Gavin Darby, installed this month as chief executive of Cable & Wireless Worldwide (CWW), is keen to distance himself from the financial excesses of the previous regime, which saw senior managers take £88m of cash out of the struggling business in just five years. During contract negotiations, Darby set a new tone, declining the offer of a chauffeur-driven car as part of his pay package.
Now, as he tours the embattled telecoms group's major shareholders in the run-up to Christmas, Darby is in "listen-only" mode, out of respect to investors who have suffered an 80% collapse in the company's share price in the last year and a half.
There will be questions about how many millions were squandered on the "private-equity style "incentive scheme that wound up earlier this year and rewarded the top five executives with a pay bonanza of some £25m.
Cable & Wireless Communications, which owns telecoms operators across a number of Caribbean islands, Panama, Macau and Monaco, and was demerged last year from the UK arm Cable & Wireless Worldwide, paid out a total of £30m during the life of the scheme, while CWW splashed out £58m on its top executives, according to the annual reports.
But the most pressing question will be about what happens next: another long turnaround effort, or an auction.
Analyst Morten Singleton at Investec bank says CWW "has been mismanaged for years", and is now worth five times as much broken up and sold off as listed on the stock exchange – where its market valuation languishes at less than £500m.
Investec puts the break up value at £2.5bn: around £500m for the tax assets alone, £1bn for the UK network, £350m for its data-centre assets such as servers, and £650m for its sub-sea cables.
Breaking up will be hard to do, though: sources close to the company say there is no easy way to unstitch international from UK cables, or domestic from multinational clients.
A number of hedge funds are pressing Darby to hoist the for sale sign. His two biggest shareholders, Orbis Investment Management (with 16%) and Sky Investment Counsel (9%), specialise in underpriced equities and could be key in any bid or sale process.
"We are detecting growing curiosity from other UK telcos," said Singleton. "We suspect slide rules are out and the assets are in play."
Likely would-be buyers include Vodafone and Everything Everywhere. Mobile phone networks need more fibre in the ground to connect growing numbers of smartphones to the internet, and they may want to renew a push into household broadband.
Rival business telecoms group Colt could take an interest, as could Virgin Media.
Darby will reveal whether he plans to rebuild or look for buyers when he unveils his strategy in February. A former Coca-Cola executive who ran Vodafone UK before overseeing its international investments, Darby was drafted in very much at the last minute, signing his contract the night before CWW's half-year results announcement on 15 November.
It has now emerged that the search for CWW's third chief executive of 2011 began during the summer, only weeks after John Pluthero had vacated the chairmanship to take the job. Pluthero had picked up the reins after Jim Marsh quit after little more than a year in post, after issuing three profits warnings.
Darby has a track record in cost-cutting. He oversaw a 25% reduction to the UK workforce at Vodafone and if CWW is to remain whole, any turnaround will undoubtedly involve more axe wielding, even though reducing headcount has been a fact of life at Cable & Wireless for a decade.
The firm traces its history back to telegraph companies founded in the 1860s, whose sub-sea cables became the British empire's communications network. Privatised before BT, Cable & Wireless employed 54,000 people around the world by the year 2000.
Problems were encountered during the dotcom boom, when chunks of the family silver were sold, including the One2One mobile phone business (now T-Mobile). Some £5bn of the proceeds were put into creating a web-traffic carrier by buying internet companies, mainly in the US.
The idea was ahead of its time. Without traffic to fill the brand new fibre networks, price-cutting became ferocious.
When Richard Lapthorne, architect of the controversial incentive scheme, arrived as turnaround chairman in 2003 the firm rang up a loss of £6.4bn, from revenues of £4.4bn. The Caribbean was still making a profit but the UK part of the company had cash leaking out of it at a rate of £1bn a year.
Telecoms entrepreneur Francesco Caio was brought in to sell off the loss-making internet businesses. He also bought smaller UK rival Energis, then run by Pluthero, who had made his name creating the internet service provider Freeserve. In a reverse takeover, Caio left the business a year later, and Pluthero was named head of the UK arm.
His strategy was to cut back from serving 30,000 business customers to focus on the 300 biggest, most-profitable clients. For a while the plan looked to have worked.
Revenues grew, the UK business began returning cash, and the demerger went ahead as planned in March last year. At that point the turnaround began to crumble and investors looked on, unable to claw back any of the bonuses paid out under the incentive scheme.
CWW is now once more bleeding cash, but without the Caribbean revenues to mask the fact. Espirito Santo bank says cashflow will plunge £100m into the red this financial year. So what went wrong?
Pluthero's forthright management style wasn't for everyone, and senior staff came and went at speed. More fundamentally, the geographical reach of CWW's network is too limited, compared to BT and Virgin Media.
Recent cuts reduced the investment in the network. They also damaged customer service, say analysts. Contract fulfilment for smaller clients slipped from days to months. Some customers receive three bills, with the integration of Energis and the more recent purchase Thus plc still not fully complete.
CWW has quietly withdrawn from the bidding process for government money to build a rural broadband infrastructure, where BT remains in the running. Smaller rivals such as Alternative Networks and Kcom are taking share at the lower end.
Espirito analyst Nick Brown says: "All the turmoil is giving people second thoughts about signing new contracts with CWW right now, and existing customers may be looking to change supplier also."
The fact is a turnaround could take years while a break-up is easier said than done. Cable & Wireless Worldwide's chauffeur-less chief executive has a long road to travel.
guardian.co.uk
Now, as he tours the embattled telecoms group's major shareholders in the run-up to Christmas, Darby is in "listen-only" mode, out of respect to investors who have suffered an 80% collapse in the company's share price in the last year and a half.
There will be questions about how many millions were squandered on the "private-equity style "incentive scheme that wound up earlier this year and rewarded the top five executives with a pay bonanza of some £25m.
Cable & Wireless Communications, which owns telecoms operators across a number of Caribbean islands, Panama, Macau and Monaco, and was demerged last year from the UK arm Cable & Wireless Worldwide, paid out a total of £30m during the life of the scheme, while CWW splashed out £58m on its top executives, according to the annual reports.
But the most pressing question will be about what happens next: another long turnaround effort, or an auction.
Analyst Morten Singleton at Investec bank says CWW "has been mismanaged for years", and is now worth five times as much broken up and sold off as listed on the stock exchange – where its market valuation languishes at less than £500m.
Investec puts the break up value at £2.5bn: around £500m for the tax assets alone, £1bn for the UK network, £350m for its data-centre assets such as servers, and £650m for its sub-sea cables.
Breaking up will be hard to do, though: sources close to the company say there is no easy way to unstitch international from UK cables, or domestic from multinational clients.
A number of hedge funds are pressing Darby to hoist the for sale sign. His two biggest shareholders, Orbis Investment Management (with 16%) and Sky Investment Counsel (9%), specialise in underpriced equities and could be key in any bid or sale process.
"We are detecting growing curiosity from other UK telcos," said Singleton. "We suspect slide rules are out and the assets are in play."
Likely would-be buyers include Vodafone and Everything Everywhere. Mobile phone networks need more fibre in the ground to connect growing numbers of smartphones to the internet, and they may want to renew a push into household broadband.
Rival business telecoms group Colt could take an interest, as could Virgin Media.
Darby will reveal whether he plans to rebuild or look for buyers when he unveils his strategy in February. A former Coca-Cola executive who ran Vodafone UK before overseeing its international investments, Darby was drafted in very much at the last minute, signing his contract the night before CWW's half-year results announcement on 15 November.
It has now emerged that the search for CWW's third chief executive of 2011 began during the summer, only weeks after John Pluthero had vacated the chairmanship to take the job. Pluthero had picked up the reins after Jim Marsh quit after little more than a year in post, after issuing three profits warnings.
Darby has a track record in cost-cutting. He oversaw a 25% reduction to the UK workforce at Vodafone and if CWW is to remain whole, any turnaround will undoubtedly involve more axe wielding, even though reducing headcount has been a fact of life at Cable & Wireless for a decade.
The firm traces its history back to telegraph companies founded in the 1860s, whose sub-sea cables became the British empire's communications network. Privatised before BT, Cable & Wireless employed 54,000 people around the world by the year 2000.
Problems were encountered during the dotcom boom, when chunks of the family silver were sold, including the One2One mobile phone business (now T-Mobile). Some £5bn of the proceeds were put into creating a web-traffic carrier by buying internet companies, mainly in the US.
The idea was ahead of its time. Without traffic to fill the brand new fibre networks, price-cutting became ferocious.
When Richard Lapthorne, architect of the controversial incentive scheme, arrived as turnaround chairman in 2003 the firm rang up a loss of £6.4bn, from revenues of £4.4bn. The Caribbean was still making a profit but the UK part of the company had cash leaking out of it at a rate of £1bn a year.
Telecoms entrepreneur Francesco Caio was brought in to sell off the loss-making internet businesses. He also bought smaller UK rival Energis, then run by Pluthero, who had made his name creating the internet service provider Freeserve. In a reverse takeover, Caio left the business a year later, and Pluthero was named head of the UK arm.
His strategy was to cut back from serving 30,000 business customers to focus on the 300 biggest, most-profitable clients. For a while the plan looked to have worked.
Revenues grew, the UK business began returning cash, and the demerger went ahead as planned in March last year. At that point the turnaround began to crumble and investors looked on, unable to claw back any of the bonuses paid out under the incentive scheme.
CWW is now once more bleeding cash, but without the Caribbean revenues to mask the fact. Espirito Santo bank says cashflow will plunge £100m into the red this financial year. So what went wrong?
Pluthero's forthright management style wasn't for everyone, and senior staff came and went at speed. More fundamentally, the geographical reach of CWW's network is too limited, compared to BT and Virgin Media.
Recent cuts reduced the investment in the network. They also damaged customer service, say analysts. Contract fulfilment for smaller clients slipped from days to months. Some customers receive three bills, with the integration of Energis and the more recent purchase Thus plc still not fully complete.
CWW has quietly withdrawn from the bidding process for government money to build a rural broadband infrastructure, where BT remains in the running. Smaller rivals such as Alternative Networks and Kcom are taking share at the lower end.
Espirito analyst Nick Brown says: "All the turmoil is giving people second thoughts about signing new contracts with CWW right now, and existing customers may be looking to change supplier also."
The fact is a turnaround could take years while a break-up is easier said than done. Cable & Wireless Worldwide's chauffeur-less chief executive has a long road to travel.
guardian.co.uk
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