Tuesday, February 28, 2006

Cable and Wireless - Reprise?

The markets have been very hard on CW over the last few months, but over the last few days the mood has started to turn, telling the world the business is "a crappy player in a crappier market" (their words), announcing staff cuts and an intent to lose 8000 customers from the books should have seen the stock fall through the floor.

However the presentation today by Richard Lapthorne and John Pluthero seems to have hit a number of cords. Fewer but more profitable customers, focus on reducing churn and building margins, reducing Capex by exiting unprofitable sectors.

For CW this re-positioning makes a great deal of sense, they have a significant presence in the FTSE350 and other potentially high value accounts, whilst the business overall hasn't exactly led the field in acquiring new customers in the last year or two, they have performed well in notably in Finance sector winning and retaining high value customers like Egg, HSBC and Prudential.

All the volitility in Telco is no doubt tremendous for the hedge funds but maybe, just maybe those analysts still following telcos will give CW a bit of space to prove that sound business fundamentals, like financial prudence and economic profit, have to return to the industry before the telecoms sector can stabilise.

Anyway, it will be a few days before we know if the city plans to punish CW for their audacity in coming clean.

NOTE - For those of you interested in ISP/Telco performance in the FTSE, BackChannel will shortly be publishing our 2005/6 report. This will be ther first time we have published data that drills down into customer churn, hosted services and market sector performance data for all the major business ISPs. This is the stuff that has previously only been available to our clients.

No comments: