BREAKING NEWS <<<
By Jonathan Browning –
Cable & Wireless Communications Plc had the biggest drop in six weeks in London trading as its Caribbean business struggles to grow and analysts said cutting costs at a purchased company in the Bahamas may prove difficult.
“The one region that remains very difficult is the Caribbean,” Chief Executive Officer Tony Rice said in an e- mailed statement today. The region continues to be “challenging with tourist spend and hence consumer and business disposable income significantly below historic levels.”
Cable & Wireless Communications, which split from its parent company in March 2010, provides mobile and fixed-line services in Panama and the Caribbean. Earnings before interest, taxes, depreciation and amortization in the fiscal second half ending March 31 will be about the same level as the $115 million reported for the first half, the company said today.
“CWC’s underlying cash generation is insufficient to justify either the share price or fund the CWC dividend,” said Mark James, an analyst at Liberum Capital, in a note today. “We expect consensus estimates to continue to decline and remain sellers with a 27 pence target price.”
The stock declined as much as 4.3 percent to 47.15 pence, the biggest intraday drop since Dec. 30, and was down 3.2 percent as of 8:55 a.m.
The company said it recorded a “stronger performance from Panama” in the current fiscal second half and that the units in Macau and Monaco continue to “trade well.”
Cable & Wireless Communications today said it signed an agreement to buy 51 percent of Bahamas Telecommunications Company for $210 million. The company is the leading mobile- phone, fixed-line and broadband operator in the Bahamas, a member of the Caribbean Community trading bloc.
“We fret about the costs of restructuring, and how difficult it may prove to lose staff,” Liberum Capital’s James said. “There has been well-documented backlash from unions to date.”
The company in December said it signed a non-binding memorandum of understanding with the government of the Bahamas for the acquisition of Bahamas Telecommunications.