C&W axes 3,000 staff and 27,000 customers in latest survival plan

Negligent management decisions have run a blue-chip company virtually into the ground

Cable & Wireless, the beleaguered telecoms group, set out its latest plan to save itself from ruin yesterday - a risky strategy in which both staff and customers will be shown the door.

Up to 3,000 staff will be invited to leave in the next five years, joined, perhaps to their surprise, by 27,000 small business clients.

Like Jerry Maguire, the angst-ridden sports agent played by Tom Cruise, C&W thinks life would be better if it had fewer customers to whom it can devote more time.

Presumably this wasn't thought up, as in the film, at 1am over pizza and beer by an executive in the throes of a mid-life crisis. But some are wondering.

John Pluthero, the founder of Freeserve who is now chairman of C&W's UK business, wants a small number of very large, very profitable corporate clients. The small fry will be given notice, perhaps compensated, but told to move on.

By the end of the five-year plan, this will leave C&W looking after 3,000 corporations or public institutions. The company thinks this will save £5m a month by September as old customers depart.

The number of UK staff will fall from 5,500 to between 2,500 and 3,500, with 350 to go by the end of this month.

Long term, the aim is still to compete with BT, which was the rationale behind the purchase of the telecoms supplier Energis last year for £674m.

Mr Pluthero arrived as part of an Energis management team that he seems to prefer to the C&W old timers. He is predicting revenue of £2bn and profit of £400m once his radical changes have been implemented.

The bold-as-a-brick Mr Pluthero was annoyed yesterday at recent press comment that he described as "speculative" and "fruity".

He should know. In a now notorious e-mail, he recently informed colleagues that "we work for an underperforming business in a crappy industry and it's going to be hell for the next 12 months".

Staff, worried that the future looks tough, were told: "It's time to step off the bus."

The City, even the unions, could forgive levels of tact that make Alan Partridge look like Kofi Annan, as long as the strategy is seen to work.

No one sounded convinced yesterday. Dougie Rafferty of the Communication Workers Union said: "This isn't restructuring, it's slash and burn economics - exactly what we've come to expect from C&W management."

Referring to three years of profits warnings, jobs cuts and a plunging share price, Mr Rafferty complained: "Negligent management decisions have run a blue-chip company virtually into the ground."

A note from Citigroup strikes a remarkably similar tone. "The UK business of C&W has been in decline for the past 15 years. We remain sceptical about the ability of this new management team to reverse its fortunes and even more sceptical still that the reinvention can be executed in a smooth and investor-friendly way."

The shares, after a miserable 12 months, dipped again yesterday to close off 1.75p at 108.5p. At the height of the dot.com bubble. C&W shares topped £15.

In theory, the turnaround plan is a five-year deal. In reality, Mr Pluthero must show results much sooner than that.

By September, he expects to be down to 18,000 corporate customers from today's 30,000, cutting costs by 10 per cent in the process.

Behind his thinking is the fact that 89 per cent of the company's customers deliver just 4 per cent of revenues. He calls the plan to ditch the unprofitable many in search of the lucrative few a "reinvention agenda".

Part of that agenda is to offer much higher levels of service while making C&W products easier to use and repair.

Awkwardly, Bulldog, its internet service provider for the man in the street, was recently investigated by Ofcom for allegedly failing in its duty to customers. Suggestions that C&W may scrap Bulldog were strongly denied yesterday. For C&W, with five chief executives and at least as many strategies in the last 10 years, this could be its last chance.

Asked detailed questions by analysts yesterday, C&W admitted that even this latest solution is open to alteration. The group chairman Richard Lapthorne said: "There isn't a single definable path that we will follow. We can't be utterly prescriptive about the steps but we are certain about the destination."

He then went on, to some astonishment, to claim that C&W bought Energis "for the management team". Even Mr Pluthero doesn't think he is worth £674m, prompting him to backtrack with the line: "Clearly, there is more to Energis than me."

Mr Pluthero described the "step off the bus" e-mail as an exercise in honesty. "I have a relationship with colleagues which is one of straightforwardness. I am not going to paint rosy pictures when they don't exist. It is about having a social contract that says I will call a spade a spade and I expect you to do the same."

Rivals are already sniffing around for the business of those exiled. William Allan, the chief executive of Thus, said in a slightly barbed statement: "I would be delighted to welcome former and existing C&W customers to Thus. We value all our customers."

If Mr Pluthero can pull off his revolution, he could become one of the UK's all-time business heroes. If he fails, he faces ridicule and a public relations nightmare.

The early signs are not encouraging. Callers to head office yesterday got this message: "This is Cable & Wireless. We are experiencing a high level of calls. Please leave a message."

A phone company that can't even take phone calls is clearly is some trouble. The unions are preparing for what they expect to be "years of hell".

The call from City investors is equally explicit: Show me the money.