Weak dollar deals blow to C&W

STRUGGLING telecoms company Cable & Wireless will unveil results on Wednesday that show it has been hit by massive currency losses.

The revelation will follow a struggle this weekend to avoid putting its American business into bankruptcy protection.

The Caribbean phone services business that is the jewel in the crown of C&W Regional has been hit by continued weakness in the US dollar.

That weakness is expected to lead to a 12% dip in turnover from the region in the six months to the end of September, according to Mathew Bloxham, analyst at investment bank Goldman Sachs.

The company is expected by analysts to report turnover of £1.9 billion compared with £2.2 billion a year ago.

A pre-tax profit of £79 million is expected compared with a £107 million loss last year when the company faced huge charges for restructuring.

Since then, it has reduced costs by cutting thousands of jobs. However, it had only a small currency 'hedging' operation last year and the decline in the dollar from about $1.60 to the pound at the start of the year to a low of $1.70 last month has hit earnings.

Analysts said chairman Richard Lapthorne was likely to face a tough reception at City presentations.

Executives are said to be locked in talks with advisers this weekend over the fate of the American division. C&W's data centres and internet backbone have been up for sale in the US since June but, as Financial Mail reported in September, finding a buyer has proved tricky.

Plans to launch a management buyout ran into difficulties and trade buyers have expressed interest in taking only the best data centres and customers.

That would leave C&W facing a big bill to pay off leases on other parts of the business and writing off its $425 million fibre optic network.

But City sources admitted that closing down the American arm would be risky.

'A British public company would have to swallow hard before using US laws on protection from creditors,' said one source. 'The creditors would howl for blood and surely sue the parent company, which still has plenty of cash in the bank.'