Half Yearly Report

ANNOUNCEMENT

8 November 2012

CABLE & WIRELESS COMMUNICATIONS PLC HALF YEARLY REPORT

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012

Trading in line, full year outlook maintained

Key Highlights

§ Mobile revenue up 9%, including mobile data revenue growth of 36%

§ Strong mobile subscriber growth in Jamaica reflecting new competitive environment

§ Mobile leadership in Panama extended

§ Good performance in Macau and operational progress in The Bahamas

§ Caribbean restructuring programme underway; operating costs down 7%

§ Discussions on portfolio reshaping

§ Interim dividend of US1.33 cents per share

Note: EBITDA and adjusted earnings per share are defined in the footnotes on the following pages, reconciliations of EBITDA and adjusted earnings per share are provided on page 27

Outlook

We maintain the guidance given at the full year, and expect:

§ Group EBITDA to be similar to 2011/12

§ Capital expenditure approximately US$350 million in 2012/13

§ Cash exceptional costs in 2012/13 between US$30 million and US$35 million

§ Dividend guidance for FY 2012/13 at US4 cents per share

Commenting on the Group results, Tony Rice, Chief Executive of Cable & Wireless Communications Plc, said:

"We have delivered a respectable performance in the first half. Despite a challenging period for the telecoms industry as a whole, our Group has posted a balanced performance, with EBITDA rising 2%.

"We have seen momentum continuing to build for our mobile data services, and this is driving our mobile service revenue. Significant investments in high speed, mobile data capable networks across the Group last year are already delivering returns, and we expect the growth to continue. Voice revenue, however, continues to decline and we are delivering on our plan to reduce costs to mitigate this.

"Private sector and government enterprise pipelines retain a healthy potential although governments continue to be hesitant before launching the new programmes which we are there to support.

"We saw improving results in Jamaica, where our 'fightback' campaign is gathering momentum following regulatory changes made by the Government. We have seen good traction in the key market of prepaid mobile and the business is re-energised. We are also delivering on our potential in The Bahamas, where we have been investing in new networks and introducing new services, particularly mobile data.

"We have also made progress on our strategy to reshape the business. During the first half we exited our West African enterprise business, and confirmed discussions regarding possible transactions involving our Monaco & Islands and Macau business units. These steps are in line with our stated plan to focus our management capability and future investment on the Pan-American region where we have scale, synergy and strong market positions as well as several growth economies.

"Despite continuing competitive and economic pressures in many markets, we are well placed to achieve the outlook indicated at the 2011/12 results."

Analysis of Group results

Revenue was in line with the prior year at US$1,431 million. Across the Group, mobile revenues increased by 9%, boosted by growth in mobile data services. Macau, our most developed mobile data business, posted a 20% rise in total revenue, driven by mobile services and smartphone sales.

Group EBITDA was similar to the prior year at US$445 million following an improved performance in the Caribbean and continued strength in Macau. The Caribbean performance was driven by mobile customer growth in Jamaica, further operating performance gains in The Bahamas and a region-wide cost reduction programme.

Adjusting for currency, revenue for the Group was 1% higher and EBITDA 2% higher than last year.

Total operating profit increased by 19% to US$256 million. There was an exceptional charge of US$26 million related to the Caribbean restructuring programme we commenced at the start of the year and where we have made good progress in the first half.

Net profit for the period was up 11% to US$120 million and adjusted earnings per share were US3.4 cents. The Board has declared an interim dividend of US1.33 cents per share, in line with our intentions outlined at the full year results in May.

The Group made good progress in its strategic growth businesses, particularly mobile data. Non-voice revenue rose by 36% and now accounts for 26% of Group mobile service revenue. Our Panama business saw a 63% increase in mobile data revenue during the first half as smartphone penetration rose to 26%. Macau, the Caribbean and Monaco also delivered strong mobile data revenue growth. We expect further growth from this segment across the portfolio.

We continued to roll out triple-play services, with pay TV as a key component, launching a service in Barbados during the period, and in the Channel Islands and Isle of Man in October.

Contacts

REVIEW OF CWC OPERATIONS

Income statement

Panama

·; Maintained market leadership in mobile, broadband and domestic fixed voice

·; Mobile revenue growth of 2% in a highly competitive market

·; 63% growth in mobile non-voice revenue following launch of high speed data network

·; Private sector and government enterprise pipelines retain healthy potential, continued delays

Revenue at US$286 million was 7% lower than the same period last year due to lower enterprise and fixed voice revenue.

Mobile revenue at US$159 million rose 2% despite the competitive four player market and introduction of mobile number portability in November 2011. An increase in data penetration from 14% to 26% fuelled strong growth in non-voice revenue, particularly in the prepaid segment. This growth more than offset the decline in mobile voice revenue as the rate per minute remained under pressure due to competition. Following the deactivation of low value, promotion driven customers in the first quarter, total mobile subscribers were 27% lower than last year.

Broadband & TV revenue of US$30 million was in line with the prior period. Subscribers declined, but ARPU increased as the business focussed on greater value customers, taking higher speed broadband and premium TV packages. The number of pay TV subscribers taking more than one service was over 70%.

Fixed voice revenue declined by 15% to US$61 million following a reduction in the volume of international transit traffic and lower national calling rates. The rate of decline in subscriber numbers has slowed as households value retaining a fixed line to complement other fixed services.

Enterprise, data and other revenue at US$36 million was lower than last year as a result of delayed government programmes in Panama. This half we announced both a government project to supply, install and support new systems to share documents electronically and a two year contract to introduce a Hospital Information System to improve the administration and patient care in all of Panama's state funded hospitals. We continue to explore opportunities outside Panama.

Gross margin decreased by 4% to US$193 million principally due to lower fixed voice revenue. As a percentage of revenue, gross margin improved by two percentage points.

Operating costs increased by 4% to US$78 million reflecting higher network and property costs following expansion of our mobile network.

Due to reduced fixed voice and enterprise revenue and higher operating costs, EBITDA reduced by 9% to US$115 million.

Our proportionate ownership of Panama EBITDA for the six months ended 30 September 2012 was 49%.

Caribbean

·; Mobile non-voice revenue up 32%, continued roll out of high speed mobile data networks

·; Mobile subscriber growth of 20% in Jamaica

·; 4G/HSPA+ mobile network established and NGN fixed network launched in The Bahamas

·; Cost reduction programme progressing - headcount down 7% across the region

Caribbean revenue was 4% down on the prior year leading to a similar decline in gross margin. EBITDA improved by 4% following progress in reducing the cost base.

Mobile revenue was 2% lower in the first half at US$262 million. Handset sales increased as the business introduced several successful promotions, although service revenues were weaker mainly as a result of lower postpaid traffic volumes. In Jamaica we received an excellent customer response to the launch of our new reduced rate mobile packages ahead of long awaited changes to the regulatory environment in July. To date we have increased our Jamaican subscriber base by 20% compared to the first half of last year and mobile service revenue also rose as call volumes and data usage have grown. Across the rest of the Caribbean there was continued growth in the postpaid customer base although prepaid voice revenue was lower as usage decreased. Mobile data has seen strong growth with non-voice revenue for the region growing by 32%.

LIME TV was launched in Barbados during the first half of this year and we have added almost 1,300 customers. Broadband subscribers increased by 3% excluding Jamaica, where we saw increased competition. There was a small reduction in ARPU as rate reductions were introduced to drive customer adoption resulting in Broadband & TV revenue falling slightly to US$60 million.

Fixed line revenue at US$149 million declined by 12%. There was a 2% decline in the subscriber base and a fall in ARPU as usage continued to reduce in favour of alternatives such as mobile and VoIP solutions. Revenue in Jamaica was further impacted late in the first half by regulatory changes which resulted in reduced fixed to mobile retail rates and interconnect revenue.

Enterprise, data and other revenue rose by 4% to US$82 million as we saw growth in corporate data solutions and increased capacity lease revenue generated from our regional cable investments.

Gross margin at US$427 million tracked the revenue performance and was 4% down compared to last year.

Operating costs reduced by 7% compared to the prior period as we realised efficiencies particularly in our Bahamas business. In our other businesses we have commenced a restructuring programme which was announced at our full year results in May.

EBITDA increased by 4% to US$137 million driven principally by operational progress in The Bahamas and the early benefits from the wider Caribbean programme.

Our proportionate ownership of Caribbean EBITDA for the six months ended 30 September 2012 was 74%.

Macau

·; Mobile service revenue up 14%, continued data growth with non-voice now 35% of service revenue

·; Economic growth continues, gaming revenue up 15%

·; EBITDA up 4% on prior year driven by strong mobile performance

Revenue increased by 20% on last year largely due to strong mobile handset sales.

Mobile revenue of US$213 million was 41% higher driven by the sale of smartphones, particularly the iPhone. Excluding handset sales, revenue was up 14% driven by subscriber growth of 10% whilst data penetration within our customer base remained above 46%. Data usage grew by over 50% driving non-voice revenue higher and supporting the ARPU. Roaming revenue was in line with last year as lower settlement rates with a major international roaming counterparty were offset by higher traffic volumes.

Broadband revenue of US$29 million was 4% higher than the same period last year due to a 4% increase in subscribers. The broadband ARPU also improved as subscribers upgraded to higher speed packages including our 250Mbps fibre offering. We anticipate the introduction of a new fixed line data competitor in the market and an application is currently under review by the regulator.

Fixed voice revenue of US$35 million was 8% lower than last year largely due to reduced international revenue.

Enterprise, data and other revenue of US$33 million was 20% lower principally due to the higher volume of contracts last year.

Gross margin at US$118 million was up 4% compared to the same period last year reflecting the strong growth in mobile non-voice service revenue.

Operating costs of US$31 million were 3% higher than last year largely due to higher marketing spend and inflationary pressure on property and staff costs.

EBITDA of US$87 million was 4% higher than in the same period last year. Adjusting for handset sales the underlying EBITDA margin was 44%.

Our proportionate ownership of Macau EBITDA for the six months ended 30 September 2012 was 51%.

Monaco & Islands (M&I)

·; EBITDA 2% higher at constant currency

·; Afinis disposal in August 2012

·; Roll out of fibre to the curb in the Seychelles

Revenue at US$280 million was in line with the same period last year at constant currency. On a reported basis, revenue was 7% lower reflecting the weakness in the Euro and Seychelles Rupee compared to the prior year.

Monaco revenue remained in line with the prior year at constant currency. Mobile service revenue was driven by non-voice services which increased by 29%, higher roaming revenues and a 7% growth in subscribers. There was also growth in Broadband & TV revenue boosted by additional subscribers. This was balanced by a fall in enterprise revenue as transit traffic rates reduced.

Revenue in the Maldives was 3% lower. In April 2012, damage caused to a submarine cable by a third party resulted in lower mobile roaming revenue and fixed international traffic after customers were compensated for the service outage.

In Guernsey, revenue decreased by 4% at constant currency mainly due to the loss of an enterprise contract. We continue to seek new opportunities and are looking to grow our market leading data centre business. In Guernsey, we grew our mobile subscriber base and service revenue increased by 4% compared to prior year. Both Jersey and the Isle of Man exhibited double digit revenue growth following improved performance in mobile.

In the Seychelles we completed the rollout of a nationwide fibre network supported by the country's first subsea cable network, the Seychelles East Africa System. We also saw a good performance in broadband and mobile revenue with double digit growth on last year on a constant currency basis.

Gross margin at US$194 million increased by 1% at constant currency compared to the same period last year, reflecting the revenue trend. On a reported basis it was 5% lower.

Operating costs were US$100 million, in line with last year at constant currency and 7% better on a reported basis. Lower Monaco staff costs following headcount reductions in the Afinis business were offset by additional cable repair costs incurred in the Maldives.

EBITDA at US$94 million was 2% higher than the prior period at constant currency and 3% lower on a reported basis.

Operations in the Maldives, Monaco and Guernsey represented approximately 82% of M&I revenue and approximately 87% of EBITDA in the first half.

Our proportionate ownership of Monaco & Islands EBITDA for the six months ended 30 September 2012 was 65%.

Afinis disposal

Our subsidiary Monaco Telecom SAM completed the sale of its West African-based enterprise business Afinis Communications to SkyVision Global Networks Limited on 3 August 2012 for a total cash consideration of US$3 million.

Other includes management, royalty and branding fees, the costs of the corporate centre, net UK defined benefit pension credit or charge and intercompany eliminations. EBITDA was US$12 million, US$9 million higher than last year, following a pension credit related to the CWSF scheme and reduced costs in the corporate centre.

Our share of profit after tax from joint ventures was US$12 million, US$1 million lower than the prior period.

Roshan grew mobile subscribers by 11%, however ARPU came under pressure due to the introduction of 3G services by competitors. This resulted in a US$3 million reduction in profit after tax attributable to CWC.

This is the second year of our investment in The Bahamas. We continue to focus on providing an improved service to our customers and preparing for future market competition. In the Maldives we have entered the final year of investment in a domestic cable network that will allow us to provide data services to the population and tourist resorts.

Depreciation and amortisation at US$170 million was US$5 million lower than H1 2011/12 following the accelerated depreciation of legacy mobile assets in the prior year.

Other Group items

Net other operating expense

The US$5 million net other operating expense incurred in the first half of the year included losses on the sale of fixed assets. In the prior period, the US$7 million expense comprised stamp duty in connection with the purchase of a 51% stake in BTC in The Bahamas and US$3 million hurricane restoration costs also in The Bahamas, partially offset by a gain on the retranslation of sterling based pension funds.

Exceptional items in the period comprised charges for the Caribbean cost initiative of US$26 million. Our expectation that this programme will result in between US$30 million and US$35 million of cash exceptional costs in 2012/13 remains unchanged. The prior period charge was associated with redundancy and restructuring programmes in The Bahamas and Panama.

Net finance expense

The US$77 million net finance expense for the Group consists of finance income of US$14 million (US$5 million in H1 2011/12) and finance expense of US$91 million (US$78 million in H1 2011/12). Compared to the prior period the net interest expense is higher primarily due to increased debt.

Other non-operating expense

The US$15 million other non-operating expense charge reflected the loss on the disposal of Afinis.

Income tax expense

The income tax charge of US$44 million (US$37 million for H1 2011/12) is in respect of overseas taxes. This charge represents an effective tax rate of 24%.

Group cash flow  

The Group generated operating cash flow before exceptional items of US$268 million in the six months ended 30 September 2012, 8% lower than the same period last year following the Group's decision to invest heavily in its mobile data networks. As a result US$177 million was invested in capital expenditure compared to $153 million in the same period last year in part reflecting the timing differences between commitment and expenditure. The outflow from movements in working capital and provisions largely reflects the cyclical nature of our payments profile.

Investment income of US$6 million included dividends received from joint ventures of US$1 million, US$3 million of interest received on cash balances and the proceeds on disposal of Cable & Wireless Worldwide plc shares.

Fixed charges

As in the prior period our fixed charges are more weighted to the first half of the year. We paid US$77 million relating to income tax in the first half of 2012/13, excluding US$12 million of tax brought forward due to a change in Panama tax legislation (see non-recurring items and exceptionals below). Interest of US$50 million was paid on our external borrowings, excluding US$27 million of increased borrowing costs arising from the timing of refinancing our 2012 sterling unsecured bond. We paid dividends and loans to non-controlling interests of US$104 million in the period. This was US$16 million lower than last year due to timing differences in upstream dividend payments.

Dividends to our shareholders were in line with the prior year as the final dividend which was paid in this period was based on US8 cents per share for the financial year 2011/12.

Non-recurring items and exceptionals

The net cash outflow included US$11 million for exceptional items which related to restructuring costs in the Caribbean, where our cost initiative has progressed faster than anticipated. We also incurred additional borrowing costs of US$27 million due to the timing of refinancing our 2012 sterling unsecured bond.  A recent tax legislation change in Panama has led to the timing of payments being brought forward. As a result there were US$12 million of additional tax payments in the first half and we anticipate this change will also result in an increased outflow in the second half.

Group cash and debt

Net debt reconciliation

During the period the sterling unsecured bonds repayable in August 2012 were redeemed at par using cash balances and drawings on the US$600 million revolving credit facility. The revolving credit facility has a margin of 2.50% over LIBOR and a maturity date of October 2016. As at 30 September 2012, US$330 million of this facility was drawn.

Pensions

As at 30 September 2012, the defined benefit section of the Cable & Wireless Superannuation Fund (CWSF) had an IAS 19 deficit of £84 million, compared to a deficit of £81 million as at 31 March 2012.

Cash contributions have been agreed with the trustees from 2014 to 2016 in order to eliminate the actuarial deficit. These payments are subject to the outcome of the next actuarial valuation as at March 2013. This future deficit funding constitutes a minimum funding agreement and, in accordance with accounting standards, we are required to account for this within our IAS 19 deficit. The increase in the IAS 19 deficit in the period is mainly due to a fall in index-linked gilt yields resulting in an increase to this minimum funding commitment. The IAS 19 deficit recorded at 30 September 2012 represents the present value of the maximum amount committed under the minimum funding agreement.

The fund assets at 30 September 2012 were approximately invested 74% in the bulk annuity policy, 19% in equities, and 7% in bonds, property, swaps and cash.

There are other unfunded pension liabilities in the UK of £27 million (£26 million at 31 March 2012). The Group holds investments in gilts of £22m to partially back the UK unfunded pension liabilities. Other schemes in Cable & Wireless Communications have a net IAS 19 surplus of US$14 million (US$22 million surplus at 31 March 2012).

Dividend

We are declaring an interim dividend of US1.33 cents per share.

The interim dividend of US1.33 cents per share will be paid on 11 January 2013 to ordinary shareholders on the register at the close of business on 16 November 2012. Subject to financial and trading performance in the second half of 2012/13, we expect to recommend a final dividend of US2.67 cents per share, resulting in a full year dividend of US4 cents per share.

A currency option and the dividend reinvestment plan will be offered in respect of the interim dividend. The default currency for payment is GBP sterling. Shareholders wishing to receive their dividend in US dollars or wishing to participate in the dividend reinvestment plan should make an election using CREST Input Message or return a completed Currency Mandate Form or Dividend Reinvestment Plan Mandate Form to: Equiniti Ltd, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA by 11 December 2012. Copies of the mandate forms are available from Equiniti Ltd. UK callers: 0871 384 2104; overseas callers: +44 (0)121 415 7052 or from our website www.cwc.com.

The sterling dividend payment amount per share will be announced on 17 December 2012, and will be based on the prevailing GBP sterling to US dollar exchange rate at 2pm GMT on that date.

Appendices

Condensed consolidated interim income statement

Condensed consolidated interim statement of comprehensive income

Condensed consolidated interim statement of financial position

Condensed consolidated interim statement of changes in equity

Condensed consolidated interim statement of cash flows

Reconciliation of net profit to net cash flow from operating activities

Notes to the condensed consolidated interim financial statements

Risks to our future success

Independent review report by KPMG Audit Plc to Cable & Wireless Communications Plc

Responsibility statement

Important disclaimer

Operating performance information

H1 2012/13 CWC constant currency results detail

KPI detail

Exchange rates

EBITDA by currency  

Condensed consolidated interim income statement

The notes on pages 22 to 27 are an integral part of these financial statements

Condensed consolidated interim statement of comprehensive income

The notes on pages 22 to 27 are an integral part of these financial statements

Condensed consolidated interim statement of financial position

The notes on pages 22 to 27 are an integral part of these financial statements

Condensed consolidated interim statement of changes in equity