Cable & Wireless Memo Warns Of European Job Cuts
12 Dec 12:17
(This updates an article at 0947 GMT with additional background and analyst
comment.)
By Gren Manuel
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--Cable & Wireless PLC (CWP) plans to cut about 65% of its
staff in Europe, or about 800 people, in an attempt to stem losses, according
to an internal memo seen Thursday by Dow Jones Newswires.
The memo, sent Nov. 27 to C&W staff in Germany by Ottmar Schipper, vice
president for Germany and Austria, states that the German operations "will keep
nearly 50% of the overall work force. This is much more than the European
average of 35%."
The move is first indication of how the company's plan to turn around its
troubled C&W Global unit will hit its operations in continental Europe.
The C&W Global unit aims to be a global telecoms carrier based around
Internet-type data, but has swallowed GBP6 billion in the deteriorating
telecoms market and is still consuming cash.
That's something Cable & Wireless can ill afford: The company reported a net
loss of GBP4.54 billion for the fiscal first half ended Sept. 30, compared with
a loss of GBP567 million a year earlier, due mainly to write-downs of goodwill
and restructuring costs.
Schipper's memo indicated that some operations will be sold rather than shut
down.
"We also foresee that a number of employees will find a job with those parts
of the business going into new ownership," it said.
Peter Eustace, a spokesman for Cable & Wireless in London, said the company
hasn't finalized plans for job cuts in Europe.
"The consultation process is still going on," Eustace said.
The company employs around 1,250 people in Europe outside the U.K., Eustace
said.
An analyst in London, who asked not to be named, said the move was in line
with cost-cutting outlined in November, and was a good sign.
Cable & Wireless Chief Executive Graham Wallace pledged in November to cut
3,500 jobs worldwide as part of a plan to get C&W Global generating cash by
March 2004. He indicated most would be in the U.S., with some in Europe, but
did not give more details.
Cable & Wireless's shares rose 4% in the two hours after the memo's contents
were reported, although the gains evaporated as the day wore on. The stock
closed at 44.75 pence, up 0.25 pence, or 0.6%.
However, the analyst said the progress of the restructuring plan was
increasingly overshadowed by other issues, such as whether the company would
have to put GBP1.5 billion into an escrow account to guarantee U.K. tax
payments after its debt was downgraded to junk status by Moody's Investors
Service Inc. late last week.
The Financial Times also reported Thursday that the Association of British
Insurers, whose members control around 20% of the U.K. stock market, had raised
the disclosure of the escrow requirement with the regulator.
The ABI wrote to the Financial Services Authority, the U.K.'s securities
regulator, asking whether C&W had broken listing rules by failing to disclose
the GBP1.5 billion escrow requirement. The requirement stems from a sale of its
share in a U.K. mobile operator to Deutsche Telekom AG (DT) in 1999.
C&W shares have fallen by around 45% this week following the disclosure of
the escrow issue and the Moody's downgrade.
Schipper's memo says none of the German cuts will be made before January 2003
and the full headcount reduction won't be achieved until October 2003.
The memo said job cuts in Germany will be lighter than in other areas of
Europe because C&W's German operations were already focused on the most
strategic customers.
Company website: cw.com
-By Gren Manuel, Dow Jones Newswires; 44 20 7842 9279;
gren.manuel@dowjones.com
(END) Dow Jones Newswires
12-12-02 1217ET |
