Cable & Wireless plans beef up networks to carry more Internet and data.1 billion in Europe and 670 millions in US.
NN has already been aworded to be exclusive supplier of ATM in Europe, will provide Global ATM for C&W, which will be connected to US network, nad most likely will play key role in US network too.
London, May 12 (Bloomberg) -- Cable & Wireless Plc, the U.K.'s
second-largest phone company, said profit stalled in the second half and will
fall in the current year as it beefs up networks to carry more Internet and data
traffic.
Net income in the six months ended March 31 was 316 million pounds
($511.3 million), or 13.1 pence per share, compared with 315 million pounds,
or 13.8p. A slump at its Hong Kong unit will hurt profit again this year, C&W
said. The shares fell more than 7 percent.
Newly appointed Chief Executive Graham Wallace is aiming to reduce C&W's
involvement in the consumer market as it puts greater focus on providing more
lucrative data and Internet services to businesses. The company is increasing
spending by more than a third this year, in part to ensure its networks can
handle soaring demand from corporate customers. ''The key thing to look at is
the change in direction for the company,'' said Jim McCafferty, an analyst at
SG Securities who has a ''buy rating on the shares. ''They're really moving into
the business market away from the consumer.''
The shares fell as much as 61.5 pence to 784p after the company declined to
say how much earnings would be hurt by increased investment and the slump in
Hong Kong Telecommunications Ltd., in which C&W holds a majority stake
and derives most of its profits.
Hong Kong Telecom, which has been hurt by stiff competition and the
recession in Asia, said on May 7 full-year earnings fell 32.4 percent.
C&W's net income figure excludes one-time items and amortization. Per-share
earnings were lower in the period because the company issued new shares last
year to finance the purchase of MCI Communications Corp.'s Internet unit.
The greater focus on business refines a strategy pursued by Wallace's
predecessor, Dick Brown, who sold off stakes in businesses C&W doesn't
control and engineered last year's purchase of MCI Communications Corp.'s
Internet business, which made C&W the second-biggest carrier of Internet
traffic in the U.S.
Network Capacity
Building on this investment, C&W said it's earmarked 2 billion pounds over the
next three years to construct new low- cost network capacity to keep pace
with soaring corporate demand for high-speed services in Europe, Asia and
North America.
In the current year, C&W said it's raising overall investment to 3 billion
pounds, a 36 percent increase over last year's 2.2 billion pounds.
In the business market, ''growth is currently exceeding our ability to meet
demand, so that's why we're expanding network capacity,'' Wallace said in a
conference call with journalists.
Worldwide revenue for carrying data on the Internet is expected to more than
double to $19 billion in 2002, according to market researchers Datamonitor
Plc. The number of people using the Internet is expected to double to 300
million by 2005.
C&W said last month it's spending $670 million to develop its high-speed
network in the U.S. It's also spending $1 billion to build a high-speed network
in Europe.
London-based C&W derives more than 70 percent of sales from business
customers, including Andersen Consulting and Chase Manhattan Corp.
Financing
The greater spending will be financed through current cash flow and recent
disposals, the company said. C&W last month agreed to sell its underwater
cables operations to Global Crossing Ltd. for $885 million.
More disposals could be on the way as C&W accelerates efforts to focus on
the business market. C&W and partner MediaOne Group Inc. are aiming to
sell One 2 One, the U.K.'s smallest mobile phone company with a largely
consumer customer base. It's still also considering an initial public offering for
the unit, the company said.
Talks to find a buyer for it's stake in France's Bouygues Telecom are
continuing, C&W said.
Meantime, the company's U.K. unit, Cable & Wireless Communications Plc, is
in talks with rival Telewest Communications Plc to merge CWC's residential
cable-TV assets with those of Telewest and fold the corporate business into
C&W, a person familiar with the matter said last month.
Microsoft Corp. is also in early talks to buy as much as 30 percent of CWC, a
person familiar with the talks said. C&W declined to comment.
Full-Year Profit
The dearth of new developments at those units in Wallace's first strategy
statement may have caused some disappointment among investors, analysts
said.
Still, Wallace's goal of focusing on the business market suggest he's serious
about addressing long-standing criticism that the value of the company's stock
is worth less than the sum of its various units, which include Australia's No. 2
phone company, Cable & Wireless Optus Ltd. ''It's a very sound policy -- not
being all things to all men everywhere,'' said Peter Roe, an analyst at Paribas
Capital Markets, who has a ''buy'' rating on the shares ''Wallace is very
conscious of the discount between the group and the parts'' and the need to
close the gap, Roe said.
C&W said it will also consider shedding more units if they are determined not
to fit with the company's strategy.
For the full year, pretax profit fell 17 percent to 1.8 billion pounds, the
company said. Pretax profit before tax, exceptionals and goodwill amortization
rose 3 percent to 1.64 billion. Sales, excluding revenue from joint ventures and
associates, rose 13 percent to 7.94 billion pounds, from 7 billion pounds.
The company said it will pay a full-year dividend of 13.5 pence a share,
compared with 12.25 pence per share a year earlier.
NYSE/AMEX delayed 20 min. NASDAQ delayed 15 min. |
