C&W to perform £600m U-turn

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The Independent Online

Cable & Wireless is expected to announce restructuring costs of up to £600m on Thursday, as the troubled telecoms giant signals a withdrawal from America.

The new chief executive, Francesco Caio, will use the end-of-year results presentation to outline C&W's new direction. He is expected to tear up the strategy devised by former chief executive Graham Wallace to expand the business into internet services, concentrated in America. This proved disastrous, being a huge drain on C&W's once-sizeable cash reserves.

This week's strategy U-turn will lead to significant closure costs. Stockbroker Investec Securities estimates that if the US operation is shut down, the costs could reach £460m. There has also been speculation that C&W could close its Japanese arm, This, says Investec, could set it back by up to £150m. These costs would come on top of the £1bn announced last year following C&W's partial withdrawal from the US and continental Europe. Only £250m of this has been incurred so far.

As well as trimming C&W's loss-making businesses, Mr Caio is expected to announce around 200 layoffs in the UK.

All this will eat into the company's cash reserves, which stood at £1.5bn in March.

Mr Caio joined C&W in April as part of a clearout of the company's board. His appointment followed the arrival of new chairman Richard Lapthorne, the former finance director of British Aerospace.

Mr Lapthorne is still in talks with Mr Wallace over the level of the former chief's payoff. Because he was on a two-year contract, Mr Wallace is entitled to £1.5m. He is understood to be holding out for the full sum even though he was regarded as the chief architect of C&W's decline.