CABLE & WIRELESS’s survival was called into question last night after the company sensationally revealed that it could be forced to set aside £1.5 billion cash to meet a possible tax bill.

The disclosure will increase the pressure on Graham Wallace, the international telecoms carrier’s chief executive, to fever pitch. He is already facing calls from some major shareholders to stand down.

It comes just three weeks after Mr Wallace admitted that the company might have to pay out £800 million to scale down its heavily loss-making US division.

Taken together the two liabilities would, if met in full, wipe out the company’s £2.2 billion of net cash.

The loss-making telecoms group has a further £1.6 billion of liquidity available after that, but if it was stretched that far the company’s future would be in jeopardy. The group would struggle to fund future losses or restructurings.

The crisis follows a 6pm ratings downgrade from Moody’s, the credit-rating agency. Moody’s thrust the company into junk territory when it pushed its credit rating down from Baa2 to Ba1.

That triggered a clause in a three year old contract signed between Cable & Wireless and Deutsche Telekom that dates back to the British company’s disposal of its 50 per cent interest in the mobile phone operator One 2 One in October 1999. In a statement released at 8.45pm, Cable & Wireless said the disposal “provided Deutsche Telekom with an indemnity in the event of the Inland Revenue assessing tax liabilities against the companies sold”.

The company is now obliged to either set aside £1.5 billion in cash to meet any tax bill arising, or obtain a bank guarantee for the same sum. However, the company said it was confident that the funds would not be required.

“Cable & Wireless has received tax advice from leading tax counsel and its legal and tax advisers confirming that there is no tax liability,” the statement added.

Although the choice as to how to guarantee the sum is up to Cable & Wireless, the company said it would be contacting Deutsche Telekom as soon as possible, to see if the indemnity is still needed.

Key company executives were working late into the evening at the group’s central London headquarters, trying to deal with the ramifications of Moody’s downgrade.

The announcement, which came after the markets closed, is likely to put the company’s share price under severe pressure on Monday morning.

The shares closed yesterday at 83½p, down 2½p on the day.

Under Mr Wallace Cable & Wireless sold many of its international operations in favour of a high-risk focus on international internet-based services, which so far have led to heavy losses.