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Ethernet services

Mixed EuroFortunes

2:30 PM -- We offer contrasting tales from two of Europe's specialist service providers this week, with one smacked by British government policies and another optimistic about its near-term prospects.

The first is Cable & Wireless Worldwide plc (London: CW), which was formed earlier this year when the old C&W split in two. (See C&W Does the Splits.)

C&W Worldwide issued a profits warning Tuesday, noting that the recently formed UK coalition government's Emergency Budget, unveiled (and reviled) in June, has caused a major slowdown in public sector spending, a trend that will "adversely impact trading in the current year." That's because the carrier generates about 12 percent of its sales from government agencies. (See C&W Worldwide Updates on Q1.)

The announcement caused the operator's share price to tank by more than 17 percent to 69 pence (US$1.02) on the London Stock Exchange Tuesday. Ouch!

The reduced spending is set to wipe £30 million ($45.8 million) off the carrier's EBITDA (earnings before interest, tax, and other stuff) for the financial year ending next March. C&W Worldwide now intends to find £10 million ($15.3 million) in cost savings, leaving it with a £20 million ($30.6 million) shortfall. Full year EBITDA is now expected to be around £450 million ($687 million).

By contrast, pan-European operator Colt Technology Services Group Ltd , which isn't so tied to UK public sector spending, today announced that, while its first-half revenues were down by 2.8 percent year-on-year to €794.2 million ($1.03 billion), it's "seeing positive signs in the market which indicate an improvement in the second half and into 2011."

The whole sector will be hoping that COLT, which has been preparing for the onset of cloud and advanced Carrier Ethernet services demand, has 20:20 vision. (See Colt Reaches for Clouds , COLT Intros Flat-Rate Ethernet , and COLT Launches Online Hub.)

— Ray Le Maistre, International Managing Editor, Light Reading

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