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New CEO enters as Qwest faces stiff competition

Telecom veteran Edward Mueller has been named the new chief executive of the smallest of the major U.S. phone companies.

Qwest Communications International on Sunday named Edward Mueller, a former CEO of Ameritech and Williams-Sonoma, as its new chief executive and chairman.

Mueller, 60, is taking the helm at Qwest as the company continues to regain its footing after the telecommunications boom and bust of the early 2000s. Mueller replaces Richard Notebaert, 59, who announced his retirement in June.

Notebaert took over at Qwest in 2002 when the company was . He was the replacement for then-CEO Joseph Nacchio, who was sentenced last month to six years in prison for insider trading.

Edward Mueller
Edward Mueller

Over the past five years, Notebaert has made a series of cutbacks that have reduced Qwest's debt by about 40 percent. He also helped guide the troubled company in 2006 to its first year of operational profitability.

Even though Denver-based Qwest is in much better shape than it was five years ago when Notebaert became CEO, Mueller will still have his work cut out for him. Qwest, the smallest of the major U.S. phone companies, faces stiff competition from cable operators that are now offering phone services along with broadband Internet connections.

Unlike other major phone companies--AT&T and Verizon Communications--Qwest has not aggressively gone after the television market. Instead, the company has partnered with satellite provider DirecTV to offer television as part of a "triple-play" package.

Mueller (pronounced "Miller") has an extensive telecommunications resume, having served from 2000 to 2002 as CEO of Ameritech, a subsidiary of SBC Communications, the regional phone company that is now part of AT&T.

Mueller joined SBC Communications in 1968 and held several top positions at the company during his tenure, including president of SBC International Operations from 1999 to 2000 and president of Pacific Bell from 1997 to 1999. He became CEO of retailer Williams-Sonoma in 2003 and left that position in July 2006.

Notebaert, whom Mueller is replacing, also served as CEO of Ameritech from 1994 to 1999. He announced his retirement from Ameritech in October 1999, three days after the company was sold to SBC Communications for more than $70 billion.

In his new post, Mueller will receive an annual base salary of $1.2 million and be eligible for a target bonus of 200 percent, according to Qwest's filing with the Securities and Exchange Commission.

For the remainder of this year, Mueller will receive a guaranteed minimum bonus of about $947,000.

Qwest also awarded Mueller grants of 896,000 "free" shares of restricted stock.

The telecommunications company, which has seen its stock steadily slide from its 52-week high of $10.45 per share in early June to $8.45 a share in early trading Monday, will give Mueller until August 2010 to propel the company's stock to an average closing price of $11.50 for 90 consecutive trading days. If he is able to keep the stock price at that level for at least a three-month period, he is eligible to receive the "free" 896,000 shares anytime beginning August 10, 2010.

If he fails to do so within that three-year period, Mueller will get one additional year to make another attempt, said a Qwest representative, who noted the additional year was new to the company's compensation package and an item that Mueller negotiated into his contract.

Mueller, under the same 90-day parameters, would then need to hit a higher target price of $12.65 a share by August 10, 2011.

In addition to the stock grant, Mueller is also receiving about 2.8 million stock options as part of his compensation package. Those options, which vest over time, can be purchased by Mueller for $8.37 per share.

In addition, Qwest will install and maintain a home security system at Mueller's residence and give him access to the corporate jet for all work and personal travel. Company executives travel on the corporate jet for business because of its efficiency and for personal trips for enhanced security, a Qwest representative said.