Cable & Wireless pins growth plans on Asia

Telecoms group Cable & Wireless (C&W) set aggressive new growth targets for its Europe, Asia and US (EAU) business yesterday, pinning its hopes on a strong performance in Asia and particularly India.

C&W is targeting EAU revenue growth of between five and eight per cent per year for the next five years and core earnings growth at between 20 per cent and 25 per cent per year.

Analysts said the forecasts were encouraging but wanted to see further detail on how they would be achieved.

"Today we've set out our plans for the next five years," said John Pluthero, executive chairman of EAU business. "They're ambitious and stretching and I've every confidence that we can achieve them."

C&W split itself into two separate units last year and unveiled plans to restructure its UK business - now called EAU - which had struggled due to overcapacity and falling prices.

Under its new plan, it has focussed on serving larger customers with higher margin services, while actively dropping lower margin customers.

The decision to split into two groups has led to constant speculation that C&W will eventually demerge and the group has said it will consider its options later in thjis year and 2009.

"I think some people got a little over excited in recent weeks," said one analyst.

"Whilst the C&W restructuring story hasn't gone away, the stock has rallied strongly in anticipation of today's announcement and we would be surprised if there wasn't profit taking," Collins Stewart analyst Mark James said in a note.

"With limited news flow between now and the full year results (22 May) and an implied £1.8 billion valuation for the UK arm, we are reducing our target price to £1.80."

C&W reiterated its guidance for 2007/08 core earnings - earnings before interest, tax, depreciation and amortisation.

The group in November increased its full-year EBITDA outlook for the EAU unit by £35 million to between £205 million and £215 million.

It also reaffirmed guidance for the International unit, which was put at between £413 and £423 million in November.

The international division comprises fixed-line mobile and broadband operations in 33 countries, notably the Caribbean.

The group will target EAU capital expenditure of about 10 per cent of revenue throughout the period and free cash flow before financing growing to around 50 per cent of EBITDA.