Cable & Wireless Plc, under pressure to make use of a huge cash pile, said today it planned to hand more than Stg£1.7 billion pounds to shareholders through a special dividend and share buybacks.
C&W shares rose more than six per cent in early trade as investors in the British telecoms group welcomed solid first-half results and a slice of its £4.7 billion in net cash.
The group has sold assets to change its focus from cable and mobile telephony to providing a communications network and Internet services for companies, such as food group Heinz. But the question of how to use the cash from those sales has hung over C&W management for more than a year.
A buyback was widely expected, and most shareholders and analysts welcomed it. But one analyst questioned the strategy, saying C&W should either invest the money to get its core corporate network business into profit or give it back entirely.
"This to me is a half-way house. (Ultimately) it's not going to please anybody," said Mr Cyrus Mewawalla, telecoms analyst at Nomura, though he noted it would give a lift to shares in the near term.
One of the group's top 10 institutional shareholders said it was pleased with the plan, but would have expected more.
A special dividend of 11.5 pence per share, worth about £320 million, and plans to buy back up to 15 per cent of its outstanding shares - now valued at more than £1.4 billion pounds - would leave C&W with about three billion pounds to spend.