View from City Road: Mercury needs a clear line

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CABLE & WIRELESS should clear the air. Investors need reassurance in particular about its strategy for its Mercury subsidiary.

The latest suggestion is that talks on an alliance between Mercury and US West, the US regional telephone company, have foundered. These were supposedly aimed at US West taking a stake of about 25 per cent in Mercury for an estimated pounds 500m. They follow the collapse of talks between C&W and another US giant, AT&T.

Continued uncertainty over Mercury can do little to boost investor confidence. It begs the question of whether C&W is a difficult organisation to do a deal with, or whether the rapid change and increasing competition in the UK telecommunications market makes potential partners nervous.

But US West, of all companies, should present C&W with relatively few problems as a potential suitor for Mercury. The American company is already pooling its resources with Mercury to establish a high technology (and expensive) mobile telephone system to rival both cellular radio and fixed links.

The problem could be reticence on the part of US West's existing partners in UK cable television ventures. Cable TV networks are regarded by Mercury as key to boosting its penetration in local telephone services and would be an important part of any US West deal.

C&W has already pumped at least pounds 1.5bn into Mercury. It is high time for C&W to sort out a strategy for the telephone company. A string of abortive negotiations serves only to divert valuable management time from running Mercury to best effect.