Cable king will go to the wire: PROFILE BARCLAY KNAPP

NTL's boss is playing a cool hand as he takes on Murdoch and BT. Peter Koenig reports
Click to follow
The Independent Online
Put Barclay Knapp, the chief executive of NTL, the cable television company, in a room with media mogul Rupert Murdoch and British Telecom chief executive Sir Peter Bonfield and you might overlook him.

Even after last week's pounds 8.2bn purchase of CWC Communications, NTL remains a comparative minnow in the converging technology game bringing the cable, broadcast and telecoms industries into direct competition with each other. Besides, Knapp is made from a less superficially imposing corporate mould than the other two.

Murdoch, 68, is a buccaneering corporate type. He has spent his life expressing himself through the creation of an empire spanning newspapers, a Hollywood studio and BSkyB. His endgame will focus on choosing a dynastic successor from a welter of potentially hostile family parties.

For all his engaging sassiness, Sir Peter, 55, is a grey corporate man. Head-hunted to help BT compete against new world telecoms start- ups like MCI WorldCom and Colt, and former monopolies such as France Telecom - and beyond that cable companies and even Microsoft and Intel, he has performed admirably, but will ultimately leave only a modest personal imprint on his company. His endgame will, at a guess, involve being handsomely pensioned off to run a vineyard in Australia.

Knapp, by contrast, is a child of the Eighties. He's 42, destined to rise significantly higher in the pecking order of technology industry captains, but he could still retire by the time he's 50. Extraordinary self-discipline and a certain savvy alienation from the commercial processes that have made him rich have kept him focused on the line between where he wants to get NTL as a company, and where he wants to go personally. In buying CWC last week, Knapp pulled off a "devilishly complex deal", according to one observer. "And he's still ended up with a tan."

Still, last week Knapp unquestionably emerged as the king of UK cable in the crystallising battle between cable, broadcast and telecoms.

"You see Barclay speak," said one rival. "And you think, `yeah, he's the man'. Well, last week he proved it. He's the man."

Analysts expect NTL to complete the consolidation of the cable sector by acquiring Tele-west, the loser in the bidding war for CWC, sooner rather than later - not least because Microsoft, which has a 5 per cent stake in NTL, holds a 29.9 per cent stake in Telewest.

At the point of final consolidation NTL will be positioned to realise the long-delayed benefits of the pounds 10bn invested in infrastructure to date. It will be ready to sell its services to the more than 50 per cent of UK homes passed by cable wires in the ground.

The story of how Knapp became heir to all this is, to say the least, unlikely. It is the story of how a boy from Omaha, Nebraska, who got his professional start in 1983 selling mobile phones in Cleveland, Ohio positioned himself for the big time by buying up semi-dormant cable television franchises in Britain 10 years later.

Knapp obtained his first degree in mathematics. His first job was working on guidance systems for the cruise missile programme and the integration of military communications systems. In 1982, while still at Harvard Business School, he started working part time for two men who were in the process of founding virtually the first US mobile-phone company, Cellular Communications.

CCI was sold to San Francisco-based Airtouch in 1996 for $2.5bn (pounds 1.54bn). Last January, Newbury-based Vodafone bought Airtouch for $58bn.

By this time, however, Knapp had moved on to the precursor of NTL, International CableTel, which he floated on Nasdaq in 1993. "In 1993 changes in UK regulations allowed cable television companies to get into telephony," he said. "This allowed us to build a broadband network for the future, while operating as a telecommunications company in the here and now."

Building a UK cable company, Knapp relied on his experience in the construction of a US mobile-phone company. As he put it: "We kicked [the Chicago-based Baby Bell telephone company] Ameritech around the block. We felt we could kick BT around the block. We thought: Jeez, cable television might just be the added upside here."

In 1996 International CableTel bought NTL, the privatised engineering arm of the Independent Broadcasting Authority, for pounds 235m, and changed its name to NTL. Knapp is blunt: "The first time I talked to NTL, I wasn't entirely sure what they were."

But he soon learned that he had stumbled on a gem. NTL not only owned the IBA's broadcast antennas, it was knee-deep in knowledge about nascent digital television. NTL became the foundation for Knapp's artwork: a network capable of delivering television programmes and telephone and internet services via satellite, microwave, copper wire and broadband coax and fibre-optic cable.

Knapp succeeded in building a cash-generating cable company where other American interlopers had failed by shrewdly gearing NTL's marketing to British consumer tastes. Other American cable guys offered expensive 50- channel mega-packages. He offered bargain mini-packages.

Today NTL competes against BT by offering competitively priced phone services - with cable television thrown in for free. It competes against BSkyB by offering competitively priced cable packages - with telephone thrown in for free.

If Knapp can attribute much of his success to his own clear-sighted analysis of the technology game, however, that success has had a price attached to it. To buy CWC Communications he had to peddle a 25 per cent stake in NTL to France Telecom. All is sweetness and light between the two companies today.

However, the French telecoms giant is still 60 per cent owned by the state. Its destiny is uncertain. Keeping this unpredictable giant sweet will require all of Knapp's diplomatic skills.

More skills will be required to deal with regulators at the Office of Fair Trading and the Brussels competition directorate. Eyeing NTL's growing strength, BT and BSkyB are grumbling that its bundling of services could be anti-competitive. The regulators are looking at this.

Meanwhile, the competitive capacities of BT - which Knapp openly identifies as his arch-rival - have yet to be fully revealed. BT can become a broadcaster on 1 January 2001 - at which point it can begin competing against NTL without one arm tied behind its back.

But BT is now sneaking into broadcasting through various back doors. On Thursday, at its quarterly results press conference, it announced it was making available a kind of pay television via a new telecoms technology called ASDL - which links broadband phone lines to television sets via modems. BT plans to offer this service to a million homes by March.

Looming over the convergent technology chess board, finally, is a dark cloud with the names of all hot technology companies, including NTL, on it. This cloud is the bear market to come. Laughing at the doomsayers to date, NTL has had no trouble gaining access to capital to fund growth despite modest sales of $2.5bn a year and no profits to speak of.

Asked to talk about the profits NTL is generating, Knapp jokingly makes a vampire-rebuffing sign of a cross, then launches into a dissertation about why pre-tax profits have become an archaic yardstick of corporate performance. Yet, as Sir Peter put it with studied mildness on Thursday: "At some point or another the cable companies will have to start thinking about earning a return on their investment."

By the time the bear market comes, Knapp will probably have shifted NTL into survivability mode. Perhaps he will have sold up. Personally, he could trade weekly flights on Concorde for long stretches at his summer home on a New Jersey sandbar called Long Beach Island, just off the coast from Atlantic City.

Comments