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Wednesday, 14 November, 2001, 12:37 GMT
C&W shares rise 7%
Cable and Wireless chief executive Graham Wallace
Graham Wallace: 'customers like strong balance sheet'
Shares in telecom giant Cable and Wireless have jumped more than 6% after it announced plans to hand back 1.7bn to shareholders.

The company has caved in to pressure from investors to return some of the 4.1bn cash pile generated through the sale of assets such as Australian company Optus.

C&W said it intends to hand back 300m to shareholders in a one-off dividend of 11.5p a share.

It also plans to buy back up to 15% of its own shares, which is expected to cost it about 1.45bn.

Cable and Wireless shares were up 7.3% at 371.5p in mid-morning trading, following the announcement.

The company's share price has fallen by about 65% this year, amid difficult trading conditions.

It said the return of funds would not affect the group's future investment plans.

Welcomed by investors

C&W built up its cash mountain by selling assets as it changed focus from cable and mobile services to providing communications networks and internet services for individual companies, such as food group Heinz.

This to me is a half-way house. (Ultimately) it's not going to please anybody

Cyrus Mewawalla, analyst, Nomura
The question of how to use the cash has hung over C&W management for more than a year.

A buy-back was widely expected, and most shareholders and analysts welcomed it.

But one analyst questioned the strategy, saying the group should either invest the money to get its core corporate network business into profit or give it back entirely.

Cyrus Mewawalla, telecoms analyst at Japanese investment bank Nomura, said: "This to me is a half-way house. (Ultimately) it's not going to please anybody."

But Mr Mewawalla admitted the buy-back would give a lift to shares in the near term.

Profit slump

On Wednesday, C&W unveiled a profit slump of almost 85% for the six months to September.

The strength of our balance sheet is a real competitive advantage in these turbulent times

Graham Wallace, C&W chief executive
Excluding one-off items, C&W made 83m, compared with 537m in the same period last year.

Last month, the firm warned its revenues were falling amid volatile market conditions and a downturn in the global technology industry.

The group said its capital expenditure is set to fall by 38% this year to around 1.3bn.

So far this year the company has cut more than 6,000 jobs, a third of its workforce.

The company is set to buy parts of US internet company Exodus Communications for 300m, according to a report in the Daily Mail newspaper.

'Competitive advantage'

C&W claims its cost-cutting plan is ahead of schedule.

Strong revenue growth from its large corporate customers has offset falling domestic consumer and small business customers, the company said.

Chief executive Graham Wallace said: "The strength of our balance sheet is a real competitive advantage in these turbulent times.

"It is important to our customers and allows us to invest selectively for future growth."

Marconi write-downs

Meanwhile, troubled telecoms equipment maker Marconi said it had written off the entire goodwill from its 3.1bn of US company Fore systems.

The deal was one of a series of disastrous acquisitions made by Marconi shortly before the bubble burst.

"We have written off all of Fore, and some of Reltec, but we do expect to get some value from the businesses," Marconi chief executive Mike Parton is quoted as saying in the Financial Times.

The Fore losses account for more than half of the 3.1bn write down that helped push Marconi to record first half losses of 5.1bn.

The BBC's Nils Blythe
"Frustrations have been growing"
Cable and Wirelsss Chief Executive Graham Wallace
explains the company strategy
See also:

13 Nov 01 | Business
Marconi losses reach 5.1bn
11 Nov 01 | Business
Tech industry tries for a comeback
20 Jul 01 | Business
Fat cat furore hits Boots and C&W
14 May 01 | Business
Cable & Wireless plugs US gap
26 Mar 01 | Business
Australia's Optus sold for 6bn
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