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Cable & Wireless
The figures were yet another triumph for bookkeeping opacity. On a continuing basis, turnover fell 6% to $3.54 billion and operating losses increased from $123 million to $366 million. While C&W's traditional telecom businesses largely held their own, the Global operation saw its EBITDA performance plummet into loss.
Throw in Global write-offs totalling $5.6 billion, a few discontinued businesses, and various other funnies, and the final post-tax loss came to $7.1 billion. The only undisputed figures were the cash pile and the dividend. At the end of September, net cash stood at $3.5 billion. The half-year payout was raised by 6%.
Any lingering visions of C&W becoming the telecom operator of choice for the world's corporate multinationals have finally vanished. Today's statement proves the "last man standing" argument -- of C&W being left to clean up following the bankruptcies at WorldCom and Global Crossing, etc. -- is null and void. Rather than capitalize on the difficulties of others, C&W has in fact announced a retreat of its own.
A restructure of the Global business is set to restrict U.S. and European operations to large corporate clients only. Capex will be cut and about 3,500 jobs (28% of the Global workforce) will be axed in a $1.2 billion shake-up. Astonishingly given its recent acquisitions, C&W also admitted that a total exit of U.S. and Continental Europe had been under discussion, too.
Unsurprisingly, there's no sign of any near-term improvement for C&W. "Difficult market conditions" and "downward pricing pressures" have created an "unusual degree of uncertainty in sector demand forecasts." While keeping the faith with Global becoming free cash flow positive by March 2004, C&W has relied upon an embarrassing (and costly) withdrawal to maintain the promise.
In short, today's disastrous results offer no reassurance on management's ongoing pledges. Going on the latest performance, there's only one potential way to profit from C&W shares: Invest at a hefty discount to the $3.90-per-share cash pile and hope somebody quickly puts Global out of its misery.