C & W may run out of cash

12 Dec 2002

Troubled international telecoms carrier, Cable & Wireless, is reported to be close to running out of cash as the ongoing troubles dogging the telecoms market spiral out of control.

The company may exhaust its £3.8bn sterling of cash within a year after the phone and internet provider repays debt, revamps its biggest business unit and puts money aside for difficult times ahead.

Analysts have said that a tricky bond sale may not go so well unless turnaround plans succeed and no more nasty jitters shock the troubled communications business.

Cable & Wireless has £1.2bn sterling of bonds due next year and faces as much as £1bn sterling worth of one-time costs. Earlier this week, the company said that a tax liability clause in a 1999 sale agreement may tie up £1.5bn sterling for several years.

Investors, angered at the disclosure about the tax clause have called for the resignation of CEO, Graham Wallace, who started to turn the 130 year-old company into a data services provider just before the telecoms market hit its worst ever downturn.

Shares at the carrier have slumped 47pc this week, valuing the company at about £1.06bn sterling compared with more than £37bn sterling in March 2000 and is now the worst performing stock on the FTSE 100 index in the past two years and, according to Bloomberg, its eviction from the index is likely this month.

According to Bloomberg, Moodys Investors Service cut Cable & Wireless’ credit rating to junk status, forcing the company to either get a £1.5bn sterling bank guarantee or set aside that amount to cover possible tax expenses at mobile operator One2One. Cable & Wireless sold 50pc of One2One to Deutsche Telekom in 1999.

Cable & Wireless in November is reported to have said it will have £1.2bn sterling in cash after paying its debts next year, down from £4.7bn sterling in 2001. The company has to pay a US$1.5bn bond in June next year and a further US$400m bond in December next year, according to Bloomberg data.

Cable & Wireless in November announced that it planned to trim some 3,500 jobs. The company’s data centres, which were bought when Exodus collapsed are to be reduced from 42 to 23. The company employs 167 people in Ireland.

By John Kennedy