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Optical/IP

C&W Puts New Duo in Charge

Troubled international carrier Cable & Wireless plc (NYSE: CWP; London: CW) has appointed a new CEO and created the new post of COO in an effort to turn the company's fortunes around (see C&W Names CEO and COO).

Francesco Caio, formerly chief of U.K. business ISP and Web services firm Netscalibur, replaces Graham Wallace as CEO on April 4 (see C&W Ousts CEO Wallace). Caio was also chief executive at Italian mobile operator Vodafone Omnitel before it was acquired by Mannesmann, which was then bought by Vodafone Group plc (NYSE: VOD).

COO Kevin Loosemore (not pronounced "lose more") joins from Motorola Inc. (NYSE: MOT), where he was president of the EMEA region. He has also headed up IBM Corp.'s (NYSE: IBM) business in the U.K., Ireland, and the Netherlands. He starts work at C&W today.

Chairman Richard Lapthorne, himself a relative newcomer to the operator (see C&W Brings in Lapthorne), is relying on the pair to stem the flow of negative news and rescue the share price from its current doldrums. The carrier has suffered some recent downgrades (see Fitch Affirms C&W Ratings and S&P Cuts C&W CCR to BB/B), though last week it managed to extricate itself from a potentially tricky tax situation (see C&W's Share Price Shrinks and Cable & Wireless Pays Its Taxes).

The operator's share price leaped from 60 pence to 73 pence on the London Stock Exchange the day the tax situation was settled, and following today's news it climbed 6 percent to just more than 75 pence from yesterday's close of 71 pence.

Analysts at Lehman Brothers believe the company provides an investment opportunity following the tax payment, though the key risk is the company's Global division, which has cost the carrier dear in the past few years (see C&W Preparing to Sell US Network?). Analysts are waiting to see what the new management team will do with that division: Lapthorne says a decision will be announced on the company's strategy when full-year results are announced in June.

Robert Hall, telecom research director at Ovum Ltd., believes the tax break and the appointments are both good news, but he notes that the new management team has to make some tough decisions regarding its loss-making global IP services business and its strong revenue-generating regional set of businesses in places such as the Caribbean. "It is good that the appointments are from outside the C&W family, as that makes it easier to make tough decisions. The management needs to decide whether to stick with the IP business -- where we don't believe there will be any financial benefits before 2005 or 2006 -- and whether the regional business should receive investment or even be demerged."

Yankee Group consultant Graham Finnie, however, can see only further uncertainty for C&W's customers. "If you're a wholesale or enterprise customer or buyer, you are looking at the long term, and these appointments will mean nothing until a decision to do X instead of Y is made. So until there is some clear direction I can't see C&W making any ground on its competitors -- and it's a tough market.

"In the enterprise market [C&W] is up against strong players like Equant, Infonet Services Corp., AT&T Global Network Services, and Colt Telecom Group plc; and Sprint Corp. is getting its act together in Europe now," adds Finnie. "And there is so much price pressure still in the wholesale market, that's a really tough environment."

Finnie doesn't believe C&W currently has a place in the premier league of international carriers. "Our position is that there is only going to be four or five top-tier players that make it through the current downturn, and I wouldn't think C&W would be on many people's top five list at the moment. The company lacks credibility."

— Ray Le Maistre, Editor, Boardwatch

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