C&W plans to expand world-wide

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Cable & Wireless yesterday laid out plans for a big expansion in its network of global telecoms alliances, including the possibility of a US partnership, following the recent failure of its pounds 35bn merger talks with BT.

Brian Smith, chairman, confirmed that C&W and its German partner Veba were in talks about taking a strategic stake in Italy's national telecoms operator, Stet, as part of plans to increase its presence in Europe. An alliance is also being sought in Spain.

Mr Smith also said the North American market was a "high priority", indicating that C&W could seek to strengthen its presence through tie-ups with one or more of the Baby Bell regional phone companies.

Dick Brown, who takes over as C&W's new chief executive next month on a package potentially worth pounds 1.3m plus pounds 2.3m in share options, spent 27 years in the US telecoms industry, mostly with Baby Bell companies.

Mr Smith said the negotiations with BT had ended "more in sorrow than anger" but now that they were over there was no prospect of a giant merger of that sort again.

Instead C&W would focus on building up its federation of world-wide alliances by renewing acquaintances with all the "bridesmaids out there".

He was speaking as C&W unveiled a 10 per cent rise in pre-tax profits before exceptional items to pounds 1.26bn despite higher losses in the mobile telephone business Mercury One2One, operating losses of pounds 29m elsewhere in Europe and an initial pounds 20m loss on its German joint venture Vebacom.

Hongkong Telecom, in which C&W has a 58 per cent stake, was again the main profit earner, increasing its contribution by 12 per cent to pounds 909m.

Meanwhile its UK subsidiary Mercury, 80 per cent-owned by C&W, increased operating profits by 14 per cent to pounds 231m despite an improvement of only 3 per cent in turnover to pounds 1.7bn.

Acting chief executive Rod Olsen said that Mercury was no longer the "invalid" of the C&W group that it had been 18 months ago.

Mr Smith poured scorn on suggestions that a consortium bid was being planned for Hongkong Telecom, saying that he had received no approaches and that anyone wanting to take over the business would have to spend pounds 25bn buying C&W and then acquiring the minority shareholding.

He also sought to dampen speculation that China would want to muscle in on Hongkong Telecom ahead of its takeover of the colony next year. C&W had long relations with China going back 25 years and no indications had emerged from Peking that the Chinese wanted to take a direct stake in Hongkong Telecom.

Losses at One2One, which is jointly owned with US West, rose from pounds 61m to pounds 66m.