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The Challenge

A $25 million rural New York “independent” telephone company (Incumbent Local Exchange Carrier, or ILEC) with 24,000 lines and voice, internet, and video services experienced the resignation of its CFO on December 1 and the retirement of its CEO on January 1. The company had no other executives. It was in the midst of competition from Cablevision, installation of a new ERP system, and extensive Sarbanes-Oxley remediation efforts. It needed to stop or slow the erosion of access lines, meet 10K filing deadlines, and restore energy and morale.

The Board decided to bring in TEG as interim CEO and CFO while the search for the permanent officers was conducted. It chose TEG in order to obtain strategic direction and the beginnings of implementation during the interim period, in addition to day to day supervision and completion of SEC reports.

The Solution

TEG’s President, Tom Gray, filled the CEO role. Accomplishments during the four months of his leadership include:

  • Hired interim CFO (Ken Volz of TEG)
  • Assessed the company’s challenges: market, network, IT, finance, personnel
  • Developed vision, strategy, annual business plan, and obtained Board approval
  • Reorganized departments; hired new skills
  • Created disciplined vendor management
  • Launched successful aggressive price competition vs. Cablevision
  • Began softswitch-based IP product portfolio launch to new CLEC areas
  • Launched video network expansion
  • Implemented “Management System”, with objectives, project plans, metrics, incentive compensation
  • Hired new permanent CEO
  • Completed 10K and conducted Annual Shareholders Meeting including dissident shareholders
  • Joined Board of Directors

Results

First quarter line loss to competition decreased significantly and Operating Margin improved by 30% over the prior year. The new CEO is executing the TEG plan using the TEG Management System. Losses are expected to be halved in 2007, with breakeven in 2008 and at least a 5 to 10% EBIT margin in 2009.

For an article regarding the First 100 Days of this Operational Turnaround, published in The Journal of Corporate Renewal December 2008, click here.

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