Unrest at Cable&Wireless Worldwide

22 June 2011 | Kavit Majithia


What is going on at Cable&Wireless Worldwide? The company has been subject to widespread media attention over the past week, and the release of the company’s annual report on Tuesday has now added significant investor unrest to a long list of uncertainties facing the telco.

The report revealed a set of poor figures to mark its first year of operating as an independent company. So poor, that the Financial Times (FT) suggested shareholders’ “anger” has resulted in a cut in pay packages for its top managers. At one point during the 2010-2011 financial year, the company’s share price dropped by a staggering 43%.

Jim Marsh, chief executive at the company called on the declining revenues in voice and legacy products, the large scale of cuts in the UK public sector and pricing cuts and consolidation as reasons for poor figures. Marsh himself missed out on a bonus because cash flow and earnings failed to meet targets.

The report also declared the group is cancelling plans of a new share scheme for its top managers, and it has revoked ‘exception performance awards’ following a review of the remuneration policy, “considering the company’s strategic priorities”. The demerged Cable&Wireless Worldwide has now also put a cap on executive salary for 2011-2012.

Would taking the ‘Worldwide’ out of Cable&Wireless make the company more attractive? Apparently so. After the FT reported Hong Kong based telco Pacnet had made an informal bid of $500 million to take over its international operations, shares closed 3% up on Monday, and many industry experts claim its ‘Worldwide’ business significantly lacks the scale its competitors have, such as AT&T for example. With 75% of Cable&Wireless Worldwide revenue coming in domestically, a retrenchment to the UK may not seem like the worst option. The group has declared it rejected a bid for its international operations but we doubt this is the last bid it will have to consider.

Marsh declared the company’s commitment to move away from less profitable services and expand in new technology, declaring that “cloud is becoming a reality” in his report. It will be interesting to see what the company does in the coming year to capitalise on this potential, and whether it is successful in its informal £360 million bid for UK-based IT and cloud computing company 2e2, as reported by the FT. If Cable&Wireless Worldwide is the subject of a takeover, there would undoubtedly be widespread interest from the UK’s domestic mobile operators looking to increase fixed-line offering.