The dispute is believed to be over documents drawn up when RWE, a leading German utility, opted to joint Vebacom, switching allegiances from its partnership with British Telecom's German ally, Viag. At the time the change was viewed as a coup for C&W and Dick Brown, its recently appointed chief executive.
However, a source close to C&W said that German and English versions of the heads of agreement documents differed in key respects, leading to a protracted wrangle over the terms. The three partners have yet to sign contracts formally to include RWE in Vebacom, formed when C&W linked up with Veba in 1995.
The source said: "This is undoubtedly the worst deal the company has done so far. It's created all sorts of problems. For the past three weeks C&W's input has in effect been put on hold while directors consider whether to issue legal proceedings."
The biggest stumbling block was over RWE's commitment to build a large- scale, DM8bn (pounds 3bn) fixed telephones network. Analysts estimated that if C&W left Vebacom it would not have to consolidate pounds 50m of losses in its accounts.
A question mark now hangs over Veba's 10.4 per cent stake in C&W, acquired in the original Vebacom deal and worth pounds 1.1bn. There is a suggestion is that Veba could sell the shares to Deutsche Telekom, allowing C&W to join Deutsche's "Global One" alliance.Reuse content