C&W chief says telco could be takeover target as profits fall 23%

9 Nov 2005

The chairman of UK and Caribbean telecoms group Cable & Wireless has said that his company could be a takeover target following a recent profit warning. On the day of C&W’s fiscal half-year results announcement Richard Lapthorne told the Financial Times that he felt a private equity firm would get more value out of the telco than its current shareholders. C&W’s share price has fallen sharply since it warned the market last month that increased competition in the UK and the suspension of its cost cutting programme would impact on profits in the six months to 5 September 2005. The dire prediction was not fully borne out, and yesterday the telco posted losses that were slightly less than analysts’ expectations.

Net income in the six months to 5 September 2005 fell to GBP125 million (USD217 million), from GBP239 million the year before. Pre-tax profit fell 23% to GBP134 million, whilst revenues rose 1% to GBP1.181 billion. Much of the fall can be attributed to the costs involved with C&W’s UK broadband business, Bulldog, which posted an operating loss of GBP49 million, mainly due to the costs involved in the unbundling of the local loop. There was one reason for investors to be cheerful as C&W announced it would be restarting its share buyback programme; the telco had temporarily stopped both its buyback and cost cutting programmes following its purchase of UK rival Energis in August.

United Kingdom, Cable & Wireless (UK)