SHARES of Cable & Wireless Communications have done well since its formation a little more than a year ago, having risen by some 70%, as the market anticipated the cost savings and the benefits of additional products.
The cost-cutting is coming through according to plan. In the year to March, expenses as a proportion of revenue declined from 30% to 24% and are set to fall to around 20% this year.
The uptake of cable in the UK has disappointed the industry, though it should not have come as a big surprise given the quality of conventional television and strong competition from satellite.
The industry has consolidated considerably since the early days, and Graham Wallace, CWC's chief executive, sees two to three players ultimately, which suggests further acquisitions by market leader CWC itself.
Scale is coming to the rescue of the industry and CWC has seen customer numbers rise 26% over the past year. Customer satisfaction also seems to be improving, though churn - the proportion of customers who quit - remains high at 21.8% for telephony and 28.5% for television. However, CWC maintains that if those disconnected because they haven't paid and because they have moved house are excluded, the underlying rate drops to nearer 10%.
The proportion of customers taking both telephony and television has increased from 47% to 54%.
The product offer has been simplified through an easier to understand tariff structure and greater freedom in the choice of television channels.
Marketing is benefiting from widening exposure in the High Street and from number portability, which enables customers to retain their phone number when moving to a new supplier.
So progress is being made and the key advantage of cable - easy interactivity - has just begun to be exploited.
Shares of cable companies in the US have performed strongly on expectations of the industry providing access to the Internet without the need for a personal computer.
This prospect could provide the impetus for cable to realise its full potential, which has
eluded it for so long.
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