Serialisation: The Great Telecoms Swindle - part 4

In this fourth excerpt from their book The Great Telecoms Swindle, Keith Brody and Sancha Dunstan consider the intellectual shortcomings of those running the show and other factors in the sector's demise...

When we look at our own personal experiences within the telecommunications industry, we are not altogether surprised by the crash, even by the speed and the scale of the disaster to date. If two journalists possessed of some small measure of wit and perhaps an average, but no more, intelligence could sense that something was very wrong and that the market was heading for a serious fall (which we both felt and wrote long before things got out of control) then it should clearly not have been beyond the ken of the Harvard MBA pied pipers who led their companies over the cliff to make adequate provision in advance for the realities of the past 24 months.

Time and time again, we conducted interviews, read press releases and attended industry gatherings where it was clear that style outstripped substance by a comfortable margin. Whether we particularly minded being taken for fools on a personal level, it was clearly obvious much of the time that you either swallowed the telecoms myth lock, stock and barrel or you were on your own. As almost everyone involved with telecoms had a vested interest of some sort in swallowing the myth, few people exercised a great deal of judgement and thus the rapid nature of the fall was facilitated.

As we have said, the telecoms market was managed, in large part, by both intellectual and strategic lightweights and it is thus on its own collective shoulders that the greatest share of the blame for the crash must rest.

Additional blame lies also with those who failed to police the market effectively. Parties, in particular some legislative and governmental types who now see an opportunity to effectively exploit the crash for their own electoral benefit are, to us, sickening, whether or not they are causally responsible for what happened in the first place. What, for instance, should one make of the self-congratulating politicians who loudly and belatedly decry the 'corrupt' nature of Wall Street analysts today and their resulting negative impact on the markets?

Did the activities of these analysts suddenly come to light only after the WorldCom crash had taken place? Hardly. The purpose of regulation and legislation is surely to set protective and benevolent laws in advance of a problem occurring - not to win cheap votes by being ostentatiously seen to shut the barn door after the horse has bolted.

Congressional hearings in the US in particular, of the sort which WorldCom is presently enduring, prompt the image of a parade of congressmen-for-life, dinosaurs who grandstand on the back of crises the creation of which has to a great extent been the result of their own ineptitude in the past. No doubt they would say "How were we to know?"

The question of corporate ethics has been raised by many and, before the Swindle ends, it will be debated by many more. In so far as the real Swindle (at least where actual malfeasance is concerned) has been limited to very few players in the telecoms market, there is no reason to suspect there is a top-line ethical problem. There is no reason to believe that the boardrooms of the industry are widely peopled by criminals. Just incompetents, unfortunately.

What are the ethics of incompetence? Is it ethically wrong to be ignorant? Is it ethically wrong to fail to lead a company effectively? Probably not. Though it might be ethically wrong to fail to manage a company with due care. The sad truth is that one can act honestly at the same time as being manifestly incompetent, as the case of Marconi's George Simpson would appear to prove. He, more than WorldCom's Bernie Ebbers, seems to us to embody what the telecoms crash is really all about. People out of their depth. That some of them made fortunes in the process is merely the icing on the cake.

In a great many cases, and having worked in industries other than telecoms, what struck us in writing this book and thus in thinking about our experiences over recent years was, in the end, just how unimpressive the dramatis personae of the telecoms industry was. Our view is, sad to say, that the telecoms market in the past five years has had little real intellectual depth, little genuine leadership talent at its disposal. Of course, within the mix, there is real quality and the companies that have it at their disposal will ride the storm and flourish in the future. But that quality is in short supply and the lack of it is driving and has driven many companies under.

Anecdotally, this seemed most apparent to us when thinking back over the events and meetings we have attended and compare to them to the equivalents in other markets about which we have written. Time and time again we sat down at telecoms conferences to hear one vendor pitch his wares after another in lieu of offering an informed view, to listen to the same old faces say the same old things, and to rarely - if ever - witness serious co-operative debate or progress.

This was a market driven by sales pitch, run on the fuel of hype, careering towards an inevitable dead end of the sort which both guarantee. The telecoms industry in recent years seems to have failed to attract either the intellectual, the informed or the introspective and, in the absence of a high quality tier of senior management, its fall has been inevitable.

There are telecoms market companies that will weather the present storm and go on to better things, and among the chief executives of today, though they are in the minority, there are the Lord Weinstocks of the future. Of this we have no doubt.

We do not claim to be financial specialists and far be it from us to adopt a Grubman-esque pose and begin suggesting where the reader might invest his or her money or which are the horses to back. What we would say is that there are capable, well-run companies in the market, almost all of whom have depressed share valuations at the moment as a result of the wider crash, and who should offer real opportunity for those investors who have the patience and confidence to look for more than a quick buck.

Tomorrow: WorldCom lessons.

Part 1 - A swindle exposed - http://www.silicon.com/a57095
Part 2 - The false economy - http://www.silicon.com/a57097
Part 3 - Deregulation and glut - http://www.silicon.com/a57099