NEWS Cable & Wireless has finally managed to withdraw from its US operations – a move that it's hoping will put it on the road to profitability.
The telco has pulled off a US disappearing act, selling its business across the pond to Gores Technology Group for $125m after filing for Chapter 11 bankruptcy protection. The sale follows several months of negotiations to allow the telecoms firm to exit the US - a procedure that the company has said will cost it less than £300m.
The price tag is considered a bargain compared to the substantial sums of up to £1bn that the exit was thought to be costing, but will nevertheless make a significant dent in the company's £1.6bn of remaining cash.
C&W's US arm had been costing the company up to a £1m a day in losses and, while the company's British wing is also in the red, ridding itself of the money-burning American business has been on the agenda for execs for some time to allow the company to focus on building up C&W in the UK.
The company has announced that it expects the deal to give its results a battering, taking £10m-£15m off the final quarter's results. The financial markets seem happy with the deal, however - shares jumped several pence following the announcement.
Cesar Bachelet, analyst at Ovum, told silicon.com that the shedding of the US division should make a significant difference to the telco.
"The US operations were a heavy burden on finances – they were sucking money out of the company...The sale will make a positive difference. I wouldn't say it's the catalyst for turning things around, but it should make a substantial improvement in the company's figures and help it edge towards profitability," he said.
Looking to the telco's future, Bachelet said he believes C&W can now focus on improving the fortunes of its loss-making UK business by building on the success of its initiatives in the VSP sector.
He added that the company also needs to improve performance across its national telcos, compensating for inevitable decline in market share in its traditional fixed line business by improving its efforts in mobile and broadband, as well as entering some newly-liberalised markets.
