C&W investors 'to seek inquiry'

Graham Wallace has resisted calls to resign

Cable & Wireless shareholders are planning to ask the City regulator to look into why the troubled company did not disclose a potential £1.5bn ($2.3bn) tax liability sooner, according to press reports.

There does seem to be something here that the FSA should give serious consideration to

C&W shareholder

C&W has lost nearly half its market value since Monday, when it revealed that a downgrade in its credit rating had obliged it to set aside £1.5bn to cover possible tax liabilities arising from the partial sale of its mobile phone group One2One to Deutsche Telekom.

The firm had promised to ring fence the cash in the event of a credit downgrade as part of its contract with the German telecoms firm.

The revelation shocked investors, and prompted new calls for the resignation of C&W chief executive Graham Wallace.

Call for investigation

Some shareholders are now planning to ask the Financial Services Authority, Britain's stock market watchdog, to investigate the affair, the Guardian reported.

C&W shareholders had previously asked the firm's management whether it faced any potential cash liabilities, and had been told it did not, the paper said.

"There does seem to be something here that the FSA should give serious consideration to," one unnamed investor told the Guardian.

C&W has denied misleading investors. It said it had disclosed the obligation stemming from its deal with Deutsche Telekom as it was required to do.

FTSE exit

The latest slide in C&W stock looks set to cost the company its place in the prestigious FTSE 100 index of leading shares.

The firm's share price has fallen by nearly 90% since the beginning of the year, reflecting concerns about tough conditions in the global telecoms market.

Last month, C&W unveiled heavy losses and said it would cut 3,500 jobs as part of a restructuring strategy aimed at trimming costs by £400m a year.