C&W to exit U.S., slash jobs

IDG News Service - U.S. customers of Cable & Wireless PLC (C&W) will need to start looking for an alternative provider of corporate voice and data services after the financially troubled U.K. network operator announced sweeping restructuring changes today, including a complete exodus from its money-losing North American business.
The restructuring plans coincided with C&W reporting a pretax net loss for the year of $10.1 billion as of March 31, the last day of the period being reported, compared with $5.2 billion for 2002.
C&W also saw its full-year revenue decline 24%, to $5.1 million from $6.6 million the year before.
To improve its bottom line, C&W has decided to exit the U.S. market, where it has been losing about $1 million per day, according to CEO Francesco Caio. "We want to exit quickly, but sensibly," he said in a conference call with analysts and journalists.
Company officials declined to provide details of how they plan to sever their contracts and service-level agreements (SLA) with U.S. customers, claiming that such information is sensitive to their negotiating position.
"We intend to maintain the contracts and SLAs we've got with these customers while we explore our options," the company said. "We will communicate openly with our customers about this."
It remains to be seen how large U.S. Internet customers with international operations, such as Yahoo Inc. and eBay Inc., will respond to the shutdown, said Sandra O'Boyle, an analyst at the Amsterdam office of Current Analysis Inc.
"There are still enough service providers in the U.S., although the number of international providers is dwindling," she said. "C&W was never able to really challenge the big U.S. players, such as WorldCom Inc. and AT&T Corp., and was losing a lot of money in this market, but it's still sad to see another competitor disappear."
C&W has been on the retreat in the U.S. since September 2002, when the operator sold its U.S. retail voice and data business to Primus Telecommunications Group Inc.
The new strategy also calls for a key focus on its domestic U.K. market, where C&W, despite its relatively strong position, aims to improve its cost base by slashing 1,500 jobs over the next several months.
The goal, Caio said, is to "create a group of profitable national telecom companies with strong positions in their primary markets." By removing global and regional divisions, the group will have a simpler organizational structure that ensures lower overhead, clear lines of accountability and a more effective transfer of knowledge and skills.
"We need to move from being ...[a] company that builds networks to one totally focused on serving customers and controlling costs and cash," Caio said. "And we need to concentrate on those markets that are sustainable, such as the U.K., continental Europe and Japan."
The U.K. carrier's move essentially is a full U-turn on its strategy to become a global Internet carrier with a particularly strong position in the strategic U.S. market. In 1998, C&W acquired the wholesale and retail Internet operations of MCI Communications Corp., which had been acquired by WorldCom. That deal involved more than 3,300 dedicated Internet access customers, 60,000 dial-up business customers and 250,000 dial-up retail customers, as well as more than 1,300 wholesale Internet service provider customers.