Cable & Wireless has warned of falling revenues at its biggest business unit, Cable & Wireless Global. C&W had expected C&W Global to achieve revenue growth of between 0% and 10% for the period but now expects a decline of 6%. The company blames industry-wide price cutting and spare capacity for the decline.
Graham Wallace, Chief Executive, Cable and Wireless plc said:
Cable & Wireless Global’s trading environment continues to be difficult. Revenue in Cable & Wireless Global (excluding capacity sales) in the first half is expected to decline by around 6%. Operating costs are lower than expected and gross margins have improved. The resulting EBITDA loss is towards the bottom of the range indicated in May.
Actions to improve substantially the profit and cash flow performance of Cable & Wireless Global are under way and include the following:
The disposal of the US retail voice customer base announced on 16 September will enable the network and other costs supporting these customers to be eliminated. The EBITDA loss attributable to this business in the first half is expected to be around £65 million.
Capital expenditure will be further reduced by at least £200 million to below £450 million for the current financial year.
A review is being undertaken of Cable & Wireless Global’s activities, in light of current market conditions, to ensure achievement of the target to be free cash flow positive by the fourth quarter of 2003/04. This review includes further cost and capital expenditure reductions and the concentration of resources on those customers and services with the highest current margin and growth potential.
Underlying revenue in Cable & Wireless Global in recent months has stabilised but market conditions remain tough. Our current strong net cash position of £2.2 billion remains a source of competitive advantage with our corporate customers and we expect to maintain this net cash level at the half year.
Cable & Wireless Regional continues to perform well and in line with expectations.