Private Investor: Yes, you can make money from the phone companies

I had feared the worst from Cable & Wireless last week. The group was due to publish its third-quarter trading statement and the shares had a distinctly saggy feel to them before the annoucement on Tuesday.

I had feared the worst from Cable & Wireless last week. The group was due to publish its third-quarter trading statement and the shares had a distinctly saggy feel to them before the annoucement on Tuesday.

But strangely enough, it would seem that this weakness in the share price was not due to some people in the City knowing more than I did and more than they ought to about C&W's forthcoming numbers. No, they were simply profit-taking on what had been a fairly good run for the stock amid some general nervousness about its prospects.

In any case, just for a change, C&W confounded expectations and found itself at the top of the FTSE 100 risers table for the day, up 5 per cent, and up again the following day.

So, not a bad week really for C&W, but I didn't think the results were all that wonderful, even if they were better than had been anticipated. Maybe it's all about massaging expectations, and, as I've had cause to write many times before, every week brings a new example or two of this black art. Perhaps C&W chief executive Francesco Caio's strategy of presenting the City with a "discursive valuation" of his company a few months ago has paid off.

It was all enough for me to cash in some of my C&W shares, registering a modest gain of 6 per cent on the shares that I've been buying in the company since the great telecoms, media and technology share collapse.

Certainly not as impressive as the returns I've seen on mmO2 (130 per cent) or Vodafone (40 per cent) but better than might have ever been reasonably hoped. It was a bit of a gamble, and it hasn't gone wrong.

I'm hanging on to some C&W shares, though, because I'm intrigued about the possibilities for an operation they've chosen to call Bulldog, which is using the "unbundling" of local phone exchanges from BT control to offer subscribers new broadband services. It doesn't seem to be a very significant part of the business, but it is a much more solid start on a new line than we have seen from the company for a long time.

As for Vodafone, it also seems to be doing a bit better than some observers thought, with an astonishing global-user base of 151.8 million souls. It registered its strongest quarter of new customer additions since December 2000 on the back of aggressive marketing. Full-year forecasts were confirmed yet, in contrast to C&W, the shares hardly budged, continuing their long-term stagnation around the 140p mark.

So is Vodafone a utility or not? It's sheer size and the fact that its fastest years of growth are behind suggest it is. It's newest customers seem to spend less than existing ones, and in Japan the firm seems to be making no headway at all. And yet the phone companies seem to be able to invent newer and newer applications for the dear old mobile. The time when you bought a mobile phone that would just make phone calls is long gone, and it is now a games console, internet browser, calendar, calculator, alarm clock and goodness knows what else. Some of us can stay bewildered by the choice and all those funny buttons, but you may be sure that a whole new generation will grow up that thinks it peculiar that anyone should use a phone that has a piece of wire attached to it.

Even the health scares don't seem to stop the kids, who seem more interested in assaulting people on buses, trains and the London Undergound, using their mobiles to video their japes and then send the evidence of their violence to their mates. Another reason to stay in your car, I suppose.

Utility or growth stock, I like Vodafone and have put my C&W proceeds into the stock.

s.o'grady@independent.co.uk