Cable & Wireless considering demerger options

By Kate Holton

LONDON (Reuters) - Telecoms company Cable & Wireless (CW.L) is considering a demerger of its two divisions this financial year after beating forecasts with a 23 percent rise in annual underlying core earnings.

The group forecast strong earnings for 2008/2009 after seeing its Europe, Asia and U.S. (EAU) business, formerly known as the UK division, return to revenue growth.

The UK's second-biggest corporate telecoms provider after BT Group (BT.L) split itself into two separate units in 2006, prompting speculation this would lead to a full demerger.

"We've made good progress in our turnaround and we've talked (before) about considering value realisation," Finance Director Tony Rice said on a conference call with reporters on Thursday.

"There are a number of options. Obviously there is a demerger, rationalisation of the portfolio or leveraging and returning capital to shareholders, and we're looking at all of those. We're talking about doing something in 2008 and 2009."

The news sent shares in the group up 2 percent to 155-1/2 pence by 10:25 a.m., with analysts welcoming the outlook and solid results.

They also welcomed the comment C&W was in active discussions over options to further de-risk the pension scheme and that these options, including an insurance buyout, were not a precondition for "value realisation".

Shares in Cable & Wireless, which has a history that dates back to the 1860s when telegraph cables were first laid overseas from Britain, have slowly recovered after they dropped 13 percent in March on scepticism over new growth targets.