BT's worst nightmare

, Charles McGregor, boss of one of the UK's fastest-growing telecom companies, has watched the value of Fibernet mushroom in the past four years. Now the City wants BT broken up are his fortunes set to rise still further?
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The Independent Online

Charles McGregor is a happy man. In fact, the boss of fast-growing telecoms firm Fibernet could not have planned things better himself. There is a growing demand in the City to have his arch-rival British Telecom broken into smaller companies. Mr McGregor has always been determined to do battle in the big boy-dominated market that provides high-speed networks for the world's most prestigious companies. The break-up of BT spells the end of its market dominance.

Charles McGregor is a happy man. In fact, the boss of fast-growing telecoms firm Fibernet could not have planned things better himself. There is a growing demand in the City to have his arch-rival British Telecom broken into smaller companies. Mr McGregor has always been determined to do battle in the big boy-dominated market that provides high-speed networks for the world's most prestigious companies. The break-up of BT spells the end of its market dominance.

Mr McGregor founded Fibernet in 1986 when he was 28, with modest ambitions that grew as he began to network the British offices of hundreds of multinationals. And he has watched his company's value mushroom from £37m to £800m since flotation in 1996. In May, Fibernet reported its first pre-tax profit since the float, six months ahead of schedule. Last week, BT posted a 27 per cent decline in first-quarter sales. The City wants BT broken into smaller, more nimble and entrepreneurial entities - like Fibernet itself.

Mr McGregor's company occupies a small but lucrative niche in Britain's liberalised telecoms market. Rather than target the plethora of small and medium-sized businesses, Fibernet provides superfast fibre-optic telecom networks to large blue-chip clients. The company started with a more low-key offering, installing local computer networks in company buildings. Then Mr McGregor saw an opportunity to link company buildings in different cities. Fibernet now has most of Britain's commercial centres connected to its nation-wide fibre-optic network. With the UK sewn up, Fibernet has pushed into France, Germany, and Italy.

The company enjoys custom from heavyweight corporates including Goldman Sachs, the US investment bank, and Tesco. But as it advances overseas, it faces competition from BT, France Telecom, which recently gobbled up the Orange mobile phone network, and Deutsche Telekom, which last week snapped up Voicestream, a large US telecoms business. Now Fibernet is profitable, the big boys will be redoubling their efforts to keep it at bay. But Fibernet will not back away from a fight. Last week a spokesman said that the company was thinking of joining a consortium to sue BT for lost revenue from the delays in opening up the so-called local loop, the last mile of copper wire going into homes.

Mr McGregor says: "BT should be broken up completely, with national and regional companies, and made to compete in a proper and unsuspicious manner, which it's not considered to have done very well. But as BT's biggest competitor in high-speed networks for big companies, we compete head-on anyway. I'd like to say a broken-up BT is part of a cunning plan I had many years ago, but I didn't even know we were going to be a network operator when we started."

His confidence for Fibernet stems from its relative youth. Unlike the established players, it is unencumbered by old technology and flexible enough to be able to offer bespoke services to its customers. "If we were NTL, Telewest, or Cable & Wireless, offering everything to everybody we'd be afraid of BT. But the UK is a big market, and the most deregulated, and firms like ours with no baggage are in a good position."

Then again, Mr McGregor would say that. Above all else, he is a fully trained salesman - and proud to be. His parents wanted him to follow his father, John McGregor, the former Barclays' director, into banking. But the graduate training scheme did not pay well in his young view, so he took a job at General Motors. Three months on, he was sacked by a middle manager "for not working". Mr McGregor went to the director who appointed him and demanded his job back, got his way, then told the director he didn't want it anyway. "I walked out of the office and I thought, 'I don't have a job, or any money'."

So he took a marketing job at Telephone Rentals, which became part of Mercury Communications. "They said I had to be a salesman first because I needed toughening," he says. "I thought selling was fascinating - you're changing someone's mind." A subsequent sales job in America with Network Technologies, a networking firm, backed Mr McGregor's belief that being a sales rep can be the most respectable job. "In the US, if you are a salesman you get to the board," he says. "The British way is that you have to become an 'account executive'. At [Network Technology's] annual dinner, men and women were coming to me and saying, 'Thank you so much. Without your sales we wouldn't have been able to make the stuff and now my kids are going to a good school'."

Mr McGregor came back to Britain determined to start his own company, marking a return to his entrepreneurial childhood when he set up a soft drinks bar called The Gang Pub in his parents' back garden. "It sold fizzy pop at a 100 per cent mark-up."

He founded Fibernet with a colleague, David Foley-Fisher, as an idealistic project, to provide them with interesting and stimulating careers. After eight years of installing local computer networks, in 1994 Mr McGregor decided to create a national network, following customer demand. But there was scepticism all round. Fibernet would not be able to get a licence to run a national network like BT's, said his critics. It would not be able to raise money, let alone become profitable, they said.

To an extent, the sceptics were right. Initially, the group had to team with Sprint, the US Telecoms group, because it did not have a UK licence. The partnership collapsed, although Fibernet later ran a licence of its own against all consultants' predictions. Fibernet was able to raise £10m through its flotation on the Alternative Investment Market, but it quickly came across practical problems. The time scales it had set itself proved hopelessly optimistic. Time was needed to realign the expectations of the City to the reality the group was discovering.

Mr McGregor sees his salesmanship as key to Fibernet's success. "I can generate empathy easily," he says. "My ability to help people do something they wouldn't have done before they knew me I find the most satisfying part of any job ... making people want to do things for you."

For example? "When we began expanding overseas, an employee did not get the promotion he wanted and thought he should leave. I told him the good reasons he should stay, then said, 'Now let me tell you the bad reasons you should stay. If you leave you would lose your share options. Have you told your wife that?' I convinced him to stay. I suppose in that way there's a streak of ruthlessness in me. I will use all forms of proper persuasion."

Mr McGregor's salesmanship expresses itself in all aspects of Fibernet's businesses. He chases invoices himself, making presentations personally to get a customer to sign an order, wherever they may be. "There was one piece of business we needed particularly badly but the guy we were dealing with became ill and went into hospital. So I went to visit him with flowers and got him to sign the contract. There are certain things you look back on and think, 'Did I really do that?'"

Naturally, good selling is at the heart of Mr McGregor's business philosophy. There is, he says, a science to closing transaction. "If you're selling a piece of gadgetry you would use the puppy dog close. You say, 'Just hold it', because once they've got it they'll think they want it. Then there's, 'Back up the hearse and let them smell the roses'. You present the positive things, then you present what'll happen if they don't agree."

The principal reason Mr McGregor gets involved in the nitty gritty is, he says, not because he is better at it than anyone else, but to show colleagues he is prepared to get stuck in. He wants to avoid becoming arrogant or losing touch with his staff, which he has seen happen to other bosses who have presided over companies which have grown as quickly as Fibernet.

So far, it has worked. The City links Fibernet's success to Mr McGregor. Chris Godsmark, telecoms analyst at Investec Henderson Crosthwaite, says: "We were somewhat sceptical about Fibernet two years ago. But the company has proved by results that it is one of the few alternative telecoms carriers that can beat expectations and make profits. It's because McGregor runs a tight ship."

The company now stands at a crossroads. Mr McGregor has set two apparently conflicting tasks, to maintain Fibernet's new-found profitability while establishing expensive inter-city networks in European countries. "Being profitable means we can look at new challenges, not only to think about how best to invest the money but also to provide interesting jobs for people. Those are my priorities."

His day-to-day challenge is managing Fibernet's German expansion. The risks involved in creating the UK network - the viability of the technology, the reception from existing customers to the produce - has been replaced with fresh worries.

In Europe, Fibernet has no existing customers to feed off, and its front man's language skills are limited to an O levelin French.

"My main question is always how quickly we can get our money back," he says. "Our advisers and brokers and bankers think I'm a cheapskate because I negotiate every last penny. But I am a Yorkshireman, I'm afraid."

Given that Mr McGregor still owns 15 per cent of the company, perhaps it's little wonder he is concerned that Fibernet continues to generate cash. He is, he insists, in Fibernet for the long-term and, unlike many entrepreneurs, he doesn't have an exit strategy which would mean Fibernet should be bought out.

"We've been approached in the past [about a takeover] but I can't really see the point. The longer we go on the bigger we get. My only exit strategy is that one day I shall retire." Retiring? Not the adjective to use about this super-salesman.