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Cable & Wireless demerger takes the FTSE 100 to 101

26 March 10 12:24 GMT

Britain's leading share index, the FTSE 100, temporarily contains 101 firms after Cable & Wireless demerged and became two companies.

The larger part, Cable & Wireless Worldwide (CWW), focuses on telecoms services to business, mostly in the UK.

Cable & Wireless Communications (CWC), which runs consumer telecoms services in 38 territories outside the UK, will leave the FTSE 100 index on Monday.

Shareholders will be given one share in CWW for each share of CWC they hold.

The combined value of one share in CWW and one share in CWC is currently about £1.53. On Thursday, the value of the combined Cable & Wireless was £1.48 a share.

At the end of trading on Friday, the FTSE will asses the size of CWW, which might also leave the FTSE 100 on Monday if it is not big enough.

Return to the 80s

The old Cable & Wireless grew out of the 19th Century telegraph companies and at one point was the international communications section of the British Post Office.

Cable & Wireless has had its troubles over the years.

Speaking on the BBC's Today Programme, CWW's boss Jim Marsh said: "Four years ago, many of the analysts valued Cable & Wireless at zero. Our focus has been on turning around that business."

"What we've seen over four years is an explosive demand for bandwidth across the globe, and our business is focussed on providing data services to major enterprises."

The two new businesses have been run as separate units for a couple of years and will keep their existing management teams.

"The demerger has in effect returned our business to its shape prior to its entry into the UK market in the 1980s," said Tony Rice, boss of CWC, which operates mainly in the Caribbean, Panama, Macau and various other islands.

The question now for these different businesses is where growth will come from.

"For CWW, one of the characteristics of their market is that customers are reluctant to move supplier. They can take costs out and win new customers but rapid growth is only possible through acquisition," said Ian Watt from Enders Analysis.

"CWC face the challenges of all incumbent telcos: how to get into pay TV and how to cope with competition in mobile services. But their ability to grow through acquisition is very dependent on national politics."

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