John Pluthero, chairman of Cable and Wireless’s UK operations, took an axe to the business on Tuesday, saying he planned to halve the workforce by the end of the decade and cut the company’s customer base from 30,000 to 3,000 key clients.
The moves are an attempt to revive the telecoms group’s ailing UK business, which has been hit hard by price competition and which shocked investors at the end of January with a profits warning. Mr Pluthero said C&W would reduce its workforce of 5,500 to between 2,500 and 3,500 over the next four to five years.
The staff cuts will come as C&W shifts its focus on to a smaller number of large corporate customers and public institutions. C&W generates about 96 per cent of its revenues and 98 per cent of its gross margin from its top 11 per cent of customers.
Mr Pluthero said that within three to five years, he expected the business to have annual revenues of £2bn ($3.5bn) and earnings before interest, tax, depreciation and amortisation of £400m, giving the company a double-digit operating margin.
That would be a sharp rise over the ebitda for the current year, which is expected to be about £150m – half of which will be made up by previously undisclosed, non-recurring items. C&W warned in January that earnings for the following year would stay at the same level.
Mr Pluthero, who led a similar turnround programme as chief executive of Energis, the smaller rival C&W bought for £600m last August, said he was confident that his targets were achievable.
“Energis was a full dress rehearsal for this,” he said. “The trends on pricing and technology change continue but that makes the challenge more complicated rather than unachievable. I am very confident we will get there.”
C&W is the UK’s second-largest supplier of corporate fixed-line telecoms services after BT. However, intense competition from BT, Thus Group and Colt Telecom have caused the company’s traditional voice revenue streams to fall dramatically over the past few years.