The rollercoaster ride into borrowed time

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The words were prophetic. "Fasten your seatbelts, we're in for a rollercoaster ride", Sir Peter Bonfield said, when he took over as chief executive of British Telecom in January 1996. He could scarcely have imagined how hair-raising the journey would prove for him or for BT's shareholders.

Nearly six years on, Sir Peter has presided over two failed mergers, the biggest rescue share issue in British corporate history and the demerger of the group's mobile phone arm, BT Cellnet. Investors have watched with a mixture of excitement and fear as BT shares soared to more than £13.50 and then fell as low as £3.20.

When he first arrived at BT's Newgate Street headquarters next door to St Paul's cathedral, Sir Peter was greeted as a breath of spring air. With his south London accent, love of Eric Clapton and background in computers, Sir Peter was the antithesis of BT's patrician chairman, Sir Iain Vallance, a lifelong telecoms man.

Sir Peter joined BT from ICL, then Britain's only remaining computer manufacturer, and in his office there is a samurai sword presented to him by ICL's parent company, Fujitsu, as a reminder of the cut-throat business he was entering.

BT's new chief executive did not have long to discover just how cut-throat the industry was. Within five months BT's attempt to forge a £33bn merger with its UK rival Cable & Wireless had collapsed amid much acrimony. Sir Peter decided instead to forge a transatlantic merger with the $20bn (nearly £14bn) takeover of America's MCI. That too ended in failure.

But as the internet boom took hold, BT was able to put these setbacks behind it. By 1999 it was turning in profits of more than £4bn and the share price went into the stratosphere. In retrospect, it was the highpoint of BT's and Sir Peter's fortunes. Thwarted in its overseas ambitions, BT had also sat on its UK monopoly, failing to exploit the potential for developing broadband services. At the same time, BT found itself having to pay suicidal prices for third-generation mobile licences in Britain and Germany.

Its balance sheet began to creak alarmingly and, with borrowings touching £30bn, the chickens finally came home to roost in May this year. Sir Iain Vallance was pushed out as chairman to be replaced by Sir Christopher Bland, at the time chairman of the BBC. He promptly announced a £6bn rights issue, £7bn of asset sales and the demerger of the mobile phone business.

BT also announced that Sir Peter had signed a new contract running until December, 2002. But everyone knew that he was living on borrowed time.