The appointment ends eight months of searching by the Government following Sir Bryan Carsberg's move to the Office of Fair Trading last July.
Mr Cruickshank left Virgin in 1989 to become chief executive of the National Health Service in Scotland. His salary at Oftel has not been disclosed, but at the Scottish Office he is thought to receive about pounds 64,000 plus a performance-related element.
The remuneration on offer at Oftel - it is thought that Sir Bryan earned about pounds 80,000 - was seen in the industry as a large barrier to the Government's efforts to appoint a businessman to the post.
While at Virgin, Mr Cruickshank was responsible for the record, retail and entertainment businesses and masterminded the Virgin Megastore concept. While he was managing director group turnover grew from pounds 100m to about pounds 600m.
Mr Cruickshank left the group after representing the interests of private shareholders and independent directors during the stock market buyout of Virgin in 1988.
From 1980-84 he was a director of Pearson Longman and before that a director and general manager of the Sunday Times from 1977 until 1980. Before his foray into the publishing world he spent five years at the management consultants McKinsey and Company. Like his predecessor at Oftel, he is an accountant by training.
Mr Cruickshank is described by a former Virgin colleague as 'a delightful guy, a great strategist and someone who is very good with the big picture'. He is widely regarded as having no qualms about facing critics.
Michael Heseltine, President of the Board of Trade, said: 'I wished to appoint someone to this important post who had direct experience of competition as a businessman. Mr Cruickshank fulfils that criterion admirably.'
Bill Wigglesworth, who has been acting director-general of Oftel since Sir Bryan left, will continue as Mr Cruickshank's deputy for the time being at least. He said yesterday: 'I am the continuity man,' adding that he welcomed the decision to appoint an accountant with hands-on experience of a competitive market.
Mr Cruickshank is not expected to interfere with BT's next price regime, due to come into effect in August and run for four years. The regime will limit price increases to inflation minus 7.5 percentage points.