Telecoms firm Cable & Wireless issued a profit warning for its 2006/07 financial year and said its chief executive officer was leaving in a reorganisation, hitting its shares yesterday.

Britain's second-biggest corporate telecoms provider said UK earnings before interest, tax, depreciation and amortisation, (EBITDA) excluding its Bulldog broadband Internet business but including recently acquired corporate telecoms rival Energis, would be no higher in 2006/07 than in 2005/06.

Pressure on profit margins, the costs of reorganising its UK business and a reduction in one-off items that will boost 2005/06 results would all put pressure on underlying 2006/07 UK earnings, the firm said in a trading update.

"It's a savage profit warning for the UK, with numbers for 2006/07 likely to shift materially below current expectations," said Christian Maher, an industry analyst at Investec. "You are probably looking at cuts of between 30 and 50 per cent."

C&W shares, which once traded above £15 at the height of the technology boom in 2000, opened about 15 per cent lower at 97-1/2 pence. Mr Maher declined to provide forecast numbers for 2005/06 and 2006/07. Cable & Wireless was not immediately able to provide consensus forecasts.

C&W also announced plans to create two self-contained operational business units, called UK and International, and said chief executive officer Francesco Caio would step down after the start of the group's new financial year on April 1.

The firm said it remained confident about achieving the medium-term targets for the UK business that it announced in November and said its National Telcos business continued to perform in line with expectations. In November, C&W said it was aiming for a UK business with annual revenue of more than £2 billion and a double-digit operating margin in the next three to four years.

C&W has been cutting costs and has shed hundreds of jobs as it battles falling prices and intense competition in the UK corporate telecoms market.