Siemens to buy Mercury division

MARY FAGAN

Industrial Correspondent

Siemens is expected to announce tomorrow the acquisition of Mercury Communications' customer equipment arm - formerly known as Telephone Rentals - which manufacturers products including telephones. The operation is based at several sites including one at Milton Keynes and is thought to employ up to 1,000 people.

The sale of the equipment arm, acquired in 1988 by Mercury's parent, Cable & Wireless, is the last big step in a radical overhaul announced in December when Mercury said it would axe 2,500 jobs. The company has already pulled out of directory inquiries and earlier this year sold its public payphone operations to an Italian firm.

Mercury refused to comment on the sale but Siemens has confirmed that it plans an acquisition and strategic alliance, to be announced this week. The statement fuelled rumours that a predator was poised to pounce on Mercury itself, or even on Cable & Wireless.

There has also been speculation over the future of Mercury One-2-One, the mobile telephony arm which C&W owns with US West.

The announcement of the disposals last December was the first public act of Duncan Lewis as chief executive after the unexpected departure of his predecessor, Mike Harris. Last month Mr Lewis shocked the City by leaving C&W after only nine months in the job.

Mr Lewis's departure for "personal reasons" stunned City analysts. He was perceived to have been effective in improving performance. He has been replaced by Peter Howell-Jones, previously deputy chief executive of the group's flagship, Hong Kong Telecom.