No growth at C&W, but the company formerly known as 'troubled', stops rot

Click to follow
The Independent Online

Zero. This is the prospect of growth at Cable & Wireless's UK operations over the next few months, according to its chief executive, Francesco Caio. As the country's second-largest fixed telecoms company operating in a recovering market, this is the stark reality of three years of mismanagement and a botched strategy that almost floored the 75-year-old telecoms company.

Zero. This is the prospect of growth at Cable & Wireless's UK operations over the next few months, according to its chief executive, Francesco Caio. As the country's second-largest fixed telecoms company operating in a recovering market, this is the stark reality of three years of mismanagement and a botched strategy that almost floored the 75-year-old telecoms company.

"There will be no growth in the foreseeable future. We need to get back to competitive mode," said Mr Caio, who replaced the architect of C&W's problems, Graham Wallace, last year.

Mr Caio is one year into a three-year plan to turn the company around. Despite his downbeat predictions, Mr Caio, along with C&W's chairman, Richard Lapthorne, have taken the company farther than most in the City had predicted. Mr Caio announced pre-tax profits last week, before exceptionals, of £317m for the year. Gone are C&W's regular-as-clockwork quarterly profits warnings.

C&W is no longer automatically referred to as "troubled" or "ailing", but Mr Caio still has a lot to do before the company can again be described as a genuine competitor to the likes of BT.

"We have stopped the bleeding by cutting costs. People who work at C&W are beginning to see a clearer direction at the company," Mr Caio said.

The first sign of the new direction came last month with the purchase of Bulldog, a British company which offers broadband internet services. "We are now about to approach the kink in the curve," Mr Caio said. "Broadband is taking off. There are a number of things we need to do to take advantage of this - marketing to large enterprises is one."

When C&W gets its house back in order, he will consider branching out into mobile phones, Mr Caio added. This won't see C&W buying a mobile operator, but instead developing wireless broadband (called Wi-Fi) in the UK and bidding for secondary mobile phone licences in countries such as Oman.

A year ago, the City would have balked at the thought of C&W eating into its £1.5bn cash pile, which helped to save it from collapse. But, Mr Caio said: "Acquisitions can accelerate our ability [to grow]. But we need to be careful on the number and speed of the acquisitions."

Some in the City would like to see C&W returning more of its cash to shareholders. While the company announced a better-than-expected final dividend of 2.1p per share last week, it gave no sign of the rumoured share buyback programme. "It is way too early," Mr Caio said.

Higher up Mr Caio's agenda, however, is C&W's interests in Japan, which was the company's worst performing division over the past year. The business made just £2m in profits before exceptional items and slipped £131m into the red when these were factored into the results.

Mr Caio refuses to rule out a sale of its Japanese business: "I cannot say yes and I cannot say no [to a sale]," he said. "Japan is not a distraction for us, but we are keeping our options open. We have reduced the cost base and we are not deploying cash to keep it alive."

C&W is also facing a headache in the Caribbean. As the incumbent telecoms operator, it is facing fierce competition from new entrants in the market and has seen its revenues fall. But Mr Caio has shaken up the management of the Caribbean operation, which has helped to stem the decline.

"There is no reason to panic here, but [under the old regime] there was no real understanding of the competition," Mr Caio said. "If you are not prepared for the competition then it is like a tornado hitting you. If you take a more knowledgeable view then it is nothing new."

Year one behind him and Mr Caio has stopped the rot at C&W. With costs under control and the company making modest profits, the hard part will come in year two and three - deciding exactly what C&W should become.

Comments