COMPANY OF THE WEEK: Cable & Wireless

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The Independent Online
VEBA, Germany's top utility, sold its 10.2 per cent stake in Cable & Wireless at a profit of pounds 900m, raising funds to invest in its own phone ventures. ABN Amro and Cazenove placed the shares at 735p each, an 11.5 per cent discount on the previous week's price of 830.5p.

Cable & Wireless shares fell sharply on the news and were down 11 per cent on the week. Other phone companies dropped too, on the concern that Britain's telecommunications stocks may be too expensive given their profit outlook. Telecoms shares were one of the best performing sectors last year, helping push up the FT-SE 100 index but investors think they are now running out of steam and are selling.

Veba received about pounds 1.75bn for the sale, about twice what it paid in 1995, ending its last ties with Cable & Wireless. Veba's European alliance with the company ended in 1997. "For the last couple of years it's been no more than a financial investment for Veba," said Philip Carse, an analyst at Commerzbank. "Veba's got a bit of debt on the balance sheet and I guess they figure this is the right time to release plenty of cash."

Veba, which owns about half of Otelo, a German phone joint venture with rival RWE, and E-Plus, Germany's third-largest mobile phone operator, said the divestment is part of a plan to focus on its main units. Analysts said they expect Veba to use the money to beef up its loss-making telecommunications unit. "Veba may be preparing to expand in telecommunications," said Thomas Schiessle, an analyst at Bankhaus Delbrueck in Frankfurt.

The sale comes amid German reports that Veba's 1998 profit won't match the 1997 level because of losses at its Otelo phone venture with RWE and problems at its US semiconductor unit. It also comes amid speculation that Veba may raise its stake in E-Plus, buying a 17 per cent stake from Vodafone Group.