Management changes fail to halt C&W shares slide

Shares in Cable & Wireless dropped another 14 per cent yesterday, heaping yet more pressure on chief executive Graham Wallace to resign, amid fears the company's business in the Caribbean was faltering.

Separately, the company announced a hat-trick of management changes at its loss-making Global internet and data division.

But fears over further financial liabilities continued to weigh heavily on the share price following recent revelations the company could be forced to ring-fence £1.5bn of its precious cash pile. The stock closed down 6.75p, or 14.14 per cent, at 41p, making it the biggest faller in the FTSE 100 index and valuing the company at £977m, guaranteeing its eviction from the index.

In an effort to restore faith in its Global division, where it is axing 3,500 jobs, the company split Global chief executive Don Reed's position, leaving him with little more than a "special projects" role. Adrian Chamberlain, currently the director of strategy and development, will now be responsible for Global outside the US while Donald Muir, the chief financial officer at Global, is to report directly to Cable & Wireless' finance director David Prince.

The rejig came as the company, which has consistently spoken of increased competition in the Caribbean, was yesterday battling fresh claims that it is losing out to rivals. The report, coming hot on the heels of the revelation of the potential £1.5bn liability and other lease liabilities of around £1.4bn, could prove to be the final straw for Mr Wallace. Were he to quit, he would be entitled to a payout of at least £1.55m since he is on a two-year contract. The only other executive on the board on a two-year contract is Robert Lerwill, the deputy chief executive and former finance director, who was paid £400,000 in salary and fees last year.

Cable & Wireless was forced to flag the potential £1.5bn liability, agreed in 1999, when it sold its 50 per cent stake in One2One to Deutsche Telekom, after the credit ratings agency Moody's downgraded its debt to "junk" status.

The deal, which was only raised at board level last month, was designed to protect Deutsche Telekom against potential tax liabilities. It means Cable & Wireless must get a guarantee for £1.5bn from an "A" rated bank or place that sum of money into a safe account. Less than a month ago, Cable & Wireless warned it had around £1.4bn of lease liabilities.

Separately, the credit ratings agency Fitch downgraded Cable & Wireless' long-term rating to "BB+" from "A-" with a "negative outlook".

Fitch said the company "should be in a position to maintain adequate financial flexibility", but warned further costs could push the firm "into a borrowing position".