Cable & Wireless (C&W) is expected to publish plans for a full demerger of its British and international businesses within six months.

BT’s main rival in the business telecoms market split its operations into two self-contained units in February last year. The move was part of efforts to revive the struggling group and turn its loss-making UK business into a profitable operation.

C&W’s interim results, to be revealed tomorrow, are expected to show that the British turnaround – which includes a target of producing a “double-digit” operating margin – is on track. The growing success of the division should pave the way for a full demerger next year.

Analysts at Citigroup expected the top-line performance of the C&W UK business to show an “encouraging underlying trend” with “a formal statement of break-up plans” at the group’s full-year results in May.

Citigroup predicts half-year revenue for British operations of £1 billion – down 7 per cent year-on-year – with earnings before interest, tax, depreciation and amortisation of £76 million.

A sale of either or both parts of the group would be expected to raise interest from private equity players. Foreign telecoms groups such as France Télécom and Deutsche Telekom may be potential buyers.

Analysts are also expected to seek news of progress on talks to offload its £2 billion pension fund. This could help to clear the way for a demerger, but will be highly complicated.

A £400 million sale of Telent, the remains of the former Marconi, has hit trouble after protests about the future of its £2.5 billion fund and the pensions of the 62,000 people covered by it.

C&W’s restructuring plan includes a controversial scheme that offers limitless bonuses to senior executives if they meet certain performance criteria – or if a sale takes place.

The plan was condemned by corporate governance groups but waived through by investors at C&W’s annual meeting this summer.

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