Déjà Vu All Over Again

Overland Park may soon hear a giant sucking sound: Sprint going the way of Hoechst Marion Roussel.
Sprint was the hometown phone company, a Fortune 500 big business that showered the town with charity fundraising sponsorships and lent its weight to such civic projects as restoring Union Station. Sprint employees were all around us, the good guys, building a billion dollar headquarters in Overland Park, spreading the joys of a wireless network and the pristine clarity of fiber optics. And when the big boss spoke, Kansas City believed him.

"We don't believe that a company can master the changes propelling our industry simply by increasing scale," Sprint CEO William T. Esrey said in the company's 1998 annual report. "We would rather lead than be large."

Throughout its history, Sprint never came across as a big, lumbering phone-company behemoth, clubfooted and content with protectionist regulation. It was a little company that started in Abilene, Kansas, back in 1899 and became part of the Kansas City community in 1966. Sprint made its mark by laying the nation's first digital, fiber-optic network, announced in 1984 and completed by 1986. In 1995, Sprint won the rights to Personal Communications Service (PCS) licenses nationwide, bragging that it could ensure the first coast-to-coast telecommunications route for voice, data, image, and video without interruption even if a cable was cut or an electronics failure occurred. Wireless communication was here for the masses.

Against that backdrop, Sprint meant innovation, risk-taking, and creativity -- plus smartness, signaled by the use of baby-boomer heartthrob Candice Bergen in its "pin-drop" TV commercials, which turned Sprint into a household name.

But not long after Esrey made his PR spiel about how the company would rather "lead than be large," it appeared Sprint was being led ... for stockholders' benefit and in the name of technological necessity. When the merger with WorldCom was announced in October 1999, Kansas City was stunned -- but in a sympathetic way, as if Sprint were just behaving oddly while under the influence of some powerful foreign attraction.

WorldCom chief Bernie Ebbers wanted a $129 billion deal with Sprint. He needed Sprint. WorldCom stock had languished through most of 1999, and Ebbers was a servant to his stockholders.

Sprint hadn't been "shopping itself"; instead, the impetus for the merger came from outside the company because of Sprint's assets, mainly its wireless PCS network, says Dr. Peter Eaton, director for the Center for Economic Information at the University of Missouri-Kansas City. Though it was number three in the telecommunications world ($20 billion in revenues for 1999), Sprint had a big corporate footprint in the wireless field (number five, with 6.7 million PCS subscribers) and WorldCom didn't.

As for WorldCom: A few days after the merger was announced, The New York Times called Ebbers an "unknown," noting that WorldCom had grown by buying some 40 companies and that Ebbers needed time to "learn to run what he had built."

From the sidelines, it all smelled of money. For Esrey, other senior executives, upper management, and plenty of other Sprint stockholders, including institutional investors such as mutual funds, pension funds, and 401(k) plans, it meant an opportunity to cash out or increase the value of the portfolio.

"It's driven by selfishness," says Eaton. "That's the way it's supposed to work: a market-driven system where you obey the signals of the market."

The market might have been happy, but Overland Park sat on the sidelines, like a water boy watching the big game, holding a bag of tax-incentive giveaways and embracing a naive belief that a global corporation would jot down the city on its "things to consider before merging" list.

Overland Park had courted Sprint since the early 1990s. Finally, in 1997, the city thought it had the knot tied. The city council authorized $1 billion in economic development revenue bonds (later raising it to $1.4 billion) for construction of the Sprint Corporation's 265-acre World Headquarters Campus. There were other goodies as well: a 50 percent break in personal property taxes, a 10-year property tax break amounting to $113 million, and sales tax exemptions of nearly $43 million.

"I think it was a good deal. Very smart. A no-brainer," says Dennis McKee, president of the privately run County Economic Research Institute (CERI).

Overland Park City Councilman Mike Lally might agree with the no-brainer part, but not as a compliment. "To have a company with this incredible success to ask us to use the city as a bank is outrageous," he says.

But Lally didn't press the point on the council. He says he's "not a total purist" when it comes to opposing tax breaks for development. "I see a need in areas that need redevelopment." Not unexpectedly, since Lally represents the older, northern part of Overland Park, supporting taxpayer subsidies for the high-end 119th Street corridor, where the Sprint campus is located, isn't in his playbook.

In a perfect world, the Overland Park/Sprint economic development playbook wouldn't change. The predictions CERI made a year ago would come true: By 2003 annual operations of the Sprint campus would generate more than "$6 billion in industry output throughout every sector of the Johnson County economy." Because of Sprint, more than 51,000 jobs would be created or retained, bringing $1.4 billion in annual earnings to Johnson County households.