Cable & Wireless keeps Government work after cutting bills

Cable & Wireless Worldwide (CWW) has moved to reassure the market that it has retained its public sector contracts after it issued a shock profits warning ahead of the Government's cost-saving drive.

The company yesterday said that it had signed a deal with the Cabinet Office to retain all its existing government telecoms contracts, including a deal to provide video conferencing for the Office for Criminal Justice Reform.

However, it is understood that CWW was forced to shave millions of pounds off the value of the contracts, which brought in £285m of revenue last year. The company refused to state exactly how much it had reduce the contracts by.

Brian Woodford, head of CWW's public sector arm, said: "The memorandum of understanding represents an important milestone as we meet the Government's immediate efficiency agenda and commit to support its reform initiatives.

"We are extremely well placed to continue to deliver value for money for the Government and the tax payer."

Last week Sir Philip Green's report into how the Government could improve efficiency singled out fixed-line telecoms as a key area in which spending could be reduced.

The Top Shop boss said the Government could cut its £2bn annual telecoms bill by 30pc to 40pc if individual departments joined together to force down prices.

Francis Maude, the Cabinet Office minister, had demanded that 19 telecoms and IT companies slash the cost of the Government's annual telecoms bill.

BT, Hewlett-Packard and Cap Gemini have already announced similar deals with the Government.

CWW shares, which dropped almost 17pc in one day in July when the company first warned about its vulnerability of its public sector deals, closed down 1.15p to 72.05p.

Vodafone, which is understood to supply about 98pc of the Government's mobile phone contracts, has yet to sign a new deal but it is understood to be close to agreeing terms.

Vodafone said it was working closely with the Government to reduce public sector office costs by up to 40pc by promoting the "intelligent use of mobile working".

The company estimates remote working could help cut the Government's £12.4bn property bill by £5bn.

Source: The Telegraph, 20th October 2010

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