IT HAS been a traumatic 12 months for Steve Akin, the chief executive of Colt Telecom. He has seen hedge fund managers try to liquidate his business and he has been forced to fend off Britain’scorporate governance brigade, who have attacked his salary and bonus.
Having dealt with those traumas, plus the daily grind of knocking Colt into a viable outfit ready to take on rivals such as BT Group and Deutsche Telecom, he might be forgiven for claiming exhaustion and heading back to his native US.
At 58 the question does arise as to whether I am writing his swan song or simply previewing a new chapter in his eclectic and peripatetic career. Is this the point Mr Akin hops off to retirement in America, or is he girding himself for the battles ahead?
“Great question,” says Mr Akin “and it’s one the board and I need to consider. When we think we’re at that next level and we need the next set of skills to take us there, we will look at how we go about doing that.”
So what about the fact that The Independent has stumbled across the news that Colt has got headhunters out recruiting a new senior management team? These are, insists a company spokesman, appointments to bolster the existing team and are not, repeat not, attempts at finding Mr Akin’s replacement or, for that matter, a new finance director.
“I think to build a healthy culture you always recruit both from outside and build internally,” says Mr Akin.
Anyway, in the past couple of years dozens of his rival telecoms companies have either gone bust, seen their chief executives in handcuffs or forced to seek protection from creditors using America’s increasingly convenient Chapter 11 bankruptcy laws. Mr Akin, however, has emerged solvent and ready to take on the incumbent telecoms giants of Europe with Colt’s alternative telecoms services for business users.
The product of a two-room school house in Mahwah, a rural settlement in northern New Jersey, Mr Akin certainly seems capable of a good scrap, although being married to a professional opera singer has obviously smoothed some of the rougher edges. While presenting the image of corporate bruiser, he has adopted several cultural projects thanks to the influence of Mrs Akin. He has been president of the Kansas City Lyric Opera and the Mansfield Symphony Orchestra in Ohio.
Since 1992 he has worked for Fidelity, America’s biggest mutual fund business. For several years he has been in charge of the private investments of the group, controlled by the Johnson family. They own 54 per cent of Colt and parachuted Mr Akin into the company in July 2002, having supported a rescue rights issue the previous November. “I think it’s a great advantage having them as a major shareholder,” says Mr Akin. “They think very well about investments. They tend to be long-term investors, although I can’t speak for the Fidelity team. It’s a tremendous advantage for us and our other investors to have someone like Fidelity involved.”
Certainly he would have turned to his Bostonian patrons a little over a year ago when aggressive US hedge funds sought through the UK courts to have Colt closed down and its pounds 935m of cash handed out to Colt’s bondholders. A brazen attempt at asset-stripping or a reasonable course of action given Colt’s prospects? Certainly it was an affront to Mr Akin’s view of how to do business. “If they had prevailed it would have had a significant impact on capital markets,” he says. “It would have said that a bondholder at any point could claim the assets of shareholders. Now, in November 2001 shareholders had put in about pounds 500m and you then have bondholders eight months later saying “We want access because Colt is sitting there with pounds 900m on its balance sheet’.
“It was offensive to me that the attack was made. It would have put 5,000 people out of work, it would have taken shareholders’ value and their money, and it would have done so trying to manipulate the legal system. The good news is that the English courts would have none of it.”
While the courts reinforced Mr Akin’s generally positive view of the English commercial establishment, one element has not best pleased him.
The corporate governance lobby, in the form of the National Association of Pension Funds, has had a go at Mr Akin’s salary and bonus.
Mr Akin says the brouhaha over his pay was simply a result of poor communication by the company that has been resolved. There are, however, two aspects of British corporate governance that stick in the craw for Mr Akin. “The first relates to our board and the criticism we’ve received because directors have been given options in the company.”
Corporate governance orthodoxy suggests granting options undermines a non-executive director’s ability to think independently about a company he advises. “We think it’s a good thing for directors to have a key interest in a company’s success. However, we have changed so that new directors do not receive options.
“Secondly, some of the corporate governance rules call for age limits on directors. We think that makes no sense. You have to look at the competency of people. There are some people who are incompetent at 19 and some people competent at 90. We categorically disagree with age limits,” says Mr Akin.
One thing that has resulted from the hedge fund experience, and the brush with the corporate governance powers, is a renewed focus on getting Colt fit to take market share away from the big bruisers such as BT in the fixed-line telephony market.
“We are now on a sound footing for next stage of growth,” says Mr Akin. “The first stage was go get the franchises, go get licences, go get fibre, go get customers and go get revenue. We’ve now built a business with pounds 1bn of turnover. A big element in what I’ve been doing is getting control of capital expenditure. Now that we have finished building our network we have to spend capital in relation to getting a return on investment.
“We spent pounds 804m in 2001 and pounds 412m in 2002. This year it will be less than pounds 170m and 80 per cent of spending will be success driven, meaning we spend capital when hooking up customers rather than building out the network. That said, I’m leaving money in there to build the business. This is not a stop spending strategy.” Mr Akin has rationalised Colt closing eight out of nine data centres and reducing the number of its network operating centres from ten to just one. The number of properties the company occupies has been slashed while the head count has been reduced from 5,000 to 4,270.
All this has been aimed at building profitable revenues and Colt’s top line, after currency adjustments, should show a 7-8 per cent increase in 2003 in an otherwise flat market. Analysts are expecting the company to turn the bottom line from red to black in 2005.
But will this year be one for a wider recovery in the telecoms market, as so many people have predicted?
“I don’t see it yet. Companies have honed their skills in reducing costs even when markets firm up. They will have that focus until they really get pressed on growth. We have assumed no uptick in the market. That said, if it does get better, then that’s great. I have less than 3 per cent of the market so in my view our destiny is in our own hands.”
STEVE AKIN RELOADING COLT
Title: President and chief executive, Colt Telecom
Age: 58
Salary: pounds 425,000
Career history: After obtaining a Bachelor of Arts in economics from Ohio Wesleyan University in 1969, Mr Akin went to Columbia University Business School. He has held various jobs in the telecoms industry including president of Sprint Long Distance in the US. He joined Fidelity in 1992 and served as chief information officer and chair of Fidelity’s global technology board
Interests: A new-found passion for English rugby, although some of the rules still surprise and confuse an American football enthusiast. Classical music.
