Cable & Wireless Profits Warning Comes As Microsoft Eyes CWC Stake

Global network and telecommunications group, Cable & Wireless, has this morning said that difficult economic conditions in Hong Kong are expected to reduce underlying earnings significantly in the current year. The profit warning comes as C&W report a pre-tax profit fall of 17% to £1.8 billion for the year ended 31 March 1999. Profits have also been hit by significant investment in the millennium bug solution.

C&W also confirmed that its UK cable TV and telephony subsidiary, Cable & Wireless Communications (CWC), is in ongoing talks with rival UK cable group, Telewest Communications. The talks could lead to merger between the two groups, further consolidating the country’s cable market and leaving only NTL as a significant competitor. Any such merger between CWC and Telewest would be subject to the Takeover Code.

Rumours have also been circulating that Microsoft is in talks to buy a stake in CWC, possibly as much as 30%, according to the Wall Street Journal Europe. Such a deal would increase Microsoft’s presence in the UK cable market, building on the 30% stake in Telewest which the software giant acquired last week (see Sharewatch).

Following the news CWC shares shot up 49˝p to a high of 747˝p this morning; parent company C&W fell back by 29˝p to 816p.

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