The world’s worst phone company

Source: Findarticles.com

April 15, 2001 by Grahame Lynch

It is praised by financial analysts for its remarkable re-invention. It praises itself for what it claims is the world’s most technically capable IP network. But it still makes too much of its money via neo-colonialist monopoly arrangements in third-world countries.

The company is Cable & Wireless. And despite the rave reviews, it remains a company that makes money in odious ways.

Cable & Wireless has a proud beginning, building the first submarine cables in the 19th century. Not long after, it spread out, taking advantage of the economic reach of the British Empire to secure itself telephony franchises in the Caribbean, Central America, the Pacific Ocean and British Far East Asia.

Of course, these days Cable & Wireless gets most attention for its expansive IP network rollout, reaching some 84 cities across the world with OC-192 connectivity.

But this IP-centric business focus isn’t yet profitable. Indeed, as a business unit, it lost some 216 million pounds (US$317M) in the last financial year.

Where does Cable & Wireless make its real money? Jamaica. Ascension Island. Panama. The Falkland Islands. Diego Garcia. And lots of other places that are a) small, b) poor and c) suffer the misfortune to be ex-British colonies.

Together, Cable & Wireless’ island monopolies are home to only a few million people with limited incomes. But Cable & Wireless certainly extracts its pound of flesh.

Indeed, Cable & Wireless made some 203 million pounds (US$298M) in pure profit from its “regional businesses” last year, along with another 71 million pounds (US$104M) in Australia and 282 million pounds (US$414M) from “discontinued operations,” mainly Hongkong Telecom.

For many years, Cable & Wireless made most of its profits from Hong Kong. And although the British finally handed Hong Kong back to China in 1997, Hong Kong taxpayers were then forced to cough up billions to “compensate” Cable & Wireless for the early termination of the monopoly license granted by the British administration in the mid-1980s.

And what a monopoly it was. Cable & Wireless took advantage of Hong Kong’s small borders to charge full IDD rates for calls travelling as few as 15 miles to neighboring cities in China and the adjoining enclave of Macau, where the local telephone company was also owned by Cable & Wireless. At one point, Hongkong Telecom was returning almost half its sales in profits!

But while the Hong Kong cash cow has been consigned to history, the cash cow of a whole bunch of former British Empire island nations continues on. A quick perusal of the ITU’s list of international settlement charges shows that the most expensive in the world are almost always levied by a Cable & Wireless property on some island nation. What’s more, these countries are being left behind by Cable & Wireless’ monopoly rents and refusal to invest profits back into their infrastructure.

Just last month, five of them in the East Caribbean got together and said enough is enough. High phone charges and under-investment were leaving them marginalized from the world economy. So they forced Cable & Wireless to step aside and face liberalization. Cable & Wireless was petulant in negotiations, threatening to disrupt telephone service without an orderly transition. After it agreed to the liberalizations, it spitefully laid off hundreds of local workers.

What is most offensive about this odious company is the way it used the monopoly rents of small, poor island nations to subsidize its loss-making fiber networks in rich European and American countries. Its grand new IP network doesn’t extend out to these places — when it’s clear those economies would benefit from being connected to the world’s broadband network.

Off course, not all of the profit makes its way back into first-world IP investment. Some 138 million pounds (US$198M) of it was given back to Cable & Wireless’ British and American shareholders in dividends last year.

The East Caribbean actions of last month should empower other countries to end C&W’s monopoly deals. Good riddance to the world’s worst telephone company.

Grahame Lynch is the global editorial director of Advanstar Telecom Group.