C&W hires Lapthorne as chairman on multi-million pound package

Cable&Wireless, the beleaguered telecoms group, yesterday brought in a heavy hitter as chairman on a three-year pay deal which will net him at least £1.5m and potentially twice that if he succeeds in turning the company around.

Richard Lapthorne, 59, the man credited with rescuing British Aerospace from collapse in the early 1990s, has taken over as C&W's non-executive chairman from Sir Ralph Robins with immediate effect.

His appointment ends an embarrassing hiatus in the company's search for a new chairman and places a further question mark over the future of its embattled chief executive Graham Wallace.

Mr Lapthorne, who is giving up the chairmanship of the biosciences group Amersham in order to devote his time to C&W, will be paid £300,000 to £350,000 and is on a three-year contract. In addition, he will be given 1 million free C&W shares at the end of the three-year period.

Part of the deal is that he buys 1.6 million C&W shares out of his own money – 1 million now and a further 200,000 at the end of each year in office. At the end of year one he will be entitled to buy the first tranche of 200,000 shares at yesterday's price. In years two and three he will buy the shares at an agreed premium to yesterday's price or at the market price if the shares fall in value.

Mr Lapthorne joined BAE as finance director in 1992 when it was teetering on the brink of collapse and left in 1999. Since then he has taken on a string of non-executive chairmanships at Morse, Avecia, Tunstall Holdings and TI Automotive. An avowed francophile, Mr Lapthorne is also on the board of France Telecom's mobile operator Orange and spends much of his time at his villa in Provence. A company spokesman said Mr Lapthorne would be "very healthily involved" with C&W although he would not be working a fixed number of days a week.

C&W's shares rose 16 per cent to close at 55.5p last night as the City welcomed the hiring of Mr Lapthorne. "His appointment is likely to be taken broadly positively," Fraser McLeish, telecoms analyst at Investec Securities, said.

Based on C&W's closing share price yesterday, Mr Lapthorne's free shares would be worth £555,000 in addition to the £1m in salary he will earn in the next three years. If C&W's shares were to double over the next three years, then he would own 2.6 million shares worth almost £2.9m.

Analysts warned, however, that Mr Lapthorne still faced an uphill task to stop the company from falling into insolvency. In the past three years its shares have fallen by more than 96 per cent from an all-time high of 1,562p and the company has been ejected from the FTSE 100.

Late last year C&W embarked on an £800m restructuring programme involving the withdrawal from the domestic markets of the US and Continental Europe. But it has subsequently been hit by the need to put £1.5bn of its £2.2bn cash pile into an escrow account to cover potential tax liabilities relating to its sale of the mobile business One2One to Deutsche Telekom.

Investec's Mr McLeish said this increased the threat of insolvency because C&W had little financial leeway should it incur further restructuring costs. "Given the huge risks relating to the restructuring, question marks over future solvency, competitive threats to its regional division and general lack of confidence in management, we expect the stock to trade closer to the lower end of a 40p-100p range," he added.