Verizon dumps C&W stake amid talk of looming shake-up

The US telecoms company Verizon Communications yesterday sold its 5.4 per cent stake in Cable & Wireless just days ahead of the publication of the British company's strategic review update.

Verizon's 128.4 million shares were placed with investors in the market yesterday at a price of about 139p a share, raising the US group roughly £178m.

The disposal, managed by the investment bank Morgan Stanley and part of Verizon's plan to shed non-core assets to cut debt, left shares in Cable & Wireless 7.25p adrift yesterday at 139.75p.

Investors, already nervous ahead of next Wednesday's announcement when Cable & Wireless will release its half-year results, feared Verizon's motives for offloading the stock.

"I guess Verizon doesn't think they [Cable & Wireless] are going to announce anything useful, or they would have waited," one analyst said.

Others, however, said Verizon would not have been able to trade had it had any privileged information.Analysts at Cazenove, one of the British group's brokers, said: "Verizon would clearly not be permitted to trade if it had obtained any inside information. In reality, Verizon's stake in C&W was non-core and somewhat immaterial in the context of Verizon's market capitalisation."

Speculation is mounting that Cable & Wireless will announce a radical shake-up next week that could force the departure of the chief executive, Graham Wallace.

The company has been carrying out a review of its loss-making web-hosting and data business, Global, which, analysts reckon, could be significantly scaled back, put up for sale or shut entirely.

Because Global, which employs about 11,500 staff, is Mr Wallace's brainchild, an embarrassing U-turn there would make his position untenable, analysts said.

While analysts feared the costs of any retrenchment, which some have pitched at as high as £500m, they were divided yesterday on whether Mr Wallace would resign next week. David Prince, who was appointed as the company's finance director earlier this year, is widely viewed as the favoured candidate to replace Mr Wallace if he quits.

Cable & Wireless has issued four profit alerts in a year and a half and has seen its shares collapse to current levels from a high of nearly £15 reached at the peak of the internet boom in the Spring of 2000.

In September, Cable & Wireless predicted revenues at Global would fall six per cent in the six months to 30 September, from a year before, and would post an underlying, or Ebitda, loss estimated at £120m. It said then the review included further cost and capital expenditure cuts to ensure it hit its target of becoming free cash flow positive by the fourth quarter of 2003/04.

The Cazenove team forecast that Cable & Wireless will announce total sales of £2.35bn, a fall of 9 per cent, an Ebitda profit of about £149m and an operating loss of £220m next week. "The main focus will be details of the strategic review of Global. We are hopeful of radical thinking, which will see the closure and rationalisation of loss-making businesses," it said.