Another possible cable partner for Mercury is Nynex

Another possible cable partner for Mercury is Nynex.Mr Howell-Davies, said: “It is a great disappointment that we haven’t created a better relationship over the last eight years. Bell Canada, which owns the 20 per cent of Mercury not held by C&W, has a 46 per cent holding in Bell CableMedia. One possibility is for Mercury to take a majority stake in Bell CableMedia in return for C&W allowing Bell Canada to raise its stake in Mercury. Mercury, Britain’s second-biggest telephone operator, might step up competition with BT by forging cross-shareholder links with cable operators in advance of the widely-expected consolidation in the industry, writes Michael Harrison. Peter Howell-Davies, Mercury’s new chief executive, said yesterday that securing closer links with cable operators was one of the most pressing strategic issues to be addressed in the next 12 months.
Initially, Mercury is likely to focus on improving its commercial relationships with the cable industry, where it handles 80 per cent of all trunk and international call volumes. But this could be followed by equity stakes.Mercury already has a 12.8 per cent stake in Bell CableMedia, which provides television and telephony services to 2 million franchised homes in London, Southampton, Leeds and north Yorkshire.

C&W had long relations with China going back 25 years and no indications had emerged from Peking that the Chinese wanted to take a direct stake in Hongkong Telecom.Losses at One2One, which is jointly owned with US West, rose from pounds 61m to pounds 66m.. An alliance is also being sought in Spain.
Mr Smith also said the North American market was a “high priority”, indicating that C&W could seek to strengthen its presence through tie-ups with one or more of the Baby Bell regional phone companies.Dick Brown, who takes over as C&W’s new chief executive next month on a package potentially worth pounds 1.3m plus pounds 2.3m in share options, spent 27 years in the US telecoms industry, mostly with Baby Bell companies.Mr Smith said the negotiations with BT had ended “more in sorrow than anger” but now that they were over there was no prospect of a giant merger of that sort again.Instead C&W would focus on building up its federation of world-wide alliances by renewing acquaintances with all the “bridesmaids out there”.He was speaking as C&W unveiled a 10 per cent rise in pre-tax profits before exceptional items to pounds 1.26bn despite higher losses in the mobile telephone business Mercury One2One, operating losses of pounds 29m elsewhere in Europe and an initial pounds 20m loss on its German joint venture Vebacom.Hongkong Telecom, in which C&W has a 58 per cent stake, was again the main profit earner, increasing its contribution by 12 per cent to pounds 909m.Meanwhile its UK subsidiary Mercury, 80 per cent-owned by C&W, increased operating profits by 14 per cent to pounds 231m despite an improvement of only 3 per cent in turnover to pounds 1.7bn.Acting chief executive Rod Olsen said that Mercury was no longer the “invalid” of the C&W group that it had been 18 months ago.Mr Smith poured scorn on suggestions that a consortium bid was being planned for Hongkong Telecom, saying that he had received no approaches and that anyone wanting to take over the business would have to spend pounds 25bn buying C&W and then acquiring the minority shareholding.He also sought to dampen speculation that China would want to muscle in on Hongkong Telecom ahead of its takeover of the colony next year. Brian Smith, chairman, confirmed that C&W and its German partner Veba were in talks about taking a strategic stake in Italy’s national telecoms operator, Stet, as part of plans to increase its presence in Europe. Altogether, GDP rose 0.4 per cent, the same as the preliminary estimate.. Cable & Wireless yesterday laid out plans for a big expansion in its network of global telecoms alliances, including the possibility of a US partnership, following the recent failure of its pounds 35bn merger talks with BT. Investment grew 0.7 per cent in the first quarter, its second quarterly increase after falling during the middle of last year.A drop in exports due to weak demand in Europe and an increase in imports meant that trade acted as a drag on growth. Although some economists thought this meant the stock overhang would be run down slowly, others believed that there could be a more serious cutback.”Stocks will remain a drag on output for the remainder of this year,” said Adam Cole of James Capel.So far, consumer spending is the only area showing sustained strength.

The balance has been negative for nine months running and remains at its lowest since December 1993.The balance reporting higher output edged up during the month, as did expectations for future output. But excess stocks built up, too.A positive balance of 25 per cent of firms said stock levels were more than adequate, the highest recorded in a monthly survey for nearly five years.Export orders remained weak. The balance reporting higher rather than lower orders was minus seven per cent.This weakness in the survey evidence was confirmed by yesterday’s official figures for GDP in the first quarter.It showed manufacturing technically in recession, with output falling for the second successive quarter.In addition stockbuilding continued at an abnormally high level in the first quarter. Ian Shepherdson, an analyst at City bank HSBC Markets said: “Our consumer boomlet will not be enough by itself to turn manufacturing around.” Industry’s hopes rest on a recovery in its export markets in continental Europe.According to the latest survey of industrial trends from the Confederation of British Industry, the balance of firms reporting lower rather than higher orders earlier this month was minus 17 per cent. The volume of sales at food stores was only 1.2 per cent higher in February-April compared with a year earlier. “Non-store retailing” – mainly mail order – was down 2.2 per cent.”Consumer demand is now growing at an above-trend rate,” concluded Kevin Darlington, an economist at brokers Hoare Govett.The contrast with the fortunes of manufacturing could scarcely be wider. This was their fastest annual growth since February 1995.The main categories of retail sales grew at a far faster rate over the 12 months Excluding food stores, sales were up 3.7 per cent.

Year-on- year growth was even higher for textiles and clothing and household goods, at 4.7 per cent and 5.7 per cent respectively.Two categories of spending held the headline figure back. This compares with growth of 0.5 per cent a quarter in the second half of last year.Official statisticians said that spending on services was growing faster than spending on goods. They also revised up their estimate of how fast the output of the service industries grew in the first three months of 1996, to 0.6 per cent.Separate figures showed that the volume of retail sales rose 0.7 per cent in the three months to April, and were 2.2 per cent higher than the same three months a year earlier. “The fear is that the next manager may not be so loyal to the fixed income markets,” commented Matthew Greenwald of Oppenheimer Capital.Mr Vinik’s regulatory headaches began with reports last year that he was being probed for upbeat remarks he made about Micron Technologies in a media interview at a time when Magellan was in the midst of selling Micron. More recently there have been unconfirmed reports that he and other senior Fidelity managers may have been “front-running”, namely buying shares on their personal accounts in firms that were about to attract Fidelity investments. Mr Vinik has denied all the allegations.But in spite of these well-publicised difficulties, his announcement caught most on Wall Street off guard.

“It was entirely his decision,” a Fidelity spokesman said of his departure “There was no pressure from the company to resign”.. The gulf between the fortunes of consumers and industry is growing wider, according to new evidence yesterday. Growth in consumer spending in the first quarter of this year was at its highest, but manufacturing orders remained at their weakest, since the end of 1993. The mixed figures meant there was no risk of higher inflation in the near future, analysts said. “The day of pressure for an increase in base rates has been postponed further,” said Simon Briscoe, an economist at City bank Nikko Europe.
In its latest inflation report, the Bank of England prepared the ground to push for a rise in rates later this year if the economy gathers steam. Although the Treasury will shortly publish a lower forecast for growth this year than the Chancellor’s 3 per cent target, most economists fully expect a pick-up as the year progresses.Total consumer spending grew 0.8 per cent in the first quarter to a level 2.5 per cent higher than a year earlier. Bonds account for about $10bn of Magellan’s holdings, analysts said yesterday.