BT dismisses PlusNet's chief executive and CFO

By Maija Palmer, Financial Times
Published: Mar 07, 2007

BT has dismissed the chief executive and chief financial officer of PlusNet, the internet service company that it bought three months ago for £67m.

People familiar with the company said Lee Strafford, chief executive, and Neil Comer, finance director of PlusNet, had been accused by BT of plotting to start a rival business.

The two executives deny any such plans and Mr Strafford is understood to be considering legal action against BT.

BT confirmed that the pair had left the company with "immediate effect" but declined to give a reason.

People close to the company said there appeared to be a misunderstanding over strategic plans for the PlusNet business following the acquisition by BT.

PlusNet executives are understood to have put forward a number of different options, including the creation of a new business that could be relisted on the stock exchange with BT's backing.

The management of PlusNet is thought to have been concerned about ensuring adequate remuneration for key staff at the company and had suggested a new stock market vehicle as a method for providing performance- related pay.

The company was acquired by BT in November for 210p a share after its share price had collapsed from a peak of 410p, leaving many employee stock options under water.

PlusNet, like many internet service providers, was hit hard by the launch of "free" broadband by Carphone Warehouse in April last year.

At the time of the acquisition, BT said it planned to retain PlusNet's executive team, including Mr Strafford, who founded the company in 1997 and is estimated to have made £3.5m from the sale.

BT said yesterday that the executive departures would not hold back its plans to integrate the business into its Retail arm.

BT acquired PlusNet to gain access to the company's technology for managing companies' broadband needs. Before the takeover, BT was already using PlusNet's internet traffic management system, Workplace, to supply remote broadband access to companies.

The takeover of PlusNet has already been tinged with controversy - the Takeover Panel last month publicly reprimanded NM Rothschild for mistakes in advising BT on the deal.