Brain Food: Behind the spin

THE DILEMMA

by
Last Updated: 31 Aug 2010

Another year, another strategy for ailing telecoms giant C&W. New UK boss John Pluthero announced plans to shed half the UK workforce - about 3,000 jobs - and ditch the least profitable 90% of its customers to concentrate on just 3,000 large corporate accounts. From a late-90s high, C&W has suffered a series of declines. A disastrous foray into web hosting just as the dot.com bubble burst wiped millions off C&W's value, and increased competition in the telecoms sector has gnawed away at profits. So far, Pluthero has failed to convince others of the necessity of his proposals.

Shares fell after the announcement of his 'reinvention strategy', and industry analysts are sceptical.

THE SPIN

Pluthero's plan is to run C&W the way he ran Energis - concentrate on a small number of high-profit accounts; in his words, 'selling less stuff but making better profits out of it - think Giorgio Armani rather than Topshop.' His rationale is plain - only by slashing the customer base back to its best performers and gutting the workforce can the 134-year-old business compete in today's market.

THE STRAIGHT TALK

Pluthero was blunt in a leaked e-mail to employees: 'Congratulations, we work for an underperforming business in a crappy industry and it's going to be hell for the next 12 months. That's the only certainty at C&W.' But communications union boss Dougie Rafferty is blunter. Describing Pluthero's 'slash-and-burn' economics, he says: 'The only strategy that works at C&W is get yourself into a top job and you can fuck up anything you want and walk away with millions.' Citibank's Michael Williams is politer but no less scathing: 'The UK business has been in decline for the past 15 years. We remain sceptical about the ability of this new management team to reverse its fortunes.'

THE VERDICT

Pluthero has an enviable track record, but this is a five-year strategy and plenty of people are ready to bury C&W long before that. Market experts - who've seen five CEOs fail to turn the company around in the past 10 years - are unimpressed. Investors have snubbed his plans and the unions are up-in-arms. Do the problems at C&W run too deep for it to be turned around? One clue - the week that the job cuts were announced, callers to HQ got a recorded message: 'We are experiencing a high level of calls. Please leave a message.' A telco that has a problem dealing with phone calls might be in a battle too far, even for the combative Pluthero.

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