Money from thin air

After graduating from Stanford in 1973, Craig McCaw took over Twin City Cablevision in Centralia, initially operating from a repurposed gas station with a modest team of six. Despite being the youngest, McCaw quickly instilled a sense of professionalism, introducing uniforms, repainting vehicles, and holding daily meetings. He married his college sweetheart, Wendy Petrak, who focused on their home life, while his mother played a pivotal role in the business.

Unlike many who saw the cable TV industry as stagnant, McCaw ambitiously aimed to expand his subscriber base from 4,200 to 10,000 without increasing his staff. His early attempts to acquire additional cable systems were thwarted by Gordon Rock, a savvy operator whose acquisition strategy McCaw adopted, learning to leverage purchases to avoid capital gains taxes.

In the late 1970s, Craig McCaw was rapidly expanding his company, McCaw Communications, through a strategy of aggressive acquisitions and bidding for new cable franchises, aiming for a subscriber base of 100,000. This growth was fueled by high leverage; the company would buy a cable system, enhance it with pay channels to boost cash flow, and then use the improved assets to secure further loans, repeating the cycle.

By 1980, the company had grown to 200 employees and nearly 30,000 customers, attracting significant investment, including an $8 million loan from the Bank of New York and a $12 million investment from Affiliated Publications for a 45-percent stake, which would dramatically increase in value over the years. With new capital, McCaw acquired an Oregon cable system, bringing the subscriber count close to the initial target. Craig McCaw then ambitiously reset the goal to 400,000 subscribers.

Craig McCaw's venture into the telecommunications industry began with a focus on cable TV and pagers, but his interest quickly shifted towards the emerging cellular phone technology.

When the Federal Communications Commission (FCC) announced in 1979 that it would issue two cellular phone licenses per city, McCaw formed Northwest Mobile Telephone to bid for licenses in Seattle and Portland. This partnership, later renamed Interstate Mobilephone Company, also pursued licenses in San Francisco, San Jose, Denver, and Kansas City. The licensing process was politically charged and expensive, with legal and administrative costs for Interstate exceeding $1 million amidst widespread skepticism about the profitability of cell phones.

Despite the initial excitement surrounding cellular technology, its market adoption was sluggish, and the costs of establishing a cellular network surpassed initial estimates, pushing profitability further into the future.

In this challenging climate, MCI Communications opted to divest its cellular operations, which included majority interests in six markets and minority stakes in five others, setting the price at $120 million.

McCaw Communications, not tied to any of MCI's competitors and willing to meet the asking price, faced the hurdle of not having the necessary funds. Initially turning to Salomon Brothers for financing through the issuance of high-interest junk bonds, McCaw eventually sought the expertise of Michael Milken at Drexel Burnham Lambert when the former failed to secure the needed capital.

Craig McCaw, a visionary in the telecommunications industry, adopted a unique philosophy towards criticism and external opinions. He believed in insulating himself from others' perceptions, focusing instead on pursuing what he believed was right, guided by his own moral compass.

This approach was crucial during the 1980s when skepticism surrounded his decision to keep McCaw Communications independent amidst a landscape where many expected it to be acquired by larger entities. Despite the prevailing doubts and the challenging financial landscape of the cellular market at the time, McCaw's strategic foresight and deal-making acumen began to shine through. He ingeniously negotiated deals that provided him with significant leverage over his partners, a move that would later be recognized as a masterstroke in the industry.

Craig McCaw's ambition to create a national cellular service faced significant challenges, particularly in securing coverage in New York City and Los Angeles.

To overcome these obstacles, McCaw Communications enlisted British Telecom's support, which invested $1.5 billion for a 22-percent stake.

Efforts to merge with LIN Broadcasting, which held crucial cellular licenses, initially failed, leading to a hostile takeover bid.

The ensuing battle with BellSouth in 1989 saw McCaw's offer increase to $154.11 per share for a 51-percent stake in LIN Broadcasting, totaling $3.4 billion.

Craig McCaw, after selling McCaw Cellular and declining an invitation to join AT&T's board due to its stifling environment, remained keen on the telecommunications sector.

Spotting an opportunity with the FCC's auction of PCS licenses, a new digital wireless technology, McCaw formed ALAACR Communications and made significant bids totaling $800 million for licenses across various cities.

Concurrently, he engaged in negotiations with Morgan O’Brien of Nextel, a company acquiring SMR spectrum licenses at bargain prices. McCaw struck a deal to invest up to $1.1 billion in Nextel for effective control, steering the company towards national coverage. Nextel's stock surged 25% with the announcement of McCaw's involvement.

Craig McCaw, known for his innovative ventures in telecommunications, was simultaneously working on Teledesic while not taking a day-to-day role at Nextel.

Teledesic, a fusion of "telephone" and "geodesic," aimed to revolutionize global communications through a network of 840 satellites, with an additional 80 as backup. This ambitious project sought to provide high-end communication services comparable to land-based systems but accessible anywhere in the world. The cost was formidable, considering the price tag of a single satellite and the limited number of launches per year.

Despite the presence of competitors like Motorola's Iridium and Celestri systems, Globalstar, Canada's Odyssey, ORBCOMM, and SkyBridge, Teledesic distinguished itself with a focus on broadband communications, enabling services like teleconferencing and high-speed data transfer globally. Craig McCaw's strategy centered on creating value, a philosophy shared by Teledesic's CEO, Russell Daggat.

Craig McCaw, a visionary in the telecommunications industry, has consistently demonstrated a knack for identifying and capitalizing on emerging opportunities.

His approach to business is characterized by a blend of strategic foresight, delegation, and risk-taking.

McCaw's journey began with significant investments in Nextel and Teledesic, but his ambitions didn't stop there.

In 1994, he founded FiberLink with a $55 million investment from his own pocket, aiming to revolutionize the fiber optic cable market.

This venture, later renamed NEXTLINK, quickly expanded, offering competitive local and long-distance services and eventually going public with a valuation that significantly exceeded McCaw's initial investment.