CWC to spend pounds 400m on network improvements

CABLE & WIRELESS Communications (CWC) yesterday raised the stakes in the intensely competitive UK phone market, revealing plans to spend pounds 400m on replacing or upgrading much of its long-distance fibre network.

It also emerged that CWC has appointed accountants Coopers & Lybrand to identify cost savings in the pounds 5bn company, formed out of last year's merger of Mercury Communications with three cable operators, Bell Cablemedia, Videotron and Nynex CableComms.

The new network involves a risk-sharing partnership with the Canadian equipment giant Northern Telecom (Nortel), which CWC claimed would enable it to leapfrog competitors, including British Telecom and Energis. It is the largest ever contract won outside North America by Nortel, which was responsible for building Energis's digital network and the controversial wireless technology used by Ionica.

The four-year programme will form part of CWC's pounds 1bn annual investment budget, which is due to generate positive cash-flows by 2000-2001. CWC said the pounds 400m investment was likely to see "low utilisation" in the early years, but the group was anticipating an explosion of data traffic similar to that seen in the US.

Graham Wallace, CWC's chief executive, said the advanced digital technology was of "a completely different order of magnitude" to that used by competitors. It would increase capacity by at least 10 times on the existing Mercury fibre long-distance network, rolled out during the mid 1980s.

Greg Clarke, CWC's chief operating officer, said the company may also offer voice telephony across the internet. "We don't see internet telephony as a threat, we see it as an opportunity. You can't be a luddite or a King Canute."

Arguments about technology have become increasingly heated among phone operators in recent months, as rivals seek to exploit the shift from traditional voice telephony to high-speed data transmission and internet access. CWC said its network would adopt "self-healing" technology which identifies and fixes faults, similar to that used by Energis or Colt but on a much bigger scale.

BT, which recently revealed a pounds 300m digital network upgrade, disputed C&W's claim. "We already have the largest advanced network in the UK with more capacity than C&W's. This is just standard technology," said a spokesman.

An Energis spokeswoman said it would take CWC at least two years to catch up. "By that time we'll have enhanced our network even further. This gives us a window of opportunity to widen the gap."

Mr Wallace declined to reveal the new cost-cutting targets yesterday, but said Coopers & Lybrand would look at ways of shifting resources to the fastest growing parts of CWC's business.

Since last year's complex four-way merger five network control centres have been merged down to two sites.