Cable and Wireless Ltd (Hansard, 13 February 1975)

§ Mr. Bean

Yes. Social Audit Ltd made allegations of incompetence on the part of the management of Cable and Wireless Ltd. These were addressed to the "private systems" part of the company's business, and especially to the loss made by a subsidiary in Hong Kong: Coltronics Ltd. These allegations have been the subject of a detailed examination by my Department.

As far as Coltronics is concerned, the facts are that a loss of some £2¼ million was sustained in 1973–74 by the company mainly as a result of its undertaking a contract which was beyond its ability to fulfil. The explanation tendered to me by the chairman shows that the undertaking was entered into by the then general manager of the subsidiary in disobedience of written instructions requiring him to obtain the prior approval of his board for a transaction of this magnitude. No approval was sought or given.

Social Audit's further main allegation was that Cable and Wireless Ltd's accounts for the year ending 31st March 1974 did not disclose the fact of these losses and so did not give a true and fair view of the company's affairs for the purposes of the Companies Acts. I am, however, advised that the company's accounts satisfy statutory requirements and conform to accounting conventions. Nevertheless full details of the Coltronics losses will be given in the 1974–75 202W accounts, and future accounts will give improved information about other private systems' business.

On Social Audit's more general observation that the company's private systems ventures are not profitable, I note that these ventures were started fairly recently as part of a policy of diversification within the telecommunications field which it will take time to develop successfully. It would be premature to conclude that the company's policy of extending its activities is misconceived, but it will be necessary for the company, and the Government, to keep them under close review. To enable this to be done arrangements have been made to improve the regular flow of information from the company to the Department.

It would, or course, be wrong to judge the performance of the company's management by reference solely to the result so far of its private system ventures, or of Coltronics in particular. In such a business some failures are unavoidable, and the test of the company's competence is its overall performance. The group's profits have risen from £5.6 million in 1971–72 to £14.7 million in 1973–74. I regard this as satisfactory.