Cable & Wireless axes 3,500 jobs

The majority of the job losses will be from outside the UK, with the bulk of cuts from America and continental Europe. Data centres could also be at risk

Troubled telecoms giant Cable & Wireless is cutting 3,500 jobs from its loss-making global division, which provides Web site hosting and telecoms services for companies worldwide, and which accounts for more than two-thirds of Cable and Wireless's business. The £800m restructuring of the global data services will cost the telecoms group almost one-third of its cash reserves, and bring annual savings of £400m, said the company. The job cuts will leave the global division with 9,000 staff -- down from 12,500. Precise figures for job cuts in the UK, where there are 6,000 staff in the global division, and Ireland, which has 150 staff, have not been disclosed. In an attempt to make its global data centres profitable, the global group is cutting its data centres from 42 to 23. Utilisation rates of the centres are currently running at about 30 percent, which is below the 35 to 40 percent level needed for profitability. There are three Cable & Wireless data centres in the UK. Their fate has currently not been made public. In its results on Wednesday, the firm wrote down the value of its global division by £3.5bn, leading to pre-tax losses of £4.43bn for the half-year to 30 September. This figure compares to last year's pre-tax loss of £291m. Chief executive Graham Wallace said the cuts will allow C&W to generate positive cash flow. "It does absolutely not depend on a recovery in the market, because I think that would be a bit foolish," he said in a conference call. The target is to reach profit by Q4 in 2003 to 2004, a spokesman told ZDNet UK. C&W invested £5bn under Wallace in its global division before the telecoms collapse, when the price of global data services nose-dived. In the US alone, the company spent $1.1bn on acquisitions to compete with telecos there. In March 2001, C&W cut 4,000 jobs from its global division. Since then the international charges for transmitting 2MB of data over an Internet protocol network have dropped from about £400 to only £170, making it difficult for the business to achieve growth. In September C&W issued its fourth profits warning in 18 months and told staff that it was looking at job cuts. C&W shares have dropped from a peak of £15.62 in March 2000 and on Wednesday morning hit an 18-year low of 98p.
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