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No. of Recommendations: 1
As you can guess from my Fool nickname, I live in one of the jurisdictions where C&W have a monopoly on service. In addition, I have had extensive business dealings with them on a regional basis for a number of years.

On the positive side, there Caribbean regional NET margins are approaching 50% (to hell with using 50% as a gross margin target), which is heavily related to their monopoly position.

In fact, while the Otter's article uses the ITU agreement on deregulation as a +ve for C&W (it may well be for their data traffic business, I'm not to up on that), it is big negative for what is still their core business, monopoly domestic/international traffic provider in numerous international locations.

In fact, historically the great bulk of C&W profits has come from these domestic monopolies in the many far flung countries where they do business, and many of these are now under significant fire. The single biggest profit contributor for C&W has always been Hong Kong, and there position there is not totally stable (to put it mildly). Added to this is the writing on the wall for their monopoly position in the Caribbean region.

The big question here is can they transform themselves into "the carrier's carrier" and thus benefit from teh deregulation boom ?

My answer is NO, and for one simple reason....poor management. This company is a relic of the old telco days of POTS (plain old telephone service) and monopoly protection (milk the cash cows, to hell with the service and capital investment). I seriously doubt that they can turn the 180 in their whole corporate philosophy that will be necessary to succeed in the new telco world.

Don't take my word for it, just take a look at how many times the company has restrucutured management in just the last five years, there is no clear direction here....

In short (hmm, there is an idea), don't be long C&W, they have no more than a short to medium term future.

Now back to my regular haunt on the UK Rule Shaker board....

Cheerio !
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