Cable & Wireless Communications (CWC), which turned a profit for fiscal 1999, warned that its spend on digital television will depress its profits next year.
The company reported today that it had seen a strong sales growth in all its divisions - consumer markets, business markets, corporate markets, and international and partner services. Revenue increased 15 per cent to pound sterling 2,621 million, while profit for the year end was pound sterling 140 million. This compares to a loss of pound sterling 49 million last year.
Underlying operating costs were driven down to 22 per cent of revenues, despite a 29 per cent increase in volumes, confirmed CWC chief executive, Greg Clarke.
"Our major investment programmes are on track, and are already delivering significant improvements in meeting customer demand for quality service and for high growth services such as data, Internet and telebusiness. Revenue growth in these areas is over 40 per cent, compared to nine per cent in ordinary switched telephony, with dial-up Internet traffic now accounting for nearly 20 per cent of our consumer volumes," he continued.
CWC on Wednesday began commercial trials of its digital cable TV service. It will go live in Manchester and north west England from 1 July, with other areas of the UK rapidly following.
The cable company estimates that 66 per cent of its customers will have digital cable TV by the end of the financial year.
CWC plans to spend an additional pound sterling 60 million to add more channels and interactive services, depending on the take-up of digital cable. The company forecasts that it will invest pound sterling 1.1 billion this year enhancing its national and local networks to make them compatible with Internet technology.
"Given the clear demand growth for non-voice services, we will continue to invest for long-term growth and to continually drive up standards of customer care and support," explained Clarke.
In the short term Clarke warned that digital television will reduce revenue growth in the consumer markets between 1999 and 2000 as customers switch over from analogue to digital.
"The success of digital television will improve the prospects for profitable growth in subsequent years," added Clarke. "These investments are essential in ensuring that Cable & Wireless Communications reaches its full potential and exploits the excellent market opportunity it faces."
The company's investment plans follow BSkyB's announcement that it is to give away digital set top boxes, set up a free Internet access service and cut BT standard telephone charges by up to 40 per cent.
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