Departure date for Lord Young fuels bid rumours

Lord Young put a date on his retirement from Cable & Wireless yesterday "to end the recent ill-informed and destabilising comment, and to put the record straight". His departure immediately re-ignited speculation that BT would launch a bid for the company, to establish a presence in the Far East and realise what many observers see as C&W's hidden value.

Lord Young will leave a company still struggling to convince the City of the merits of its global telecommunications federation, but determined to press ahead with its strategy. Chairman of C&W since 1990, he will quit in February 1997.

He said yesterday he had decided to put an end to speculation about his future following a spate of newpaper articles suggesting he was under pressure from institutions to quit, and alleging a rift with the company's other directors. Denying any disagreement, Lord Young said it had always been his intention to quit on his 65th birthday.

Cable & Wireless has long struggled to convince investors of the value of its federation of telecoms companies around the world, with Lord Young most closely associated with the company's failure to present its case properly and its refusal to change its strategy to realise its value to shareholders.

At times the stock market value of C&W has been barely more than the market capitalisation of the company's 57 per cent shareholding in Hongkong Telecom, its most valuable asset, although the valuation gap has narrowed sharply in recent months.

Lord Young said he would have no say in the selection of his replacement, but expected it to be an external appointment, probably another former politician with the skills to carry on his ambassadorial role around the world, especially in the fast-growing telecommunications markets of Asia.

Lord Young announced his planned departure alongside a 9 per cent rise in pre-tax profits for the six months to September. He warned that growth in demand for fixed-wire services had slowed in line with lower economic activity in some of C&W's markets, but said Mercury was back on track and pointed to sharply lower losses from start-up associate companies.

After a 7 per cent rise in turnover to pounds 2.71bn, operating profits rose by a similar amount to pounds 636m. Reported pre-tax profits of pounds 815m included a pounds 199m exceptional profit from the sale of C&W's 5 per cent stake in Mannesmann Mobilfunk, a German mobile phone company. Underlying profits of pounds 616m compared with pounds 567m.

The company responded to persistent criticism of its federation of telecoms companies around the world by spelling out for the first time the economic value of the network. Better management of telephone traffic, sharper procurement terms and shared product and service development were worth pounds 40m in first-half pre-tax profits, C&W said, and would add pounds 90m to the bottom line in the full year to next March.

In the six months to September, Mercury lifted operating profits from pounds 96m to pounds 103m and claimed 15 per cent growth in residential lines compared with the small decline announced last week by BT, and twice BT's rate of growth in domestic and international call volumes.

Following a 25 per cent reduction in staff numbers over the past year, Mercury said it had reduced its on-going cost base by pounds 60m.

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