Qwest's new CEO and chairman, Ed Mueller, has the opportunity and experience to build the Denver telco into a competitive telecommunications maverick, experts said Monday.

But he faces the challenge of doing so amid a competitive onslaught by cable companies in Qwest's key markets, a limited amount of capital and an underused nationwide fiber-optic network.

Dick Notebaert's hand-picked successor took the reins Monday, talking to analysts and reporters and greeting about 400 employees at the Hyatt Regency in downtown Denver.

Like Notebaert, Mueller, pronounced Miller, emphasized putting customers first. He indicated he's ready to compete.

"I do think we win in the end of the day not through technology but through people and service," he said.

Mueller, 60, has spent 34 years in the telecommunications industry, rising within the ranks of SBC Communications to become CEO of Ameritech from 2000 to 2002. More recently, he served from 2003 to 2006 as CEO of upscale home retailer Williams-Sonoma.

He said his experience at Williams- Sonoma taught him "what it takes to win" and that "everything you do today you have to earn."

At the employees meeting, the new boss took the stage without a jacket or tie. He fielded questions from the audience and from workers who phoned in from San Jose, Calif.; Seattle; Chicago; Phoenix; and other cities. The meeting was beamed to Qwest offices around the nation.

Qwest would not let reporters or photographers into the meeting. But several employees afterward said Mueller stressed customer service and listed the companies he admired for distinguished service: Southwest Airlines, Nordstrom and his former company Williams-Sonoma.

"It was a great message," said one employee who declined to be named. "He gave us a good indication we've made strides but we've got a long way to go."

The announcement calmed investor jitters. Qwest shares were up 13 cents to $8.50 Monday, after falling nearly $2 since Notebaert announced plans to retire in June.

Notebaert was credited with lifting Qwest from the brink of bankruptcy, restoring credibility and putting the company on firm financial footing.

But job and cost cutting played a big role in the financial turnaround, and Notebaert lost a bold bid to acquire MCI in 2005. Qwest is the only regional Bell left out of the wave of mergers and acquisitions led by SBC- AT&T and Verizon.

Notebaert told analysts Monday that Mueller is "perfectly built" for Qwest's next step, with his combined experience in retail and telecommunications.

"In my discussions with Dick (Notebaert), he had his guy. So I don't think it ever was a horse race," said Ray Gifford, former Colorado Public Utilities Commission chairman and now head of the communications practice at the law firm Kamlet Shepherd in Denver. "(Mueller) will write the next act, and the next act doesn't seem to be selling Qwest. The next act seems to be acquiring, to make the company bigger and more competitive."

Notebaert and Mueller are cut from Bell phone company cloth.

Both were former Ameritech chief executives. They became close friends when Mueller went to Chicago to run Ameritech from 2000-02. Later, Notebaert stayed with the Muellers in California when he came bidding for business from Williams-Sonoma. (Qwest declined Monday to say whether it provides communications services to Williams-Sonoma).

Donna Jaegers, a telecommunications analyst with Janco Partners in Greenwood Village, has a "sell" rating on Qwest stock. She has expressed concerns about the competition in Qwest's key metro areas such as Denver, Seattle, Minneapolis and Portland, Ore. She said Qwest needs to be more aggressive in acquiring companies that will boost traffic on its nationwide fiber-optic network.

But Jaegers was upbeat about the selection of Mueller to head Qwest.

"He has good experience in the Bell system, good consumer marketing experience," Jaegers said. She also said he should have some background in mergers and acquisitions as a director in a recently organized company called GSC Acquisition Co.

The "icing on the cake," Jaegers said, is that Mueller has done this before.

"Since he followed Notebaert at Ameritech, he saw the downside of not investing in the physical plant and all the things that can go wrong when you scrimp on capital spending. The fact he is willing to follow him again, he should know what to expect," she said.

There's no secret in the telecom industry that many SBC executives believe that Notebaert neglected Ameritech's infrastructure before the two companies merged in late 1999. Mueller had to deal with many of those issues, yet the two became good friends.

Mueller said he has great respect for what Notebaert has accomplished in the past five years at Qwest. "But now the challenge is to continue to build on that solid foundation by driving revenue growth," he said.

Jonathan Chaplin, a telecommunications analyst at JPMorgan, said in a research note that Mueller should "be able to hit the ground running" because of his telecommunications background.

Phil Weiser, professor of telecommunications law at the University of Colorado, said he believes Mueller's experience at Williams-Sonoma will enable him to think more broadly about how the world is changing.

"He has the benefit of having stepped outside the Bell perspective," Weiser said. With Williams- Sonoma, Weiser noted, Mueller has seen consumers increasingly order products over the Internet, and he's seen the proliferation of wireless technology used for such things as keeping track of store inventory.

"He's aware of how the Internet is shaping telecom and also understands the move toward wireless," Weiser said. "He will think of those in terms of the customers."

Nelson Phelps, executive director of the Association of U S West Retirees, said, "Hopefully, Mr. Mueller will be more of an advocate for retirees and hold up commitments." The retirees were angry that Notebaert reduced benefits.

Union officials didn't return phone calls for comment Monday.

Mueller said he has no plans as far as mergers and acquisitions but reiterated Notebaert's previous line that Qwest would seek to be opportunistic.

Mueller said he didn't come to Qwest to groom the company for sale, but rather to "effectively operate the business."

What he'll earn

Here's what Qwest CEO Edward Mueller gets in his compensation package:

• Salary of $1.2 million, $100,000 more than outgoing CEO Dick Notebaert.

• A target bonus of twice his salary, or $2.4 million, with the opportunity to make more if Qwest exceeds targets. (Notebaert made a $4.14 million bonus in 2006.) Mueller is guaranteed a bonus of $947,000 for 2007.

• Stock awards worth about $15 million, divided between 896,000 restricted shares and 2,083,000 options. Absent a merger, Mueller's termination or a handful of other events, Qwest stock must hit either $11.50 within three years or $12.65 within four years for Mueller to have the right to sell the shares.

• A severance arrangement that will pay between $3.6 million and $10.8 million, depending on how long he stays with the company and whether his departure comes after a merger.

• The use of Qwest's corporate jet for personal travel. His wife also may accompany him at no charge. Qwest says it requires Mueller to use the plane at all times "in order to provide enhanced security," as it did for Notebaert. Mueller must pay for other family members' trips.

• Moving expenses for his relocation to Denver, plus travel and $5,000 a month in temporary housing expenses until Feb. 15. Qwest will pay the taxes on these reimbursements.

• A promise to buy Mueller's house at a value determined by independent appraisers if he cannot sell it by March 31.

• An annual "flexible benefit" payment of $75,000.

• Up to $40,000 for legal expenses from negotiating his employment agreement.

• Costs for the installation and maintenance of a home security system.

• 30 days vacation per year.

smithje@RockyMountainNews.com or 303-954-5155 Staff Writer James Paton contributed to this report.

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