Profile: Sir Peter Bonfield - BT boss faces up to zero hour
Sunday 16 November 1997
BT's 53-year-old chief executive is not a billionaire. Nor a household name. Gates is courted as a sage, and Murdoch is feared as a corporate Ghengis Khan, but Bonfield is merely one of several hundred chief executives trying to make commercial sense of the hydra-headed information technology industry.
And yet this weekend, as BT comes to terms with the loss of its American partner MCI to WorldCom, the Mississippi-based telecoms company run by a former basketball coach named Bernard Ebbers, Bonfield has never had a higher profile - or been more exposed.
"I have tremendous respect for Peter Bonfield for keeping ICL from going under in the 1980s and so preserving a computer presence in the country," says Tony Hardy, stock exchange manager for the Church Commissioners. "I expect he will find a way to keep BT in the first rank of global telecoms companies."
For UK plc's sake, he'd better. In the converging worlds of telecoms, computers, and media, UK plc has no corporate champion except BT. Until last week, when WorldCom swiped MCI with its $37bn bid - the largest in M&A history - BT under Bonfield and chairman Iain Vallance appeared to be fighting its corner.
Bonfield - a precise, bearded, icy-beneath-the-self-deprecating-humour- surface type of boss - has not failed. But he faces the challenge of a lifetime. His reputation may well be sealed by what he does next.
Bonfield has under-appreciated negotiating skills. The three-way battle for MCI between BT, WorldCom, and the Connecticut-based telecoms company GTE were like a multi-dimensional game of noughts and crosses, and one source on the opposite side of the table gives Bonfield high marks for exiting the situation handsomely. BT put $4.3 bn (pounds 3bn) into MCI. It earned a $2.25bn profit. That's not a bad return for four years.
To get the maximum sum, sources close to the negotiations say, BT inveigled GTE to enter the bidding war for MCI after WorldCom had trumped BT's bid. This reduced "the mano-a-mano hostility level" surrounding the war for MCI and prompted MCI to open its books to all comers. MCI's open books gave WorldCom the information necessary to go back to its shareholders to get the green light for the clinching $37bn bid - which netted BT its handsome profit on the 20 per cent of MCI it owned before the bidding war started.
Now Bonfield must plug the US hole in its global strategy. He said last week: "BT has many opportunities to pursue alternative alliances in the US." A BT spokesman added: "BT still considers a foothold in the US achievable and very much part of overall strategy." Targets mentioned by the press include GTE, Bell Atlantic, Ameritech, and other "baby Bells" - regional companies created through the break-up of AT&T in the US.
But prices are high. A spokeswoman for Chicago-based Ameritech seemed more intent on providing details for Ameritech's new office in London than on discussing a link-up with BT. A spokeswoman for GTE gave off warmer signals. "After all GTE has done for BT [in bidding up MCI], it would be a terrible snub if BT did not offer GTE right of first refusal [to a US partnership]," noted a party close to the negotiations.
BT would benefit from a US partner not only because of the access it would offer to the US market, but also because it could shore up Concert, a series of alliances, mainly with European utilities, aimed at winning the business of corporate customers. "Until MCI Concert had momentum," says Merrill Lynch analyst Mark Lambert. Now it could lose momentum. Without MCI the telecoms manager of, say, a Footsie 100 company might be more prepared to listen to Concert's competition."
The loss of MCI could also depress BT's future earnings. The company had pre-tax profits in fiscal 1996-97 of pounds 3.2bn on turnover of pounds 14.9bn, roughly flat on 1995-96. But BT faces growing competition in its home market from the150 telephone, cable television, and other companies licensed to do telecoms business in the UK.
To keep growing BT must expand overseas. Through various joint ventures the company is already entrenched in France, Germany, and other continental European markets. Nevertheless, Merrill's Lambert reckons that with MCI BT's compound annual earnings growth over the next five years would have been 8-10 per cent. Without MCI he forecasts it will be 3-5 per cent.
To recover from the MCI blow Bonfield must first avoid making a special pay-out to BT shareholders as a result of the MCI sale, according to observers supportive of management. "The money should go into long-term investment," says Mr Hardy at the Church Commissioners, which has pounds 40m of its pounds 2.25bn invested in the company.
Hardy wonders how well informed those shareholders were who pressured BT to knock down the price it was offering for MCI after MCI issued a profit warning. "First in an industry like tele- communications there's a strategy. Then there's financing to support that strategy. Somehow it got turned around," he says.
Bonfield could also use some help from the Government. "I don't see the stars and stripes over BT's masthead," says a competitor. "I see the rising sun."
Bonfield possesses the background and qualities needed to take advantage of breaks from the City and Whitehall. Born in Letchworth, Hertfordshire in 1944, he attended a convent school before graduating from Loughborough University in 1966. He worked first for Texas Instruments, then between 1981 and joining BT on 1 January 1996 for the computer company ICL. At ICL he negotiated the company's 80 per cent purchase by the Japanese computer company Fujitsu. Through a non-executive directorship in Fujitsu he stays in close contact with Tokyo.
As he might say himself in the quasi-Japanese personal style he has adopted, mixed with a Texas twang: "End of BT-MCI relationship very bad. Prospect of a BT-Nippon Telephone & Telegraph very good."
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