Cable & Wireless place demerger on hold

Due to the recent chaos in the financial markets, recent plans for a demerger have now been placed on hold my communications operator Cable & Wireless.

It was expected that an announcement would be made by the telecoms provider to split its UK arm from its operations internationally by the 10th November during the half-year release of its figures.

There are concerns from its board, however, that this is not the best time to make such drastic changes in light of the continuing uncertainty in the stock-market.

It was flagged by C&W, under the leadership of John Pluthero, that this financial year would see it considering its options for “value realisation”, which would allow it to come up with a verdict by next march. Suggestions have been made that this would mean any kind of carve-up would take effect in June at the earliest as the planning stage may take three months or more.

Although a split is seen as the most likely way forward by many investors it is something that C&W have never officially confirmed. With a current market value of £3.6 billion, the company managed to parcel off £1 billion of its pension liabilities to the Prudential last month, which was considered by many to be the removal of a key obstacle.
April next year will see the beginning of payouts from C&W’s long-term incentive plan and there are concerns that any kind of delays may affect its value. Estimates show that the top 60 managers in the company could share around £216m but this is linked to the performance of its share prices.

Even though, in the last month, the share value for C&W has dropped by 17 percent, over the same period it has outperformed the FTSE All-Share index by 10 percent.

There are very few similarities between the two C&W divisions. With the UK arm of the company serving corporate users with data and voice network using high-speed connections. With the recent acquisition of a rival carrier called Thus for £300m C&W looks as though it will be cash-flow positive this year after several year of it underperforming.