President and chief executive officer, Nextel Communications
Education: John Carroll University, BA, 1971.
Career: MCI Communications Corporation, 1984–1986; McCaw Cellular Communications (now AT&T Wireless Services), 1986–1989, president of paging division; 1989–1991, president of U.S. central region; 1991–1994, president of northeast region; AT&T Wireless Services, 1994-1996, president of northeast region; Nextel Communications, 1996–1999, president and COO; 1999–, president and CEO.
Awards: Networking and Communications Entrepreneur of the Year, Ernst & Young, 2003; Greater Washington Master Entrepreneur of the Year, Ernst & Young, 2003.
Address: Nextel Communications, 2001 Edmund Halley Drive, Reston, Virginia 20191; http://www.nextel.com.
■ As of 2004 Tim M. Donahue was the president and chief executive officer of the Reston, Virginia–based Nextel Communications, a unique cellular-phone company with a network of private mobile-radio systems favored by the group of customers considered by industry experts to be the most highly coveted: business clientele. From companies employing delivery drivers, construction workers, and taxi drivers to those involved in government and security contracts, the backbone of the Nextel market is willing to pay the highest prices for communications products and services in order to be assured of the utmost reliability.
In the mid-2000s Nextel Communications—a company that went public under the name Fleet Call in 1992, becoming Nextel in 1993—was a major provider of fully integrated wireless-communications
services and had built one of the largest all-digital wireless networks in the United States. Under the leadership of Donahue, Nextel was providing service to 95 percent of Fortune 500 companies—as of February 2004, 90 percent of its 12.3 million users were business customers. Corporations and government organizations thrived thanks to communication provided by Nextel Wireless Business Solutions and Customer Network Solutions. Nextel Communications and its affiliate Nextel Partners were serving 293 of the 300 major U.S. markets where approximately 250 million people worked and lived.
Nextel's customers made use of Digital Cellular, a service providing high-quality calls and guaranteed message delivery in the protected, secure environment available throughout the Nextel network. The software code used in the Nextel system was based mostly on Java and Wireless Application Protocol, providing specialized data applications for business markets such as construction and building trades, education, field sales and service, financial services, government, health care, manufacturing, real estate, emergency services, and transportation and distribution.
The educational and early work background of Donahue bore no relation to either telecommunications or technology. Upon his father's insistence Donahue studied English literature and Shakespeare at John Carroll University in University Heights, Ohio, graduating in 1971. A few decades later Donahue attributed much of his business success to his education, which had given him the confidence to speak in public in a variety of situations, honed the skills he would need to become a leader, and evoked his ability to make personal connections with people.
Little is known about Donahue's early career. He entered the telecommunications industry in 1984, when he gained employment with MCI Communications Corporation. He started his wireless career with the company now known as AT&T Wireless Services—formerly McCaw Cellular Communications—in 1986 as president of the paging division. In 1989 he was named president of the U.S. central region; from 1991 to 1996 he served as the northeast regional president. Donahue began his career with Nextel in January 1996 when he was appointed to be the company's president and chief operating officer; he became Nextel's president and chief executive officer in 1999.
When Donahue began his term of employment at Nextel, the company was not meeting the standards set by the competition. While other wireless operators were flying high on the technology bubble of the mid-1990s, Nextel was almost deflated. The company had concentrated on production of push-to-talk cellular phones, which were popular in the early 1990s but less so a few years later. Push-to-talk technology allowed users to connect to each other with only a push of a button—that is, with no dialing, ringing, or waiting. At this time Donahue first stated the philosophy that he would continue to use at Nextel for years to come: "Be first, be better, be different" (March 24, 2004). Donahue hoped to ascertain the market segment in which Nextel would most reasonably specialize by asking such pointed questions as, "Who are our customers?" "How do we attract them?" and "How do we keep them?"
The questions were answered when Donahue decided to target the underserved commercial and enterprise (business-to-business) markets. In 1996 Donahue put forth high-end specialized data applications along with a variety of top-of-the-line communications services aimed specifically at corporations with extensive, non-stationary work forces. The intent was for businesses to realize that with Nextel services, waste management supervisors, for instance, could locate all of the company's garbage trucks at any given time; swimming pool contractors could use Nextel technology to determine the number of gallons of water in a spa; and carpenters could calculate the rise and run of a staircase.
Donahue arranged for software developers such as Etrieve and Mobilesys to sell or rent their software (usually on a monthly basis) directly to Nextel customers (with Nextel receiving a percentage of the profits). He formed alliances with such industry leaders as IBM, EDS, Microsoft, and Sun Microsystems in order to provide unique services that customers could only receive through Nextel products. In addition, Donahue made it a priority for his sales force to understand and be trained in the use of the specific applications and products its customers needed.
Under the direction of Donahue, Nextel implemented a digital technique invented by Motorola called iDEN (integrated digital enhanced network), which was unique from other wireless techniques such as TDMA (time division multiple access), CDMA (code division multiple access), and GSM (global system for mobile communications). Nextel's iDEN, which was introduced in 1996, was an integrated digital-technology platform providing superior transmission and audio quality for such services as regular dialed calls, two-way radios and instant messaging, data terminals, and dual capabilities with other companies' wireless platforms.
Donahue chose to use Direct Connect (an exclusive Nextel feature where every Nextel phone has a special button that lets the owner connect instantly and reliably to any Nextel customer in the local coverage area) for three reasons in particular. First, the technology was capable of establishing connections in about one second, compared with the two- to nine-second connection time found with other services. Second, Direct Connect allowed the largest number of characters to be sent per message: five hundred (in 2002) versus the average of 160 allowed by competitors. Third, Direct Connect would allow businesspeople to communicate with associates, family, and friends without placing actual phone calls. Most financial and telecommunication analysts agreed that the service Donahue created at Nextel was superior to that of the competition.
Nextel became especially well known for its Direct Connect walkie-talkie phones. Donahue expanded Nextel's operations by ensuring that its communication devices were technologically superior to the competition and by identifying and concentrating on niche business users who traditionally spent more time using mobile communications than the average customer. As of February 2004 the average Nextel customer paid $71 per month before taxes and most additional fees, as compared with the industry average of $50.
The Direct Connect system, offered by Nextel since the middle of the 1990s, was especially popular with companies and government agencies involved in natural security thanks to its private, exclusively owned technology that was impossible to illegally access. Donahue expected its importance to grow well beyond the 10 percent of Nextel customers with high-security needs as of February 2004; among these customers were the Central Intelligence Agency, the Federal Bureau of Investigation, and the U.S. Senate.
Donahue completed nationwide Direct Connect service in 2003, such that a user on the East Coast, for example, would receive the same performance whether talking to someone on the West Coast or down the street. In 2004 Donahue planned to introduce new features to Direct Connect, improving voice quality, adding video functions, and setting up Web-based directories for dynamic conference lines. While Donahue advanced Nextel's established push-to-talk features, the competition still struggled to introduce push-to-talk for the first time. Donahue was also developing plans to use satellite technology to deploy Direct Connect globally, which was very appealing to the fastest-growing customer sectors of government and public safety.
Before 2002 Nextel was just another company in the wireless phone business. By that year, with the competition struggling, Nextel's accomplishments over the preceding years became evident. Donahue felt that Nextel had become the leader in the United States with regards to data services in the wireless arena, pointing out that in 2001 Nextel, in conjunction with Motorola, was the first wireless company to launch Java-technology-enabled wireless phones in the United States. Mobile professionals could personalize and improve their phones with the latest business tools and network applications as well as improve the quality of their professional lives.
Later in 2001 Donahue had launched the Motorola iBoard, which let Nextel customers compose e-mail, organize address books and calendars, and work with Java-enabled applications—all from a wireless phone and a full-sized, foldaway keyboard. In late 2002 Donahue directed the successful launch of the handheld, wireless BlackBerry device, created by Research in Motion. The device offered a suite of Nextel wireless mobile solutions, including all-digital cellular service, e-mail, Direct Connect digital walkie-talkie service, numeric and text messaging, Nextel Online service, and Java technology.
By the end of 2002 Nextel had one million Java-capable handsets on the market. At this point Donahue saw Nextel's fundamental strength as its ability to initially sell cost-effective walkie-talkies to businesses, later upgrading services to include a wider range of data transmission capabilities.
Domestic revenues for Nextel in 2003 were $10.8 billion; the company had 12.9 million domestic digital subscribers and about 17,000 U.S. employees. Though Nextel was ranked fifth among the six national U.S. wireless carriers, it had been growing at the fastest rate of all six operations. As a result of Donahue's efforts Frost and Sullivan, a New York City consulting and market-research organization, named Nextel the 2003 Mobile Communications Company of the Year, and BusinessWeek ranked Nextel first in its 2003 Information Technology 100 list. Paralleling such honors for Nextel, Donahue was named the 2003 Entrepreneur of the Year in the Networking and Communications category and the 2003 Master Entrepreneur of the Year in the greater Washington area, both by Ernst & Young.
With Nextel focusing primarily on the business customer, Donahue found the company's average revenue per user to be the best in the industry; the company itself was profitable since 2001, unlike rivals such as Sprint PCS Group and AT&T Wireless Services. Overall, Nextel experienced record-setting financial results, with six straight quarters of positive net income as of the last quarter of 2003. Donahue built Nextel into a Fortune 300 company with a significantly reduced debt load and a subscriber base that had more than tripled between 1996 and 1999.
Donahue stayed focused on the business customer, developing products and services that others could not provide or quality that others could not match. Even during the very significant economic downturn during 2000 and 2001—which hit the telecommunications industry especially hard—Nextel did well. Nextel made its first full-year profit in 2002 with a net income of $1.66 billion. Donahue made a point of cutting debts during this time; in that year debt was reduced by $6 billion, from $16 billion in the last quarter of 2000 to $10 billion in the last quarter of 2002. Donahue expected that debt would decrease to $7.4 billion by the end of 2004. He emphasized that the company accomplished these financial feats thanks to quality products that increased productivity, most especially Direct Connect and its ability to link users nationwide almost instantaneously.
Donahue demonstrated value and return on investment to be important Nextel traits within the worldwide wireless-business market by concentrating on service over pricing. Nextel had a termination rate of 1.4 percent, the lowest in the industry—in the third quarter of 2003 AT&T Wireless had a termination rate of 3.3 percent. Donahue believed that Nextel could continue maintaining and adding to its customer base for many years to come. About four million users were added to Nextel's customer base each year from 2000 to 2002, and Donahue expected about 1.6 million more users in 2004. He stated that the company was nowhere near market saturation, as it had acquired business from only about 32 percent of construction companies, 19 percent of manufacturing companies, and 7 percent of service companies. Donahue expected the transportation and service industries to be two especially strong growth segments.
Donahue did not rest on past successes: in 2004 he guided Nextel to sponsorship of NASCAR auto racing. Donahue felt that hugely loyal racing fans would be attracted to Nextel's dedicated style of operations.
Donahue was a member of the board of directors of Eastman Kodak Company and NII Holdings. He was the chairman of the board of directors of Cellular Telecommunications and the Internet Association.
See also entry on Nextel Communications, Inc. in International Directory of Company Histories .
Hamerly, David, "Nextel Communications, Inc." Hoover's Online, http://www.hoovers.com/nextel/—ID__10950—/free-co-factsheet.xhtml .
"Keynote Sessions: Timothy Donahue, President and CEO, Nextel Communications," CTIA Wireless, March 24, 2004, http://www.ctiawireless2004.com/keynotes/keynote.cfm?calID=284 .
—William Arthur Atkins
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