C&W cuts US lease exposure but still looking for exit route

Cable & Wireless yesterday pointed to a cheaper exit from its US operation than was previously feared by revealing it had cut its lease commitments there by about £200m.

The company remained tightlipped, however, on how it might engineer its eagerly awaited exit from the region, despite growing speculation that it could put its US business into Chapter 11 bankruptcy protection. C&W chairman Richard Lapthorne said the company had gone from "exploring" its options in the US to working through them but would not be drawn further. "We're keeping our powder very dry," he said.

C&W, which has invested about £9bn in the US, including buying three businesses for about $2.6bn (£1.6bn), plans to have identified an escape route by the end of its financial year in March. Hopes it will now prove cheaper than previously expected sent the shares up 12.5p, or 9.75 per cent, to close at 140.75p, making it the biggest riser in the FTSE 100. Analysts had estimated exit costs of between £500m and £1bn.

C&W - which sketched out a three-year turnaround plan in June - unveiled a pre-tax loss of £3bn in the six months to 30 September compared with a £4.4bn loss last time thanks to exceptional charges. Sales were £1.9bn, down 18 per cent.

Francesco Caio, the company's chief executive, said he was "increasingly confident" that the business had "great potential" although he highlighted the size of the task in hand. "It's not going to be easy...there are major challenges," he said.

He insisted, however, that the company was making solid inroads into the restructuring of the group in the US and the UK and termed the progress made in the first half as an "encouraging beginning of a long journey".

In the US, where revenues fell 41 per cent in the half-year from a year before, it has shut eight data centres and cut the number of staff by just over 1,000. In the UK, it has slashed about 600 positions as part of a programme of 1,500 planned job losses. Another 600 staff are expected to leave the company in the second half of the year. Sales in the UK of £825m were flat on the second half of last year which, Mr Caio pointed out, was a good result considering turnover had fallen 12 per cent a year for the past two years.

C&W, which booked £148m of exceptional charges in the six-month period relating to the restructuring, also admitted it was coming under pressure in the Caribbean from increased competition. Sales there fell 16 per cent.

Mr Lapthorne hinted yesterday that the company might consider getting back into the mobile phone market but said there was nothing on the cards.