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RealTime IT News

Cable & Wireless Begins U.S. Overhaul

Although officials won't name any numbers, Cable & Wireless began its U.S. overhaul this week, culminating in a letter to its employees Thursday warning them of their pending unemployment.

The job cuts, as well as the cancellation of its low-margin customers, are part of the U.K.-based carrier's strategy to shore up costs that attributed to C&W's $7.37 billion loss and 70 percent drop in earnings before interest, taxes, depreciation and amortization (EBITDA) to roughly $427 million in 2001.

While officials wouldn't say exactly how many employees got the pink slip, rumors speculate the number is significant. Officials said the employee reductions affect U.S. sales and technical support representatives in the C&W Global division.

Chad Couser, C&W spokesperson, said the actual cuts will happen over the next month, part of the carrier's plans to move away from its voice and domestic frame relay businesses and concentrate on IP and Web hosting to higher-margin enterprise customers.

"This is something we've always been focusing on since our (annual report) in May," Couser said. "We've just accelerated the timeframe."

In addition to employee reductions, some of C&W's low-margin frame relay customers were given notice Monday to find a new carrier, and that existing contracts would be null and void in about a month. Couser said "there's a process for getting these customer's transitioned, nothing immediate but in a month or so."

The number of affected customers is relatively small, he said, affecting only those with sub-T1 bandwidth contracts. C&W reports these customers, contracted through its service provider and business markets units, attributed to a 14 and 18 percent (respectively) revenue decline.

IP and data services in the U.S. is expected to be grim for the first six months of fiscal 2002, C&W financial experts concluded in their 2001 annual report. They expect zero to 10 percent revenue growth in the first half of 2002, revenues coming almost entirely from its hosting and Web services divisions.

"As a result of the actions we are taking to restructure our whole U.S. business to reflect the strength of our hosting and Web services proposition and our focus on enterprise customers and IP and data services, we anticipate taking an exceptional restructuring charge in the first half (of 2002)," the C&W annual report stated.

C&W has been aggressively pursuing a global IP network spanning the U.S., Asia and Europe in recent years, though the carrier has been steadily shoring up its costs to offset the sales decline in the U.S., beginning with its December 2000 staff cut of 8,000 employees. The reduction helped improve the company's gross margin to 42 percent in 2001.