C&W shelves plans to split due to credit crunch

Cable & Wireless, the UK's second largest telecoms provider to businesses, has shelved plans to split because of the uncertainty brought on by the credit crunch.

Yet the group managed to shrug off any further effects of the economic downturn as it beat expectations with a strong set of results and a surprisingly positive outlook for the year.

The FTSE 100 company had already internally split its Europe, Asia and US division from its International business – which includes operations in the Caribbean, Panama, Macau and Monaco – two years ago. Yet it emerged in 2007 that the group had planned to demerge the businesses completely by the end of this financial year.

It will now wait until market conditions stabilise, according to Tony Rice, who took over as head of the International business yesterday.

He said that while almost all "the boxes had been ticked" to demerge, the market conditions made it an "unnecessary risk" for the two businesses. "When the market sorts itself out, and not just over a five-day period but shows a decent period of stability, we will look at the prospect again," he added.

C&W's chairman, Richard Lapthorne, added: "Whilst our trading position is in good health, the same cannot be said of the financial markets, which are extremely volatile and which currently provide no basis for proper financial planning."

The group made the announcement as it released strong results for the six months until the end of September, beating the analyst estimates.

C&W, which competes with larger rival BT for business contracts, said that revenues had lifted by 5 per cent to £1.65bn, and earnings before interest, tax, depreciation and amortisation were up a quarter at £357m.

The management backed the telecoms sector as a defensive area during the current crisis, and was yet to see signs of a UK recession after a record month for sales during September.

John Pluthero, executive chairman of the Europe, Asia and US arm, hailed the results as particularly strong and said it wasn't all about benefiting from cost cutting. "You can't save your way to victory. It will see us through the next couple of years but we also have plans for growth."

The interim dividend is to be lifted 13 per cent to 2.83p per share, and Ebitda outlook from £725m to "at least" £780m. The news sent C&W shares up as much as 5 per cent in the morning.

C&W has its roots back as far as 1869, when Sir John Pender founded a telegraph company which later merged with the Eastern Telegraph Company. After a period of consolidation, the company was named Cable & Wireless Ltd in 1934.