Photo: Kris Kathmann
Long-time President/CEO of $40 million, two-state telecommunications company experiencing exponential growth.
There is far more to New Ulm Telecom than meets the naked eye. Far more to 57-year-old President Bill Otis, too.
Most Connect Business Magazine readers don’t realize New Ulm Telecom is a publicly traded company (NULM) that formerly owned 10 percent of Mankato-based Midwest Wireless, which sold in 2005-06 for more than $1 billion. Most don’t realize $40 million (2014 estimated gross revenue) New Ulm Telecom has an ownership footprint in 23 Minnesota and Iowa communities, including Sioux City, Hutchinson, Sleepy Eye, Springfield, and New Ulm. The company has nine wholly owned subsidiaries providing everything from voice, digital television, Internet, managed services, and wireless to computer sales and repair.
Most don’t realize.
They haven’t heard the story of Bill Otis becoming New Ulm Telecom controller/chief financial officer at age 23 and president/chief executive officer at age 27. He was board chair of Midwest Wireless during its colossal sale, and of Hector Communications Corporation, and has been a board member of United States Telephone Association, Minnesota Telecom Alliance, and of OPASTCO, an organization recently merging into NTCA—The Rural Broadband Association.
Today, most don’t realize he serves on the board of Alliance Bank, BroadBand Visions, Independent Emergency Services, and FiberComm, a young telecommunications company serving Sioux City, Iowa.
New Ulm Telecom and Bill Otis have flown under the radar. Most haven’t known—until now.
How would you like your name to appear on our cover?
My actual name is Billy, not William. My name is Billy Don Otis. When my dad was in the military during World War II, his best friend was a man named Billy, who was from the South. My dad’s first name was Donald. I always tease my mom that I don’t have a formal name. On legal documents, everyone always wants to put William down. If anything, my name has become a badge of honor. I’m not William and I won’t sign my name as William. (Laughter.) It’s not my legal name.
Your father, the man who named you Billy, what was he like?
My parents are from Minnesota’s southeastern hills, near Houston. My dad was very hard working and very black and white. I wouldn’t say he was strict, but fair. He was dedicated and loyal.
Obviously he was loyal to name his son after an Army friend.
My father worked for a co-op, ACE Telephone Association. He probably got into the business through his brother-in-law, who was managing the company. Eventually, he worked his way up through the company to being personnel and safety director. He passed away in 2006 at age 86.
You were introduced to the telephone industry early on. Were you the kind of kid who was hired at the age of 14 to do odd jobs?
I washed company vehicles, and for a summer job I also ran a plow that did install drops to main cables. At 16, in the early ‘70s, I was responsible for delivering ten thousand telephone directories in southeastern Minnesota by hanging them in plastic bags on mailboxes or on doors. In some towns, I hired other kids to work with me.
What did you pick up from your parents?
I picked up honesty, particularly from my dad. With him, you could make mistakes. He used to say if you aren’t making mistakes, then you aren’t doing a lot. My dad had something about him—I just didn’t want to disappoint him. (Pause. Deep emotion in voice.) Even as a teen, and when I was mad, I still had a deep respect for my dad. I still can hear him saying that trust takes a long, long time to build up, and can be destroyed with just one thing. Whether people like me or not, I would like to be known as honest. You know where I stand. I don’t play games or manipulate.
You run a publicly traded company. If you did something dishonest, eventually more than just your immediate staff or family would find out about it.
Absolutely. I probably have a tendency with my board towards over-disclosure. Many times I could give a board member a quick answer to a question or problem, but that wouldn’t mean they would really understand it. So I like saying the short answer is yes, and then take time to give the reasons why.
For a man who is careful about what he does and says, you sure took a leap of faith 25 years ago investing in the little cellular company that became Midwest Wireless. What you did was a gamble.
About 1988, our company had part ownership in four southern Minnesota cellular partnerships. There were other cellular partnerships in northern Minnesota. In 1988, the partnerships we were involved in hired Northwest Telecommunications to manage its operations, and through that company came Dennis Miller. Back then, cellular telephones were the size of boxes.
My selling point to my board at the time for entering into the partnerships was that the license was worth something. If nothing else, I said, we ought to be able to get our money back. The company began as Cellular 2000.
And in 2005-06, Mankato-based Midwest Wireless sold for more than $1 billion.
Technically, we were the second-largest shareholder, owning about 10 percent.
How did Dennis Miller and his team do it?
Dennis has an ability to sell ideas. He is on our New Ulm Telecom board today. One of his secrets was in hiring some very good people to run the back room. He brought in cellular companies from Iowa and Wisconsin. His personality enabled him to do all this. When some companies that owned Midwest Wireless wanted to sell out their shares in 2002-03, we bought additional interests in the company.
Dennis is a great guy. I have gone on fishing trips with him, and he’s the type of guy you don’t have to worry about in terms of increasing the tension in a room. He has the ability to defuse situations. I’ve seen him do that on our board. At Midwest Wireless, he had a board made up of top executives from ten companies from Wisconsin, Iowa, and Minnesota.
And every proposal Dennis presented was not going to please everyone.
He had the ability to step through boardroom divisions. Ultimately, he helped the board become much better at governance and helped see we each had to look beyond our own back yard and toward the long term. For example, one board member wanted to know why billboard advertising wasn’t in his area when his area was just as important. Through being on that board, I could see how you could grow something by looking beyond your footprint today toward what could be tomorrow.
When the company eventually sold in 2005-06 for more than $1 billion, obviously, New Ulm Telecom didn’t take home all $1 billion. How much were you able to take home and what did your company do with the money?
I became chair of the Midwest Wireless board in 2004-05, which meant I was chair when we sold. During that time, Dennis, myself, and a handful of others were sued personally by one of the owners of Midwest Wireless. I would not go through that ordeal again for anything. The company suing us wanted first right of refusal for any sale and more out of the deal. To this day, I’m not sure what they wanted. That’s public record.
Ultimately, we won the lawsuit. Because of the lawsuit and potential for conflict of interest, I had to leave the boardroom during all discussions about any proposed sale. If it had been up to me, I wouldn’t have given them a dime. (Laughter.) I firmly believed we were in the right. So there was some pain associated with the sale. But the sale itself was fun and exciting—all new. The dollar amounts thrown around were unbelievable. New Ulm Telecom ended up over time receiving about $82 million. Unfortunately, we had to pay taxes, so about 40 percent of that money disappeared with the remainder used for acquisitions and shareholder distributions.
You could say one of the biggest single beneficiaries was the government.
Absolutely. An opportunity came up just as the Midwest Wireless deal was closing. Mary Ellen Domeier was on our board then. She helped tremendously with strategic planning, governance, structure, procedures, and making sure we were doing the right things for the right reasons. We talked about exit strategies, growth opportunities, and organic growth, which we decided wouldn’t offer enough growth.
We decided, in part, to grow through acquisition. The first opportunity was for Hector Communications. They were a bigger company, so going after them was a scary proposition. They had ownership in Midwest Wireless, too. Hector Communications owned Sleepy Eye Telephone. For me to even think about borrowing $80 million was beyond my ability and comprehension. Ultimately, we became in 2006 one-third owners of Hector Communications along with BEVCOMM and Arvig. With our three companies sharing operations, I became board chair and president of Hector Communications and its subsidiaries. We ended up managing telephone companies in Sleepy Eye, Hanska, and Goodhue for seven years until December 31, 2012, when the three owners decided to spin off all the companies. We ended up with about 20 percent of Hector operations. Last year, 2013, was the first year those spin-offs were fully blended into our operations.
We also took part of the “Midwest Wireless” money to purchase Hutchinson Telephone, a deal that closed on January 4, 2008.
Take me through your career path.
After graduating from Winona State in 1980 on a Saturday, I literally started working for 3M in St. Paul as a cost accountant the next Monday. I was married and we had a child on the way. I would have told you then I would never be working for a telephone company because I had watched my dad work long and hard days.
While there only a year, I received a telephone call from a CPA firm that audited many telephone companies, including New Ulm Telecom. They asked if I was interested in a controller position there. Before the interview, I wouldn’t have been able to tell you where New Ulm was. I met and had lunch with the full board and received a job offer. I was told there was no reason to believe I couldn’t be running the company down the road.
They said that? And you were only 23 at the time?
Yes. Ultimately, I decided to take the job. I became the general manager at age 27.
You were so young—you must have been scared to death.
It was a much smaller company then. I had good mentors, especially Richard Rodenberg, who helped me get through a number of events. At first, I didn’t know what I didn’t know, and there was a lot I didn’t know. I probably should have been more afraid, but at least I knew enough about the plant operations because of having worked for ACE Telephone.
Did you call your dad for advice?
I would call my dad for advice. One time, I was thinking about buying company stock and asked what he thought. He said, “I think you’ve asked yourself the right questions.” Then I pressed him more and again asked what I should do. He said, “It’s not my decision. You have to live with the results, not me. Therefore you get to make the decision.”
Another time, I said to him, “While I was growing up, you tried telling me things so I wouldn’t make the same mistakes you made. There were times I didn’t listen and made mistakes. So now I’m ready to take your advice.” He said, “I’m proud to say you don’t need my advice now because you’re asking all the right questions.”
As for New Ulm Telecom, in terms of making decisions, you have to have the right people in the right places.
You’re an accountant and not an electrical engineer or a salesman.
I trust in a lot of people and they trust me. When I became general manager, I made a vow to the board and they made the same vow to me. The vow was we have no surprises. I do everything I can so that you aren’t surprised when something happens. I asked them for no surprises back. There is a deep level of trust between management and board. You have to have that—I have to have it. When organizations don’t have trust, they break down. Trust issues are huge to me. I get that from my parents. If you don’t have trust, you really don’t have anything.
Richard Rodenburg, who was a board chair. He didn’t work in the industry or company, but I respected and sought after his help. He was the one who told me I couldn’t leap every time. What I mean is, when I was younger, I often wanted to go from point A to Z right away. I’m more of a black and white person. If I’m at Point A and if I know I’m going to Z, I thought, why mess around? Why not just get there. Because of thinking like this, I needed people around me, like Richard, who were far more process-oriented than I was. To develop staff, you have to go step by step.
I think I do relatively well today with people, such as one-on-one, in groups, and at our annual meeting. Am I totally polished? No. There are people who are much better speakers. I have the ability to build rapport with people, but not to pull the wool over anyone’s eyes. At our annual meetings, for example, I don’t try to sugar coat or skirt over tough issues. I try being up front and honest. I believe that comes through in public. That approach has served me well over the years, with shareholders, customers, board members, and industry.
Tell the scope of your company.
We have networks, such as fiberoptics, from Windom to Hutchinson to Mayer, and connections to Goodhue. We have quite a fiber network to Redwood Falls. We serve 23 different communities, and have voice, broadband Internet, video, Internet protocol, and IT services. We do data storage. We are growing and transitioning to the cloud with IP format, similar to other companies in our industry.
What cities are you in?
We are in Hutchinson, Litchfield, Redwood Falls, Aurelia (Iowa), Goodhue, Bellechester, and Sleepy Eye, for example. We own 18 percent of a competitive local exchange carrier (CLEC) in Sioux City (Iowa). Hutchinson and New Ulm are our larger communities. You have to add in the Klossners and Courtlands of the world to get up to 23. We have almost 150 employees.
Do you look at Enventis in Mankato as a competitor, an equal, a big brother or a role model—or do you pay much attention to them at all?
That’s quite a range. There are times when they are customers, partners, and competitors. There are times when we are putting together a network through a transport and go in with them the last mile, for example. There are times when they may be going after one of our business customers. That happens in many industries. I believe John Finke runs a good company.
When you partnered in Hector, you partnered with BEVCOMM and Arvig. Did you have a good relationship with them before?
The Eckles family owns BEVCOMM and I already knew and trusted them, but I didn’t know the Arvigs as well. Essentially, we were three companies wanting to do the same thing and none of us could do it on our own. Ironically, if wanting to make a similar acquisition today, all three of us probably could do it independently. We could leverage our way through the deal. We probably couldn’t do anything else but that deal, but we could do the deal. That partnership allowed us to get to know each other intimately, which was important. In board and employee situations, there are times you don’t agree and have to work things out.
I would call your stock thinly traded. Are there advantages to having it that way?
There can be a delay buying and selling our stock. We trade over the counter. One disadvantage of having thinly traded stock is you aren’t necessarily going to get institutional investors to come into your company, but maybe that can be a benefit because of not having people trying to push you a certain way quite as hard.
Have you had people wanting to buy your company?
Over the last 30 years we have had perhaps a half dozen inquiries, but no actual offers. Many years ago, before I came on here, a company tried, but its offer was voted down.
What are the big trends in your industry?
The largest trend is the conversion from a switched network to the cloud or IP, where voice becomes an application. I don’t think our circuit-switch network will totally go away because there are uses and benefits. For example, when your power goes off that network still works.
It’s all data now. Voice is data, video streaming is data, your cable TV is data, the Internet is data—it’s all data. It’s just all being reconfigured whether it comes out as a picture or voice or something else. IP (Internet Protocol) is an efficient format. If having known in the past how the Internet would change, and the trends involving it, I would be a billionaire.
Right now, less than half our revenues come from our landline business, and over half is from Internet and other sales, such as video. Going back 20 years, the vast majority of our revenue then was landline.
What can you do to slow down the decline of your landline business?
We bundle together different services. We’ve also been emphasizing that when your power goes off, your landline still works. The traditional voice line is still a great product. It’s just that millennials don’t talk. They text. But if you don’t want a telephone line, we are right there with video, the Internet, and wireless service that can include broadband. With wireless, we serve 12 communities. As we upgrade our services, we don’t keep expanding with copper. If copper needs replacing, we use fiberoptics.
In 1999, we had revenues under $12 million. This year we are near $39 million. We have done well and are growing. When starting a competitive local exchange carrier (CLEC), we used to look at the bottom line. Now we focus more on the cash flow and EBITDA, simply because of the way accounting rules are today. In starting new ventures, we look for synergies, a good deal, and the acquisition of cable systems or independent local exchange carriers. We bought cable systems in Cologne, Mayer, and New Germany, for example. They are relatively small, but have great growth potential after we rebuilt them.
Looking back over the years, as president/ceo, and going back to the mid-80s, what do you see as your biggest accomplishment as a company?
I would say growth through purchasing Hutchinson and Hector. Probably one of the best experiences I personally had was with Midwest Wireless. We have grown significantly since then. Some people who served on that board were sad to see Midwest Wireless end because they had been included, in terms of scope and size, at a level they will never again see in their lives.
Do you feel the same way?
No, because I kind of grew along with Midwest Wireless. All the steps in that company’s growth were logical. The steps happened when the growth should have happened. The same can be said for our purchase of Hector Communications and Hutchinson. We then bought Glencoe, which was right next to Hutchinson, which was a logical move. We have done some CLECs the same way. When going to Cologne, Mayer, and New Germany, we had fiber almost there already—so going there made sense. A lot of the “ahas” that people talk about in companies were not “ahas” at the time.
All this was just like our initial involvement with the company that became Midwest Wireless. Our logical thinking then was that if the company went South, we probably wouldn’t lose a lot of our initial investment because of being able to recoup our money by selling the license. It was logical to think and do that, too. There will be other opportunities in the future that make logical sense. I don’t know if those business ventures will be successes or not. But it makes sense for us to go down this (logical) path.
It’s great when things work out, but sometimes they don’t.
And we don’t talk about those. (Laughter.) How many times have you heard people talk about things or businesses that did not work out well?
Have you had some?
We were part of a CLEC partnership in Owatonna in the early 2000s in which the partners ultimately folded up. We just couldn’t get the traction we thought we could get. We shut it down after a few years.
Other partnerships you have been involved in—ones that worked out well?
We are one-seventh owners of IES, Independent Emergency Services. Basically, we have the database for most of the outstate sheriff departments’ 911 calls. We also sell equipment to sheriff departments. Our Hutchinson company had that contract when we bought them, and New Ulm Telecom is the managing entity for IES. Our company is also a partner and managing entity of BroadBand Visions, located in Hutchinson, which its owners throughout Minnesota use for data services and send out through fiberoptics.
It sounds as if to survive and grow you have chosen to partner with other companies.
In many cases you have to because you need scale, which would take a long time to get by yourself. Experts are predicting more consolidation in our industry. The smaller companies will have a tougher and tougher time. What’s a smaller company? It’s someone smaller than you. For example, Comcast is trying to buy Time Warner in order to get scale. They are already the largest company of their type. No matter how large, you’re always trying to get larger. You’re always saying you need scale.
What do you like best about your job.
I like the people. The people here in New Ulm have been my friends and neighbors. My wife is a Junior Pioneer here, which means she can trace her ancestors back to the beginnings of the city. I met her in Eau Claire and found out she was originally from Madelia via North Dakota, where she grew up. But her ancestors were from New Ulm. I enjoy the German heritage. Otis is a Welsh name, but my dad said the only thing Welsh about us is our name. I’m part German.
What else do you like about New Ulm?
I was born and raised out in the country in southeastern Minnesota, just a mile outside a town of 1,000. New Ulm has shops, activities, and schools, and yet also has a small-town atmosphere. If I don’t know you, I will ask your name, and I can almost always connect you with someone I know. It’s a small and caring community. You find everyone is related to everyone else, or it sure seems that way. When I first came, I started playing softball, made an effort to get to know people, and they took me in. Life is good here and I have a great life. I love to hunt and fish, and this is a good area for this. It has made my life so much better having a great board and community.
Tell me about your wife and her work.
Her maiden name is Forstner, and her grandfather was one of the brothers starting Forstner Fire Apparatus in Madelia. He passed away in 1957. She works for Pinnacle Publishing (of Bemidji) as director of business development. The company publishes print and digital telephone directories for independent telephone companies. Just for the record, I have nothing to do with the agreement with New Ulm Telecom. We’re a small part of their overall business.
Brian Tohal of New Ulm Economic Development Corporation says the telephone company does many things for the community under the radar. Why under the radar?
That’s a good question. We are modest. If we do something good in the communities we serve, it’s not just to get advertising out of it, but because it’s the right thing to do.
Bill Otis uses a number of acronyms in talking about the telecommunications industry. One is ILEC, which is short for “incumbent local exchange carrier,” and, in essence, refers to the original local telephone company providing service to a particular area. A CLEC, or competitive local exchange carrier, refers to a second or additional company offering telephone service in that same area. For example, in St. Peter, CenturyLink is the ILEC, and HickoryTech, a CLEC. New Ulm Telecom is an 18 percent owner of a CLEC in Sioux City, Iowa, called FiberComm. The Telecommunications Act of 1996 enhanced creation of these entities.
Getting to know you: Bill Otis
Born: April 27, 1957.
Education: Houston High School ’75; Winona State ’79, B.S. in business administration and accounting.
Family: Wife Lori; six children ranging in age from 10-34; and three grandchildren.
Current business involvement: BroadBand Visions, board chair; Independent Emergency Services, board chair; FiberComm, board member; and Alliance Bank, board member.
Former business involvement: Hector Communications, board chair; Midwest Wireless, board chair; and board member for OPASTCO, United States Telephone Association, Minnesota Telecom Alliance, Cellular 2000, and Switch 2000.
THE ESSENTIALS: New Ulm Telecom
Address: 27 N Minnesota Street, New Ulm, MN 56073