting executives the ability to have just one phone and one phone number no matter where they were. As soon as the new phone was unveiled, France Telecom ordered 10,000 of them for its customers. Under Donahue, Nextel's customer retention rate rose due to his drive for customer satisfaction, culled during his years at Ben Franklin. According to Forbes, four out of five Nextel users will not switch to a different carrier.

As a manager, Donahue is known as a likeable people–person. During his time at Nextel, he used these skills to turn the place around. Looking at the numbers, Donahue's turnaround is apparent. When he joined Nextel in 1996, it serviced 100,000 customers; by the start of 2004, the communications company boasted 13 million customers. Nextel also turned a profit for the first time in 2003—and the industry took notice. Frost and Sullivan named Nextel the 2003 Mobile Communications Company of the Year and BusinessWeek placed Nextel atop its 2003 list of the top 100 IT companies. That publication also named Donahue one of the "best managers" around. He also earned accolades from Ernst & Young, who named Donahue its Entrepreneur of the Year for 2003 in the Networking and Communications division.

Nextel itself took note of Donahue's accomplishments and in the summer of 2003, offered him a lucrative contract extension, which raised his salary by 43 percent. While his base salary stood at $1 million, the contract included bonuses and stock options that could potentially make Donahue tens of millions of dollars through 2006, when the contract ends. But Donahue does not take all of the credit. In a press release, quoted on The http://www.Street.com's website, Donahue thanked his staff for the success. "At Nextel, I'm surrounded by the most dedicated, innovative and results–driven team I've ever seen."

Despite Nextel's recent gains, long–standing success is not guaranteed. In recent years, telecom companies have been gobbling each other up and consolidating in an effort to streamline services and make money. MCI WorldCom bought Sprint, Bell Atlantic joined forces with GTE, and Cingular Wireless acquired AT&T, but Donahue believes Nextel can stand alone. "At the end of the day, there will be four or five [wireless] players," Donahue told BusinessWeek's Amy Borrus. "We will be one of them."

Sources

Periodicals

BusinessWeek, April 10, 2000, p. 92; January 13, 2003, p. 70.

Forbes, January 12, 2004, p. 172.

Washington Post, June 11, 1999, p. E1.

Online

"Nextel Communications' Tim Donahue Named 2003 Ernst & Young Entrepreneur of the Year Award Winner," Ernst & Young, http://www.ey.com/global/content.nsf/US/Media_–_Release_–_11–22–03FDC (February 16, 2004).

"Nextel Touts Great 2003, but 4Q Profit Dips," Telephony Online, http://telephonyonline.com/ar/telecom_nextel_touts_great/index.htm (February 26, 2004).

"Rich Reward for Nextel Chief," http://TheStreet.com, http://thestreet.com/tech/scottmoritz/10107363.html (February 16, 2004).

Additional information was obtained through correspondence with Nextel media relations in March of 2004.

—LisaFrick