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C&W CEO quits after profit warning

Despite attempts to increase competition in U.K. telecommunications, one of BT's main rivals still struggles.

Cable & Wireless is facing an uncertain future after the resignation of its chief executive, a profit warning and a plunge in its share price.

Francesco Caio will step down at the end of March as part of a restructuring that will split the company into U.K. and international divisions. This has been seen by industry watchers as a prelude to a takeover.

C&W shocked analysts on Tuesday when it said its profits for the next year would be much lower than previously expected. Tough competition in its core U.K. market was partly blamed.

Shares in C&W dropped by 15 percent following the news. They later rose slightly amid speculation that a takeover could be imminent. Earlier this week, it was reported that Iceland's richest man, Thor Bjorgolfsson, was building a stake in the company.

C&W, which bought Energis last year, sells fixed-line and mobile telecommunications services to business customers and consumers worldwide. It has been a regular critic of BT, claiming in the past that regulators have not done enough to help smaller rivals compete on a level playing field.

Communications regulator Ofcom has recently forced through some significant changes, including making it cheaper and easier for other telecommunications companies to unbundle BT's exchanges and install their own equipment. C&W owns Bulldog, one of the few companies to have unbundled many exchanges to date.

However, some analysts believe that C&W's long-term future is threatened by the move away from traditional circuit-switched infrastructure in favor of next-generation Internet Protocol (IP) networking technologies. BT is spending up to $53.1 billion (10 billion pounds) to build its own 21st-century network, which will be based heavily on IP. C&W said last year it would spend $336 million on its own IP network, which will cover a much smaller area than BT's.

Graeme Wearden of ZDNet UK reported from London.