C&W writes off $5.8 billion

LONDON, May 15 (Reuters) - Cable & Wireless faced up to the reality of reduced valuations in telecoms on Wednesday by writing down four billion pounds ($5.8 billion) in assets and goodwill, while annual earnings were cut in half, as expected.

Its shares fell five percent, reversing an initial gain, after analysts and investors met the company and found few reasons to wait for a recovery.

Chief Executive Graham Wallace said he did not expect the market to improve for at least another year.

"The industry has suffered from unprecedented turmoil, even more dramatically over the last six months, and my own view is that the market we operate in won't stabilise for another 12 months,'' Wallace told reporters in a conference call.

The company said it would cut capital expenditure in the current year to 650 million pounds at its core Global networking business from 1.1 billion in the year to March 2002, as it struggles in the collapsed market for telecoms capacity.

"We welcome the capex cuts at C&W Global but still wonder if it is possible to build a profitable business model in this area,'' analysts at Nomura said in a note.

Cazenove, which is the house broker for C&W, cut the stock to a long-term "hold'' from "buy.''

C&W shares, which hit their lowest for well over a decade earlier this month, gave up an early gain and dropped more than three percent to below the key 200 pence level by 0930 GMT.

The world's largest Web hosting group also brought in a new finance director, David Prince, from Hong Kong's Pacific Century Cyberworks, and said its chairman would step down.

Earnings halve

Earnings before interest, tax, depreciation and amortisation (EBITDA) fell to 822 million pounds in the year ended March from 1.78 billion pounds the year before.

Including the exceptional non-cash writedowns, C&W reported a pre-tax loss of 4.7 billion pounds, compared with a 3.6 billion pound profit the year before.

Wallace denied that the writedowns showed C&W had massively overpaid for its acquisitions.

"Markets change, and the rules are -- and I think the rules are right -- that you have to evaluate the value of assets in the light of current market circumstances. But it says nothing about what you paid at the time,'' he told reporters.

"You can't pay other than market or better prices.''

Experts say aggressive network building in the past five years combined with technological innovation that expands network capacity has contributed to the plummeting prices for network usage that has torpedoed companies like C&W.

C&W announced on Wednesday that Chairman Ralph Robins, who will turn 70 this year, would step down at the end of the year and be replaced by David Nash.

Finance Director Robert Lerwill would give up his position to concentrate on his other role as head of C&W Regional, the largely Caribbean-based retail telecoms business. Dealers said his replacement Prince had a good track record.