Big Plans to Follow C&W Optus IPO

Author:
Updated:
Original:

Sydney, Australia— Australia's Cable & Wireless
Optus Ltd. will emerge as one of Cable & Wireless plc's three core business units
following its $A1 billion ($US600 million) initial public stock offering, planned for
mid-November, said C&W CEO Dick Brown.

Proceeds from the IPO will also be used to retire debt and
fuel further growth in TV and telecommunications, Brown said.

Britain-based C&W will increase its stake in C&W
Optus to a majority 52.8 percent with a further investment of A$1.45 billion ($US870
million). Brown, who will also become C&W Optus' chairman, said the company is slated
to become one of C&W's three main businesses worldwide, along with MSO C&W
Communications in the United Kingdom and Hongkong Telecom.

Second in size to the much larger market leader Telstra,
C&W Optus provides mobile, local, and domestic and international long-distance
telephony in Australia. It's also active in pay TV and Internet services.

C&W Optus CEO Chris Anderson said the company expects
to move into the black next year with, for the first time, "meaningful" revenue
from local telephony, Internet services and pay TV.

The company's strategy to drive pay TV forward, outlined in
the prospectus, appears to rely on the bundling of pay TV with other products and
services. This is similar to the strategy that's been adopted by C&W Communications in
the U.K.

While pay TV and local telephony on its broadband
local-loop network account for just 5 percent of C&W Optus' revenues, heavy losses
resulting from the introduction of those services over the past three years have been a
source of considerable strain.

According to the C&W Optus prospectus, subscriber churn
on its pay TV system was 40 percent in the 1996 fiscal year and surged to 116 percent in
1997. In the 1998 fiscal year, churn fell, but only to 50 percent.

Software problems on the broadband network also kept
C&W Optus' local telephony product from driving forward. While C&W Optus chief
financial officer Norman Gillespie said earlier this year that the problems had been
largely fixed, C&W Optus is in legal dispute with former shareholder U S West Inc.
which, under a performance-guarantee contract, has been commissioned to fix the system.
MCN

Related