20th Apr 2005 12:01
20 April 2005 CABLE & WIRELESS ANNOUNCES NEXT GENERATION NETWORK PLAN * Investment of ‚£190 million over the next three years in Next Generation Network ("NGN"), and associated IT systems and processes, to serve customer demand for new services, reduce operating costs and exploit UK network scale; * Implementation of a programme to reduce outpayments and network costs by ‚£50m in 2005/6; * Bulldog's exchange roll out ahead of schedule; new leadership in place; consideration being given to expand coverage beyond 30 percent of the UK market Cable and Wireless plc ("Cable & Wireless") CEO, Francesco Caio, todayannounced the Group's intention to commit ‚£190 million over the next threeyears to the transformation of its UK core network, and associated IT systemsand processes. Commenting on the plans, Francesco Caio said:"After a period of intense focus on fixing the legacy issues, we are now movingour attention to building our competitive position in the UK. Continueddialogue with our customers confirms that in all segments demand is rapidlyshifting towards IP and broadband services."That shift in demand and the rapid advance in IP technologies provide theopportunity for Cable & Wireless to lead the transformation of the UK telecomindustry with the creation of a new model of telecom operator, where strongfocus on customer needs and the development of new services is supported by abroadband access network and an IP core."The migration to Next Generation Networks will be a catalyst to change thedynamics of the UK telecoms market. Increased functionality, customisation andreduced unit costs will be the rewards for operators with the scale andresources to take advantage of this technology shift."We are also encouraged by the ongoing OFCOM review and its emphasis oninfrastructure based competition in the UK."With the UK's second largest network infrastructure Cable & Wireless has therequisite scale and is well positioned to take advantage of these customerdemands. The shift to Next Generation Networks together with our investment inlocal loop unbundling/broadband will further differentiate us from other UKoperators".BackgroundIn November last year Cable & Wireless reorganised its UK business around threeelements, to compete more effectively, with: * Establishment of four customer segment focused business units (Enterprise, Business, Carrier Services and Bulldog); * Investment in a broadband access network and capabilities through Bulldog; * Creation of an integrated operations unit - comprising network, IT systems and field operations - aimed at optimising cost and exploiting our infrastructure. Investment in Next Generation Network ("NGN") and OperationsThe new Operations team, led by Frank Mount, has completed the first phase of areview of our network and operating costs.It has become clear that significant benefits can be achieved by adopting NGNarchitecture and the associated IT systems and processes.The UK business benefits from past investment and, as a result, is capable ofbeing upgraded to a single IP platform (NGN) with relatively limitedincremental investment to offer highly innovative and cost competitiveservices.We expect our NGN architecture build to be completed by the end of financialyear 2007/08, and to have the following key elements: * Convergence of Cable & Wireless' existing five separate service platforms onto a single integrated IP service platform; * Reduction of backbone nodes by 50 percent and rationalisation of metro-edge and metro-access nodes; * Installation of ten new soft switches to replace the existing seventy legacy voice switches (subject to the timing of traffic switching away from legacy products). This single, integrated and versatile IP based platform will present asignificant competitive advantage to C&W. These benefits include: * Enhancing our ability to offer market leading IP services, in line with the rapidly developing demand from business and residential customers; * Offering our customers the opportunity to migrate to new services ahead of the equivalent transformation so far outlined by BT; * Materially reducing Cable & Wireless' operating and maintenance costs as a result of the simplification of physical and software architecture. Cost savings will increase over time and at the end of the three year build out, we estimate that net savings will amount to approximately ‚£23 million per annum, after migration costs of approximately ‚£16 million. Migration costs are expected to reduce to negligible amount over the following 18 months; * Accommodating significant growth in traffic volumes (particularly in broadband) at a much reduced capital intensity compared with legacy technologies. The anticipated capital expenditure for the UK business (excluding Bulldog) hadoriginally been expected to be approximately ‚£160 million per annum over thenext three years. The capital expenditure required for Cable & Wireless' NGN isanticipated to amount to ‚£190 million over the next three years, with some ‚£80million being spent in 2005/06. A large proportion of the NGN expenditure willreplace legacy expenditure that would otherwise have been required to maintainthe efficiency of the current network, as a result over the three year period anet increase in capital expenditure of approximately ‚£35 million is associatedwith NGN.UK capital expenditure, including NGN, of ‚£225 million is expected in 2005/6.For the following two years, until completion of the NGN architecture, UKcapital expenditure is expected to be around ‚£145 million per annum.Early network cost reductionThis network and operations review has also identified a first phase ofopportunities to reduce costs by approximately ‚£50m in 2005/6, ahead ofanticipated NGN related savings. Most of these relate to outpayments andnetwork costs, driven by traffic and interconnect optimisation.We believe that pressure on pricing is likely to continue, particularly fortraditional services, and that, by lowering the cost base in this way, thisprogramme will substantially strengthen the company's ability to manage theeffect of these price movementsBroadband / BulldogThe roll out of the Bulldog access network is progressing ahead of schedule. Asof 15 April 2005 Bulldog had installed and released for service 320 exchanges.We expect therefore to complete the initial phase of our investment - 400exchanges - by May 2005, seven months ahead of our initial timetable.Customer response to our initial offer is encouraging and we remain veryconfident about the rate of customer acquisition in the second half of thiscalendar year, as we enter the full commercial phase of our plan.We have also made substantial progress in the development of Bulldog'sorganisation and the appointment of Emanuele Angelidis as CEO provides Bulldogwith the leadership and operating experience to execute its plans.It is against this background that the Bulldog team is developing plans forhigher speed services (currently already twice as fast as BT) and an extendedroll out that would take our market coverage beyond 30 percent. Cable &Wireless' NGN forms the scalable and flexible basis on which to grow Bulldog'sservice speed and footprint.The plan will meet our internal financial criteria and its implementation willbe phased with the evolution of customer demand. An update on the next phase ofthe plan will be communicated with the final results announcement on 26 May2005.Conference callCable & Wireless will host an analyst and investor conference call at 2pm today(20 April 2005) to discuss the contents of this press release. We advise usersto dial in up to 15 minutes before the beginning of the presentation. Aplayback facility will be available immediately after the presentationconcludes, using the access code detailed below. This recording will beavailable for one month.Dial in details:Conference Call: UK & International callers +44 (0) 1452 56 13 95Playback facility: UK & International callers + 44 (0) 1452 55 00 00Playback Access Code: 56704653#Contacts:Investor Relations:Louise BreenDirector, Investor RelationsTel: +44 20 7315 4460Virginia PorterVP, Investor Relations and Assoc. General CounselTel: +44 20 7315 6225Media:Lesley SmithGroup Director Corporate and Public AffairsTel: +44 (0) 1344 726945Steve DoubleGroup Head of Media CommunicationsTel: +44 (0) 1344 726946Mob: +44 (0) 7917 067580Cable & Wireless press office Tel: 01344 818888Note to editorsCable & Wireless is one of the world's leading international communicationscompanies. It provides voice, data and IP (Internet Protocol) services tobusiness and residential customers, as well as services to other telecomscarriers, mobile operators and providers of content, applications and internetservices.Cable & Wireless' principal operations are in the United Kingdom, continentalEurope, Asia, the Caribbean, Panama and the Middle East. For more informationabout Cable & Wireless, go to www.cw.com .ENDCable & Wireless PLCRelated Shares:
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