Telecom firms beat expectations

Telecom operators are looking to mobile for growth

Telecommunications company Cable & Wireless followed on the heels of fellow communications firm Energis on Wednesday by beating analysts' earnings forecasts.

While Cable & Wireless' profits fell by 23% to £1.12bn, they were just above expectations of between £1bn and £1.1bn.

Analysts had expected the company's profits to drop because of a 90.1% fall in the group's Hong Kong subsidiary.

But Cable & Wireless is in the middle of selling the company as part of its new strategy to focus on the internet.

Its new global division will form the heart of the restructured company, concentrating primarily on data information and internet protocol communications.

The division's sales were up 22% to £3.44bn.

"The radical disposal of non-strategic assets has supported our transformation and realised significant value for our shareholders," said Chief Executive Graham Wallace.

The company said it had increased its dividend by 11% to 15 pence, thanks to its strong financial health.

Depressed sector

The news comes as a welcome boost in a week where a slew of telecommunications companies are releasing their financial results.

The telecoms sector has taken some hard knocks recently as the market impatiently waits for news of clear strategies and greater earnings potential.

Previous poor financial performance by giants such as BT and unclear strategies have left investors impatiently waiting for some positive signals.

Deutsche Telekom concerns

Those worries were compounded when Deutsche Telekom presented a mixed picture with its first quarter results, released a day early amid rumours that it would announce a profit shortfall.

The company's first quarter net profit fell to 509m euros from 589m euros. And the company said full-year profits were likely to come under pressure from expansion in the mobile telephone and internet businesses.

But the company also announced that its first quarter sales rose 15.4% to 9.5bn euros.

It said its mobile phone, online and data operations offset a fall in sales in its fixed-line business.

But some telecommunication companies are painting a rosier picture for the future.

Cable & Wireless is firmly establishing itself as an internet service provider, with 5% market share. It is also introducing new technology, which will allow it to carry voice traffic over the internet at vastly lower prices.

Telecoms operator Energis on Tuesday said its revenues in the year to 31 March rose by 73% to £494m on demand for data and internet-related services, much higher than forecasts of between £470m and £479m.

Analysts said the company's decision to expand its European operations should place it in a more competitive position.

It plans to build a further four European internet data centres over the next year to complement its current operations in Frankfurt and Amsterdam.

It also aims to operate a Polish voice and data telecom network by the fourth quarter of 2000.

With 40 million consumers and low penetration rates, Poland offers one of the fastest growing telecom markets in Europe.

BT earnings expected

Investors are just waiting to hear from giant BT on Thursday.

The company's pre-tax profits are expected to disappoint investors, but investors are also eagerly waiting for news of the company's major restructuring plan and its plan to spin-off subsidiaries.

BT is expected to post pre-tax profit in the year to 31 March of between £2.65bn and £3bn, sharply down from last year's of £4.3bn as the company's results come under pressure from call price reductions.

The company showed poor third-quarter earnings, raising worries about the company's strategy.

BT is splitting into six different business units to make its operations more transparent and more flexible and to better prepare the units for a stock market listing.

The company could give some more information about plans to list its directories unit Yell.