Cable & Wireless unveils plan for exiting U.S. market

IDG News Service |  Business

It's all over but the fire sale. U.K. network operator Cable and Wireless PLC (C&W) will exit the U.S. market through the sale of its loss-making Web hosting and IP (Internet Protocol) services business to private investment company Gores Technology Group LLC, C&W said Monday.

In an attempt to draw as much capital out of the sale as possible, C&W will put Cable and Wireless America into Chapter 11 bankruptcy, restructure the company to eliminate and renegotiate some lease and other contractual commitments, and sell the majority of the company to Gores Technology Group, in Los Angeles, for US$125 million, C&W said in a statement.

The announcement was welcome news to C&W Web hosting customer National Semiconductor Corp.

"I'm thrilled they've completed the action and now we can fully get back to business," said Phil Gibson, vice president of Web business and sales automation at National Semiconductor in Santa Clara, California.

"Performance has been good actually since the rumors (of C&W's intentions to pull out of the U.S. market) began nine months ago. I'm pretty pleased. We've experienced solid service with improving performance," Gibson said.

Gibson is so pleased, in fact, that National Semiconductor has extended its contract through June, he said.

C&W asserted it will continue to provide service to its remaining domestic customers and committed $100 million in funding to Cable and Wireless America as the restructuring and sale makes its way though bankruptcy court.

Gores Technology Group was also quick to reassure the company's customer base that service would not only continue without a change in quality, but would improve once the sale had been completed.

"One of the reasons we agreed to the purchase is due to the strength of its customers," said Terry Fahn, a spokesman for Gores Technology Group. "Through our unique skills set, we can identify things that can be improved upon."

The transaction with C&W will be similar to Gores Technology Group's acquisition of The Learning Company from Mattel Inc. in October 2000, Fahn said. As yet, there are no definitive plans for the future of Cable & Wireless America, he added.

Representatives from C&W could not immediately be reached for comment.

C&W began its retreat from the U.S. market in September 2002 when it sold its U.S. retail voice and data business to Primus Telecommunications Group Inc.

By June, C&W had announced its intentions to fully exit the U.S. market, where it had been losing around $1 million per day, and instead focus on its domestic U.K. business. The company has spent billions of dollars acquiring and developing its U.S. assets, including buying the wholesale and retail Internet operations from MCI Communications Corp. in 1998, after it had been acquired by WorldCom Inc. (now renamed MCI)

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