CABLES AND WIRELESS.

New Zealand Herald, Volume LXIX, Issue 21132, 15 March 1932, Page 9

CABLES AND WIRELESS.

STIR IN CITY CIRCLES. PRICE OP STOCK FALLS. CAUSTIC PRESS COMMENT. By Telegraph—Press Association—Copyright. LONDON, March 13. The position of Cables and Wireless, Ltd., promises to develop into a city scandal. According to one commentator preference stock lias fallen to £45, compared with last year's high level of £7B. The market value of the company's securities has declined from a par value of £52,000,000 to £14,000,000. 'Hie Economist declares that stockholders ought immediately to be told the true position. The capitalisation of the company was based on the prices to which the constituent companies soared in 1929. This fantastic over-capitalisation should be immediately rectified.

The appointment of an independent committee of inquiry into the position of Imperial and International Communications, .Limited, was announced in London at the end of July, 1931. This followed immediately after the publication of the annual report of the company, disclosing not only a. severe decline in its net profits, but also the fact that since May of the previous year its operations had been conducted at a loss.

Imperial and International Communications, Limited, is the company organised in 1928 to operate the cable and wireless services included in the merger scheme. It has a capital of £30,000,000, and has also issued £500,000 of 6 per cent, debentures to secure advances from the associated companies. The whole of its capital is held by the three cable companies, which have large outside investments, and the Marconi Wireless Telegraph Company, which has a manufacturing and royalty business. After paying debenture interest and preference dividends, those companies pay dividends to the holding company, Cables and Wireless, Limited, the creation of which was part of the merger scheme.

The position was reviewed at length by Mr. J. C. Denison-Pender, governor and managing-director of Cables and Wireless, Limited, at the annual meeting of that company last year. Referring to economies lie said that since the establishment of the Communications Company tlie staff had been reduced by nearly 1600 men, or more than 11 per cent. This had relieved the company to the extent of nearly £400,000 a year, while the reduction in cable maintenance ships would produce a further saving of nearly £IOO.OOO a vear.

" Tile main disability from which we are suffering is the failure of the Communications Company—the telegraphic side of the business —to earn the substantial profits which the combined undertakings were earning at the time the merger was consummated," said Mr. DenisonPender. " This disappointing result is due to two main causes —trade conditions and the establishment of direct wireless services between one country and another, which absorb traffic previously transmitted over the lines of these companies. There is, even under normal trade conditions, only a limited amount of telegraphic traffic, and if new services are established to an unlimited extent they cannot be operated on an economic basis without increasing present rates." The serious position of Imperial and International Communications, Limited, was mentioned bv Sir Robert Donald at the annual meeting of the Empire Press Union on March 1 last.

Sir Robert expressed the opinion th.it it was duo to over-capitalisation and the bad bargain with the Post Office, notably the latter's retention of part of the beam stations for the purpose of competition in telephony. It seemed that there must he a revision of the whole system if they were to achievo the ideal of cheap Empire communications. There was some suggestion of a revision going on, but it would have to be radical to produce any effect on the position. One cof trol was essential, and this - could be achieved only by the elimination of, Post Office competition.

It was announced on March 3 that Cables and Wireless, Limited, was not able to declare a dividend on its 5$ per cent, cumulative preference shares. Five days later it was reported that the new nine-storey building on the Thames Embankment, London, which was intended for the headquarters of Imperial and International Communications, Limited, was to be sold. The directors of the company announced that this decision was due to the adverse effect of the world crisis entailing a drastic readjustment of their arrangements.