The great freephone fiasco
BT sold a telephone number for pounds 100. They want it back. It'll cost them pounds 200m. Nick Gilbert reports
Sunday 01 June 1997
If after 0800 you read out one-nine-two, one-nine-two you will notice the evident similarity to British Telecom's one-nine-two - the easy to remember number for directory inquiries.
Now suppose you were planning a telephone classified directory information service to rival BT's own Talking Pages. Getting hold of one-nine-two, one-nine-two would be like winning the six-figure lottery.
The man who won, Nigel Robertson, in fact scored an eight-figure triumph. His shareholding in Freepages is currently worth around pounds 29m. Last year Robertson quit as chief executive of Freepages to go into tax exile in Monte Carlo. He is 34 years old. Five years ago he was running a modest- sized advertising agency.
Robertson dreamed up the number. A company he was connected with applied to BT to get it. BT provided the number in the Spring of 1993. The cost of such a powerful set of digits? About pounds 100.
Sleeping giant BT then woke up to find the number gone and tried to get it back. In May last year BT in effect admitted defeat after three years of wrangling in the High Court ... 0800 one-nine-two, one-nine-two stayed with Freepages.
How Freepages got the number - and kept it - is a remarkable saga involving breathtaking cheek, entrepreneurial skill, offshore money ... or, as British Telecom at one stage tried to make out, skulduggery, betrayal and manipulation.
That view is brushed aside by Simon McDaide, a man closely involved in the early stages of the saga, who says: "BT are protectionist, have huge sums to fight legal battles and don't like opposition."
The saga teeters on the edge of black comedy. In March 1993 Nigel Porter, then a BT salesman who was helping his customers apply for 0800 numbers, filled in an internal memo not with 192 192 but with that innocuous seeming number 19-21-92 (nineteen, twenty-one, ninety-two). That at least was what BT said in one of the more polite allegations it tried to level against Porter. Porter denied attempting to pull the wool over his employer's eyes.
Porter was at the time the BT salesman liaising with National Connect, a now defunct company which back then had business links with Freepages, at that time known as Timeload. Robertson and Jonathan Bushby, his equally youthful partner, handled the advertising for National Connect, whose managing director at the time was McDaide.
"I used National Connect as a vehicle to apply for the number," says Robertson. The two men spotted the potential and the winning 0800 192 192 combination was then sold on to Timeload which Robertson and Bushby took over in March 1993.
Once Freepages had 0800 192 192 it began to sign up commercial customers who wanted to be included in its telephone service. Customers wanting, say, a florist can dial the toll free 0800 number and are given three to choose from in their area. Freepages makes its money from the fees charged to the three florists. BT itself benefits since Freepages pays the phone company for all those expensive 0800 calls.
The company began to advertise, making great play on the 192 element, proclaiming that the service would start up in October 1993.
BT, belatedly alert to the loss of the number, suspended Porter on full pay in August. In September it tried to pre-empt the Freepages launch warning it would cut off the number. Freepages went to the High Court to ensure it kept it. Battle was joined.
According to McDaide, a former managing director of National Connect, BT told the court that it had the right to cancel the service since the number had been given out by mistake. BT's attempt failed.
The phone giant also made allegations of a "purported signature" on an internal form and an "unauthorised entry" on a computer terminal.
Porter denied the allegations which BT ultimately dropped in the peace deal struck last May. After internal disciplinary proceedings had been started, Porter left BT and started industrial tribunal proceedings against his former employer. He withdrew them later.
According to McDaide, BT gave Porter a reference and paid him compensation. BT will not comment on any aspect of this affair, citing the confidentiality terms of the peace deal. Porter will not comment either.
McDaide maintains that Porter is the son of a former senior BT executive. Asked about this remarkable twist in the tale BT spokesman Paul Sharma said: "We can't comment on this either because of the Official Secrets Act."
"We didn't offer Porter anything," says Bushby. "I think quite a number of BT people signed off on giving the number out without realising or thinking what was happening."
According to Bushby "it was more of a cock-up than a conspiracy". McDaide agrees. "The order for the number went though about seven different people but I don't recall BT making allegations against them."
Bushby points out that Freepages has had no problems at all with Mercury which was happy to provide the company with its Freecall number 0500 192 192. "It's a good business for us," says Mercury spokeswoman Nicola Wynne, confirming an "amicable" relationship with Freepages.
Mercury says the overall market for 0800 and 0500 numbers is worth pounds 300m annually and is growing 20 per cent a year in the UK.
The happy prospect of sharing in this revenue bonanza did not console BT. Still struggling to get its hands on the digits, BT alleged in early 1994 that Freepages representatives were confusing potential commercial customers by hinting the service was linked to the quasi-monopoly.
BT set up what it called "trap interviews". Private eyes were hired. Volunteers were fitted up with wiretaps to record what the Freepages reps told them.
"A Talking Pages rep came in the day after a Freepages rep and I told him about it," recalls Steve Burton, owner of the Activ Sports shop in Folkestone. "I set up a second meeting with Freepages and a private investigator wired me up."
Other "trap" interviews took place in the Spring of 1994, McDaide recalls. On occasion some of the reps were vague in describing the exact status of Freepages. On others, reps who were asked if the company was part of BT bluntly and accurately stated that Freepages was a competitor.
"In any sales force you may get the odd person on the road getting commission saying something silly," says Bushby. "But we didn't condone it and we showed documents in court that made the position clear."
Not only Freepages but entrepreneurs connected with it have found their names in the newspapers recently.
Chris Akers, a Freepages shareholder and chairman of Caspian Group which owns Leeds United, was interviewed by Department of Trade inspectors last year. They were looking at share trading in Blagg plc, the quoted company Akers then chaired and which Freepages in effect took over in February 1996 as a way of getting its original UK stockmarket listing.
"They interviewed me in April 1996 and I have heard nothing since," said Akers. "They were not looking at my purchases of shares."
Then six weeks ago Freepages's largest shareholder, Ronald Zimet, was dragged into the debacle surrounding Andrew Regan's failed takeover attempt of the Co-operative Wholesale Society. Zimet stepped down as chairman of Freepages after a wave of adverse publicity, though he provided most of the start-up cash for Freepages and still controls pounds 30m worth of shares.
The Serious Fraud Office is investigating a pounds 2.4m payment which food company Hobson, then run by Regan, made to Zimet's offshore company Trellis International, expressed to be for his help in securing a long term Co- op contract.
Zimet and his money arrived at Freepages at a time when its legal battles were proving costly. It is no small irony that he was introduced to the company via connections at Swiss Bank Corporation. Its investment banking offshoot SBC Warburg a few weeks ago played a major role in destroying Regan's credibility as a bidder for the Co-op.
According to Bushby, he and Robertson knew Akers, who had moved from advertising to the City and was then working at SBC in London. Akers in turn worked with another SBC corporate financier, Robert Bonnier, a young Dutchman who introduced Zimet to Freepages. Bonnier himself quit SBC to join Freepages in February 1995. The wealth creation scheme that is Freepages has been kind to Bonnier too. Just over two years later Bonnier holds shares worth nearly pounds 12m and is chief executive of Freepages. He is 27 years old.
Zimet's company Trellis invested pounds 350,000 in Freepages shares in January 1994. Over the next three years Zimet or his companies lent Freepages amounts that varied from pounds 200,000 to pounds 500,000. Zimet's money was clearly vital. For at one stage the offshore investor held just over 50 per cent of Freepages ordinary shares.
Over the next couple of years other investors bought in, among them a group of Dutch investors including Bonnier and his father. In February 1996 Freepages reversed into Blagg plc. In March this year the company raised pounds 43m net selling shares at 47.5p and also gained a quote on Nasdaq. Freepages shares have drifted lower since then to 41p but they are still up 50 per cent on a year ago.
There is a lot of hope value in the price. In the six months to 31 March this year Freepages revenues were five times higher at nearly pounds 6m but the fast-expanding company lost pounds 5.9m pre-tax.
And the price of BT of getting that famous number back? Little short of pounds 200m, Freepages's current stockmarket valuation on the Alternative Investment Market. Ironically, in 1994, Bernardette Mee, a trade mark agent who worked for BT had given her opinion that: "The long term prospects of Freepages Ltd ... do not appear to be good."
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