Lewis quits after nine months in Mercury job

Duncan Lewis has resigned abruptly as chief executive of Mercury Communications after only nine months in the job. Mr Lewis, the fourth head of the Cable and Wireless subsidiary to leave within the last six years, was appointed by Lord Young, C&W chairman, to turn the company's fortunes around.

Mr Lewis's departure for "personal reasons" stunned City analysts. He was perceived to have been effective in cutting Mercury's costs and improving performance. His resignation was all the more shocking as it came the day after he delivered a swingeing attack on the industry regulator, Oftel, for doing too little to promote competition and to curb the power of BT.

Lord Young said: "I greatly regret Duncan Lewis's decision to resign on personal grounds. Over the last nine months he has refocused Mercury, laid the strategy and put the company back on the growth path. The result will become evident in the November interims."

He said Mr Lewis will be replaced by Peter Howell-Jones, at present deputy chief executive of the group's flagship, Hong Kong Telecom. "He knows the business well and inherits a strong management team to help him see the strategy through," Lord Young said.

Unlike his predecessors, Mr Lewis is leaving C&W completely rather than taking another post within the group. Previous heads of Mercury have moved within C&W after leaving Mercury, but none now remains with the organisation.

The change at Mercury is part of a wider reorganisation, which includes the appointment of James Ross, C&W chief executive, as deputy chairman - in addition to his present position.Win Bischoff, a non- executive director, is also appointed deputy chairman, but the group said there is no change in Lord Young's role.

Mr Lewis's appointment to Mercury at the end of last year coincided with the biggest shakeup in its 10-year history. The company announced plans to scrap its network of 2,700 payphones and to withdraw from directory inquiry services as part of a restructuring involving the loss of 2,500 jobs.

Mercury is also poised to sell its equipment manufacturing unit in Milton Keynes, which employs 1,000.

In the telephony market, the company has refocused on long distance operations and on services for small and medium businesses, effectively admitting that it will never be a major player in services for households.

One City analyst said: "I cannot understand it. Mr Lewis has been putting the company back on a growth path. On Monday he appeared to be at the heart of the debate over the future of the industry and on Tuesday he is gone."

In his speech to a London conference on Monday, Mr Lewis said Government policy and regulation had failed to deliver effective competition: "I have seen nothing which says we are not now headed for a catastrophe. We are at a point of crisis in the evolution of telecommunications regulation."

Another City analyst said that with the repeated change of chief executive, and of direction, there now has to be a question over Mercury's long- term future. He said that while cost cutting might improve immediate performance, Mr Lewis had been something of a company doctor who lacked strategic vision. Mercury has been widely criticised in recent years for failing to react quickly enough to competition after the Government ended the duopoly in 1991. Since then, almost 60 companies have been licensed to offer telephony services and dozens of cable television franchises have been authorised to provide local telephony within their area. Mercury has also seen margins severely squeezed in the price war with BT. The company has struggled to keep an edge over its rival, which must keep annual price changes on its basket of basic services to inflation minus 7.5 percentage points.

Cable and Wireless is also thought to have been in talks earlier this year with AT&T of the US concerning a possible stake in Mercury or the group as a whole, but to no avail.

Comment, page 19

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