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C&W still faces challenges
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August 9, 1999: 11:38 a.m. ET
One2One deal barely budges stock; 'two-year' road lies ahead
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LONDON (CNNfn) - Cable & Wireless achieved a key ambition last week when it sold its One2One cellular operation to Deutsche Telekom. But analysts said Monday the company still faces an uphill climb.
"This [deal] helps us really focus on business customers," Graham Wallace, chief executive of Cable & Wireless, told CNN.
Wallace has achieved his short-term aims by selling the cellular unit for $13.6 billion, as well as the $10 billion sale of the residential cable assets to rival Telewest (TWT).
Analysts applauded these deals, but "the easy bits have been done. Forming a cohesive international business unit [from what's left] is more difficult," warned Justinian Clifford-Bowles of Commerzbank Global Equities.
"Two years to get in shape"
He cautioned that pulling C&W's businesses in Asia, North America and Europe into shape will take "at least two years".
That scenario is backed up by C&W's share price. The stock barely moved on the completion of the One2One deal Friday, and was slightly lower in late London trading Monday. At 765 pence the stock is down almost one quarter from its high of the past 12 months, reached in January.
"One2One is a very good business," Wallace maintained. "It just doesn't fit in with our priorities." Those priorities center on "data and Internet protocol services to business customers globally," Wallace said. "This is an area we think we're good at, with lots of potential."
Lots of suitors
Even though multi-billion dollar deals have become commonplace in the fast-moving telecom business, analysts say Wallace is likely to be left alone to complete the task he has begun. He was appointed in February, a few months after predecessor Dick Brown left abruptly to head up EDS (EDS).
"There are any number of potential suitors [for C&W]," according to Clifford-Bowles.
Wallace admitted as much when he boasted that C&W "is pretty unique in the global telecoms world in what we can supply to business customers."
Predators unlikely
Still, despite being relatively debt-free, C&W is unlikely to become the target of a predator. Much of the company's attraction for a bidder is its positions in the Caribbean and Asia. In many of these markets the company has a monopoly license, thereby barring rivals from entering. However, in the event of a change of control those licenses could be renegotiated or auctioned, thereby rendering a takeover of C&W almost worthless.
Although C&W HKT no longer is the monopoly telecom provider in Hong Kong, having given up that right last year for a fee, "its relationship with the Chinese authorities remains absolutely crucial," commented Commerzbank's Clifford-Bowles.
For fear of upsetting key licensing authorities, C&W looks safe from hostile intentions, analysts say, so it could be that Graham Wallace will be left alone by the market to continue the work he already has begun. 
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