HEADLINER: New CWC boss in the hot seat as digital TV stakes are raised - Greg Clarke thinks cable’s interactive services give it an edge, Claire Beale says

It has been a busy week for Greg Clarke - freshly installed as chief executive of Cable & Wireless Communications, and riding a profits warning, a tumbling share price, an all-out digital TV price war and the possible attentions of Bill Gates.

It has been a busy week for Greg Clarke - freshly installed as

chief executive of Cable & Wireless Communications, and riding a profits

warning, a tumbling share price, an all-out digital TV price war and the

possible attentions of Bill Gates.



But in the no-longer-quite-so-long-term game of digital television,

Clarke is standing firm.



Sky might have drawn its dagger with the promise of free digital boxes

and cheaper phone bills, but the former mobile phone salesman and

die-hard Leicester City supporter says simply: ’Cable is the

future.’



However, the City does not seem to share Clarke’s bullishness. When

BSkyB announced last week that third-quarter profits were down from

pounds 75 million to pounds 16 million, it scaled the top of the

Footsie, while CWC’s tandem announcement that current year profits will

be ’significantly below 1998-99 levels’ sent its shares into a tailspin,

falling 11 per cent.



Clarke became chief executive at the beginning of March, although the

41-year-old has been chief operating officer since 1997. But last week’s

explosion of activity in the cable market - here and abroad - looks set

to be the real challenge of his career so far. After all, the Murdoch

guns have taken aim.



But, according to Clarke, Sky’s decision to force the pace of change in

the digital TV arena, offering digital satellite set-top boxes for free

and setting a sell-by date for analogue satellite of 31 December 2002,

spells desperation.



’We have 100,000 more subscribers this year, Sky has 100,000 fewer. Its

customer base is shrinking, all it has left is to give its system away.

I’m relatively sanguine about what Sky does. We’re certainly not easily

intimidated by Sky, we’re bigger than they are.’



That depends, of course, on how you cut the cake. The waving of big

willies aside, latest figures show operating profits for CWC for the

year to the end of March were pounds 331 million, compared with Sky’s

pounds 153 million in the nine months to 31 March. And Clarke is right

to point out that Sky’s ’direct to home’ figures have fallen from 3.5

million in June 1998 to 3.4 million by the end of March.



What’s more, Clarke insists, Sky’s business is founded on a crumbling

premise. ’Sky is big and rough and tough and mean, but its paradigm is

obsolete, trapped in pay-TV which is characterised by more downmarket

customers interested in football and movies, rather than those sorts of

viewers likely to upgrade to the interactive future.’



In fact, Clarke believes that ’seeing TV as simply pay-TV is like

looking at transport and seeing only steam ships and not realising that

airplanes are coming along’.



Last week CWC announced that it had signed up a host of interactive and

e-commerce partners to launch its own interactive services later this

year. Emap, Scoot, Flextech, PA Sporting Life, LiveTV and the Manchester

Evening News will join Barclays, BA, ITN and Associated New Media -

which are already on board - to offer CWC customers high-speed,

real-time interactivity via their TV remote control.



Clarke believes cable has the edge in the race to develop an interactive

offer. Sky might have linked with BT to offer 40 per cent off all

standard BT calls, but it’s not a killer proposition, Clarke insists.

’The tie-up with BT is a bit misleading. Firstly, most BT customers

already have discounted calls through Friends and Family and so on.

Secondly, using BT phone lines to dial into interactive services is not

as convenient as real time access via cable.’



Neverthless, the jury is still out on whether CWC has truly forged its

diverse telephony and TV interests into a coherent whole with a coherent

strategy. Clarke’s background is in the mobile phone side of CWC and he

admits that TV is a new game for him, ’but my telecoms background is on

the deregulated side, so I’m used to the cut and thrust of the

commercial world.’



Just as well, because talks about a potential merger with the rival

cable operator, Telewest, are ongoing, despite Microsoft’s acquisition

of a 29.9 per cent stake in Telewest last week, Clarke says.



In fact, Clarke adds, ’Gates’ investment offers Telewest stability and

that’s an important factor in any business negotiations.’



As for rumours that Gates may next turn his attention to CWC, well,

Clarke’s not ruling it out. ’We’ve talked to Gates, but we’ve talked to

everybody.’ Whether Gates will be tempted, and despite Clarke’s

bullishness, one thing’s for sure, CWC will need deep pockets if it is

to compete with the mighty Murdoch in the digital market of

tomorrow.



THE CLARKE FILE

1976

Plessey Group, graduate trainee

1983

Dowty Group, product management rising to managing director for Europe

1992

Nortel, vice-president, cellular

1995

Cable & Wireless Communications, chief executive officer, mobile

1997

CWC, chief operating officer

1999

CWC, chief executive