C&W gives early warning on depreciation

IN A series of accounting moves, Cable and Wireless is offsetting a pounds 178m profit on the sale of a 20 per cent stake in Mercury and the conversion of warrants on Hongkong Telecom with an pounds 84m charge to cover a change in depreciation, writes Clare Dobie.

The communications group is shortening the expected asset lives of its underwater cables from 25 to 15 years. This will increase the depreciation charge as the value of cables is written off faster by pounds 12m a year.

The company said it was giving early warning about its exceptional items ahead of its results, so that investors would have a clearer picture of underlying performance.

It said the changes were consistent with new accounting standards and resulted from a review of the business undertaken by James Ross, chief executive. The shortening of cable lives reflected technological change - new cables were cheaper to lay and had greater capacity.

Separately, it emerged that the company faces a pounds 245m legal action from Digitel Telecommunications, which has a contract to provide telephone services on Luzon island in the Philippines.

C&W holds shares in Digitel but has declined to invest further sums in the company. Cable's shares lost 2p to 719p on the news.