Cable & Wireless demerger put on hold

Cable & Wireless has postponed plans for a demerger until next year because of the turmoil in financial markets.

The telecoms provider had been expected to announce it would split its UK arm from international operations on November 10, when it unveils half-year results.

However, the board is worried that the continuing stock-market uncertainty makes it a poor time to undergo such a transaction.

C&W, led by John Pluthero, had flagged that it would consider options for “value realisation” this financial year, giving it until next March to come up with a verdict. A carve-up may take at least three months to plan, suggesting that it may now not take effect until next June at the earliest.

While C&W has never confirmed a split, investors see that as the most likely way forward. The company, which has a market value of £3.6 billion, removed a key obstacle last month when it parcelled off £1 billion of pension liabilities to Prudential.

Any delay might affect the value of C&W’s long-term incentive plan, which begins paying out in April. Pegged largely to share-price performance, the company has estimated that 60 top managers could share £216m.

C&W shares have fallen by 17% in the past month, but have outperformed the FTSE All-Share index by 10% over the same period.

The company’s two divisions have little in common. C&W’s UK arm serves corporate customers with high-speed voice and data networks. After years of underperformance, it should become cashflow positive this year and has been bulked up with the £300m purchase of rival carrier Thus.

The international arm supplies mobile and broadband to consumers overseas.

source: timesonline.co.uk 19-10-2008

Back to News »