ALL eyes remain on the telecom sector this week with Cable and Wireless's full year figures out today. In March the company warned that profits would fall short of analysts' expectations, citing downward pricing pressures in the US and Japan.

While BT and Vodafone go cap in hand to shareholders to help reduce excess debt racked up through the bidding of third generation mobile licences, Cable & Wireless has the opposite problem and is sitting on a cash mountain of about £7bn, built up mainly through the sale of its stake in Hong Kong Telecom.

On Monday, Cable & Wireless announced the purchase of US Internet firm Digital Island for $340m, in line with its overall strategy of transforming itself into a Global Internet Services company.

The deal hardly makes a dent in the £7bn warchest and some would argue the company has made the small purchase as proof to shareholders that it intends to use the cash for strategic purchases rather than return the cash to shareholders by way of a special dividend.

The company has recently come under increasing pressure from shareholders keen to get their hands on the cash in order to help fund BT and Vodafone's recent cash calls. A situation Cable & Wireless is understandably keen to avoid.

James Lindsley

Investment Manager

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