The main question fired at Cable & Wireless Plc was which parts of the federation are to be sold off. And the main answer fired back was ‘we’re not telling you.’ One entity that is on the way out of the federation – as the London-based telecommunications group call itself – is the chairman of the past five years, Lord Young. He is to resign from his position his sixty-fifth birthday on February 27 1997. The announcement is being made so far in advance in an effort to quash recent press speculation of discontent regarding his handling of the company. Mercury Communications Ltd’s chief executive Duncan Lewis resigned suddenly in September. Recent speculation centered around rumours that he had attempted to find a buyer for the company’s share of the One-2-One mobile telephone business or even the company’s 80% stake in Mercury. The company vigorously denied this yesterday. When asked to if he could identify possible candidates for disposal, chief executive James Ross told Reuters Not that I can talk about publicly but there will probably be a fairly steady stream. Finance director Rod Olsen said that anything that operates outside of the four key geographical areas of Europe, Asia, including Australia and New Zealand, the US and the Caribbean would be a possibility. Presumably Europe would also encompass the company’s 10.02% stake in Bezeq Israel Telecommunications Corp Ltd, which it only acquired this year (CI No 2,686). It could mean the 20% stake in Bahrain Telecommunications Co, but Olsen emphasised that the Israeli stake, although at present not strategic, would be a bridgehead to further investment in the area to become another region in the company’s portfolio. Analysts’ have put forward the 32.3% stake in Petersburg Long Distance Inc and the 24.5% stake in Optus Communications Pty Ltd as possibilities for sale.
Adverse currency translation
Under Olsen’s geographical criteria however, there is nothing really left to speculate about, which was no doubt his intention. Interim pre-tax profits were up 44% to ú815m, boosted by the ú199m exceptional gain from the company’s sale of its stake in Mannesmann Mobilfunk GmbH (CI No 2,754). Turnover rose 6.9% to ú2,711m. The company’s 57.5% stake in Hong Kong Telecommunications Ltd yielded operating profits of ú439m, up 8% on last time, on turnover up 5% to ú1,186m (CI No 2,785). The profit rise was primarily as a result of increased cellular activity and tighter cost control, said the company. Call volumes to and from China grew by 8%, but the company said the growth was depressed by anti-inflationary economic policies in China. The UK economy has also been slowing down, according to Olsen, and this, along with increased competition and price reductions hit Mercury’s performance, although this was partially offset by benefits from the restructuring operation begun in 1994. Operating profits at Mercury were up 7% to ú103m in the half, from turnover ahead 5% at ú833m. Cable & Wireless owns 80% of the company. Referring to the restructuring, Olsen said Mercury was not yet totally fixed, but was certainly very well mended. The restructuring should yield the full ú60m permanent cost reduction intended, he added. Mercury’s share of the losses at One-2-One was down to ú27m, from ú30m a year ago. The company is split 50-50 between Mercury and US West Inc. The mobile operator yesterday completed a ú600m syndicated loan, arranged by Banque Paribas and HSBC Investment Bank Ltd to finance the expansion of the network to 90% coverage within two years (CI No 2,735). The company claimed it was the first non-recourse financing by a UK cellular telephone company and was syndicated to 24 banks. Other European operations yielded operating losses of ú20m, up from ú12m losses last time, on turnover up a third at ú24m. The losses increased because of increased expenditure on product development, marketing and network development. Spain and Italy are the next two European countries on the list for the company, and talks with Fininvest SpA in Italy are well on the way (CI No 2,789). However, Olsen said the company would be talking to other telecommunications parties in Italy before making a decision on which way to proceed. All European operations would go through Vebacom GmbH, the 50-50 joint venture with Veba AG (CI No 2,667), said Olsen. Cable & Wireless Inc reported flat turnover at ú221m, which it said was due to adverse curreny translation effect. Operating profits were 13% ahead at ú21m – margins are tight in the US. Profits in Macau, where the company has 51% of Companhia de Telecommunicacoes de Macau Sarl, were flat at ú12m from turnover up just 7% to ú45m. Turnover in the Caribbean was up 7% to ú266m and operating profits 15% to ú90m. Good growth was offset by currency effects, according to the company. The interim dividend rose 9% to 2.83 pence. The shares themselves were largely unmoved, up tuppence to 425 pence after an initial spurt to 431 pence. Olsen said our mood is confident as the federation enters the second half.