CABLE & WIRELESS, the struggling telecoms carrier, yesterday unveiled plans to cut its workforce by 13 per cent and close its London head office to cut costs and capitalise on demand for broadband services.

The moves are part of a shake-up in which Francesco Caio, chief executive, will take a tighter grip on the UK business and return cash to shareholders through a £250 million share buyback.

Kevin Loosemore, the chief operating officer, and Royston Hoggarth, the former head of the UK business, are both leaving the company.

The carrier, BT’s main competitor in the UK, said the shake-up would lead to savings of £50 million by March 2006 and enable it to focus on broadband, which it regards as its key source of future revenue.

The group, which has shed 23 per cent of its staff since 2003, said that the latest jobs would go both from the UK market — where it employs about 4,500 people — and from its European offices.

Its head office will move from London, where it has been for more than 150 years, to Bracknell in Berkshire.

The shake-up comes amid increasing competition among alternative carriers in the UK market. During the past six months two of C&W’s main competitors — Thus and Colt — have issued profit warnings after complaining of intense competition.

The company, which was forced to rethink its strategy after a costly expansion into internet hosting in the US turned sour, is committed to investing in so-called local loop unbundling — the process by which the incumbent operator (BT) makes its local network available to other companies.

Earlier this year Cable & Wireless bought Bulldog, an internet service provider that targets BT’s broadband customers. It plans to invest £85 million in it over the next two years, with a view to achieving sales of £250 million within four years.

The announcement of the job losses was softened by interim results that were better than some analysts had expected and by the announcement of the share buy-back. The latter has been made possible by achieving key targets in a turnaround programme on which it embarked 18 months ago.

In line with expectations the company posted an 8 per cent rise in profit before tax and exceptional items, in the six months to September. Revenues fell 2 per cent to £1.62 billion. Basic earnings per share recovered to 8.8p from a loss of 3.4p last year.

Richard Lapthorne, the company chairman, said: “This is not just another reorganisation. I looked at the UK business and I could not understand it and if I couldn’t what chance did our investors have?” Key staff including Mr Loosemore were made redundant, he said, because they had fulfilled their needs. “The whole point is that you adapt and you move on. We were putting fires out. Now we have done that and you move on.” The company’s focus now, he said, would be in reducing its cost base and increasing its margins through capitalising on the growth in broadband. “Investing in broadband will give us genuine new revenue streams,” he said. “We are targeting growth where growth is happening.”

Mr Lapthorne added though that conditions are “likely to remain challenging” in all areas of its business.

A good performance in the company’s carrier services division and its international fixed-line business — where revenues grew by 6 per cent — was offset by falling revenues at its Caribbean and UK operations.

Chris Alliott, an analyst at Nomura, said: “Additional weakness in the UK that we had feared does not seem to have materialised and (C&W) has annnounced a restructuring.”

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