C&W in Financial Times:
I'm not sure how many understand the value of C&W and Optus to NN:
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SATURDAY OCTOBER 3 1998 UK & Ireland
PROFILE: The man who has switched on C&W
Dick Brown, who has struck 21 deals in his 27 months as chief executive of the global telecoms operator, talks to Alan Cane
Dick Brown, Cable and Wireless' indefatigable chief executive, has been shopping for culture in China. The result, Tai Chi,a 1991 sculpture by the distinguished artist Ju Ming, now has pride of place in his office in Theobald's Road, London, among souvenirs of 27 frenetic months as head of the UK's second largest communications company.
The piece depicts two martial arts exponents. Mr Brown quips that it represents C&W locked in combat with rival operators.
Some, noting the cubist influence, might see it as a metaphor for C&W's emergence as a global communications operator: impressive in outline, but requiring a little imagination to fit the reality to the label. Mr Brown, however, has in a remarkably short time dug foundations and erected steelwork for the new C&W.
Once written off as little more than an investment trust dealing in telecoms properties, C&W is transforming itself into an operator with global reach. Its heritage as a sleepy former government department is largely forgotten, replaced by areputation for fast action and delivering on promises.
Including the flotation announced earlier this week of C&W Optus, the group's Australian subsidiary, Mr Brown has overseen 21 deals valued at more then £12bn during his period in office. "These deals have got C&W into things and out of things and they have repositioned this company in a very dramatic way," he says.
He reiterates his credo for ownership of assets: "If we cannot control or substantially influence a company, then we are out."
In the past year, C&W has made good its undertaking to dispose of some £1bn of assets in that category.
Among the more spectacular deals were the creation of Cable & Wireless Communications, the UK-based operating company, from the former Mercury Communications and three cable companies, and the opportunistic purchase of the internet assets of MCI. The US operator was forced by regulators to quit the internet business as a condition of its merger with WorldCom.
"That," Brown says of the latter buy, "may have been the most difficult deal we have ever done." His quickly tendered bid of $625m (£372m) for MCI's internet "backbone" alone was thwarted when regulators ordered the whole internet business must be sold.
"By that time, the rest of the world had seen how beautiful this deal was. How attractive the assets are. We had to stay in control and lead it to a successful conclusion." In the end, C&W won the battle, paying $1.75bn for MCI's internet backbone and its whole internet client base.
Mr Brown has a simple strategy for the group, focused on growth, efficiency and global branding.
He points out: "Tens of millions of people who used to know the company by a different name now see Cable and Wireless." The Australian operator Optus is now known as Cable and Wireless Optus, for example.
Transformation from financial trust to operator, however, has meant considerable internal reorganisation.
Mr Brown has created five lines of business - marine, mobile, global networks, global markets and card services - to oversee worldwide operations. C&W is, for example, a world leader in submarine cable operations, owning a fleet of advanced cable-laying vessels.
It has some 2.9m mobile phone customers worldwide on an equity-adjusted basis. In two-thirds of the areas where it has a stake in a mobile operator, it also owns fixed wire assets, making the possibility of the emergence of an operator offering both fixed and mobile services more likely.
This week it expects its global markets line of business to announce contracts worth some $300m over the next few years to handle data transmission for a number of blue-chip financial services customers.
Hongkong Telecom is C&W's greatest asset and its Achilles heel. It retains a 54.2 per cent stake in the company and derives some two-thirds of its pre-tax profits from it.
Analysts reckon that on fundamentals, C&W shares should be valued at about 900p. Their current price of about 550p reflects the view that C&W is essentially an Asian stock, subject to the financial troubles of the region.
In particular, speculation that Hong Kong may be forced to abandon its currency peg to the US dollar is doing nothing for confidence.
Mr Brown hopes that within three years growth in other regions - specifically CWC in the UK and C&W Optus in Australia - will cut the HKT contribution to profits to below 50 per cent.
The guiding principle of Mr Brown's tenure at C&W has been, in his own words: "Performance, performance, performance. Aim high and deliver."
He moves quickly, preferring to sketch the outlines of a transaction with his peers leaving staff to sort out the details. He can be lucky. A car phone conversation with Rupert Murdoch resulted in the sale of most of the group's Russian assets to News International for £48m. Almost immediately the consideration was paid, the rouble began to tumble.
He accepts, however, that there have been mistakes: "We don't always get it right. No business does." C&WC, the UK communications group, has had a difficult start.
"There were several months of delays because of the difficulty of implementing new systems. We underestimated the volume of data business we would attract. We had to buy a company [Anite Networks, bought in 1997 for £47m] to help handle all the data business.
"And that still wasn't enough, so we had to build new networks. That took more time than we wanted to spend, so we had to turn away business we should have had."
And C&W's strategic alliance with Telecom Italia, announced in the middle of the year, remains a source of puzzlement to analysts and competitors alike.
An agreement to share networks was to be underpinned by the sale of C&W's stake in Bouygues Telecom, the French mobile operator, to Telecom Italia. In the end, Bouygues' other shareholders claimed pre-emptive rights to the stake.
Mr Brown says the two are still talking. "We are still planning networks together. If we announce something binding, it has to stand the test of time. We have to understand what it means to have jointly managed global networks and we are not there yet."
C&W is, in any case, pursuing a two-track strategy in Europe, establishing operations in 22 European cities and targeting business customers and niche markets. Switches have already been installed in Paris, Zurich and Dublin. Madrid, Milan, Brussels and Amsterdam are expected to go live before the end of the year.
The Telecom Italia deal aside, Mr Brown is still winning praise for what analysts describe as a "sensible, straightforward, pragmatic and commercial" approach to transforming C&W.
John Allen of ARC Associates, the investment bank, says: "To have achieved that degree of grip on a company so quickly is a good European management story."
It could be argued that, given his extensive telecoms experience, many of Mr Brown's moves were logical and obvious. "Only in retrospect," Mr Allen retorts.>>>>
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