C&W today wrote a cheque for £380m made payable to the Inland Revenue, to settle obligations arising from the sale of Mercury One2One to T-Mobil, the Deutsch Telekom sub.

This means that the hard-press UK telco can now set free the £1.5bn in escrow set aside to cover the potential tax liability arising from the sale. C&W always denied that it would have to shell out so much, but it was forced to freeze the money in January this year, in line with a contractual obligation to DT, following the downgrade of its credit-rating to junk status.

Shareholders were outraged at the time, with a US group filing a class action against the firm. Why? Because the £1.5bn escrow liability had never been made public, on the grounds that a descent by C&W into junk status was too fantastic to contemplate. The escrow fiasco did for Graham Wallace, C&W chief executive. He had survived a string of bad-to-awful news in 2002, but this was one cock-up too many

So will C&W now have enough money to wade safely through the dotcom datacentre dead-pool? Remember, question marks over the company's stability is what triggered the junk status re-rating in the first place. Furthermore, its milch cow, the Caribbean country ops, may soon start running dry.

Here is what Richard Lapthorne, chairman of Cable & Wireless, has to say: "Establishing clarity over the group's tax position was an essential element in our planning for the future financial shape of the group. With the settlement in place and consequent anticipated release of funds under escrow we now expect to have a firm financial base for securing the future of the company."

Hardly definitive, is it? ®

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