At the end of March the company's bad debt provision stood at $836.6 million, up from $670.9 million a year earlier.

On Tuesday, C&W's president, Gary Barrow told shareholders that the toll limit now being gradually introduced - starting with selected segments across the network - was designed to protect both the firm and its customers.

"Some of our customers have been credit-challenged," said Barrow, a clear euphemism for the fact that scores of land-line customers have been raking up thousands of dollars in charges which they have been either unable or unwilling to settle.

This has been a factor behind the reduction in the number of land-line customers at C&W over the past year -- an estimated 50,000 - though Barrow assured shareholders at the annual general meeting at the Jamaica Pegasus Hotel in Kingston, that the exodus had not only stabilised, but was now being reversed.

"The fact is that we did lose some customers but we are now in a position where we have reversed that trend and are actually moving in a positive direction," he said.

The surrender of land lines has been partially attributed to the 100 per cent increase in fixed rate charges since November 2002 as part of a rebalancing of telephone rates which saw a reduction in the cost of making overseas calls.

Barrow stressed on Tuesday that market competition was also a factor -- given the introduction of two cellular services in the market over the past two years.

"Typically with the introduction of competition there is the expectation of change in the dynamics in revenue stream and costs," he said. "It is not an unusual phenomenon. So what we had was some turning of the fixed line customers, something we recognise. We revisited a lot of our policies."

That change in revenue dynamics worked decisively against Cable and Wireless during the six-month period April 1, 2003 to September 30, when gross operating revenue declined by nearly $1.5 billion -- from $13.14 billion during the similar period last year to $11.65 billion.

The fall-off in income translated directly to the company's bottom line, where net profit at $1.41 billion for the six month period last year was slashed this year to $881.7 million.

But Barrow's argument was that the sequential quarterly sales were indicative of a stabilisation in the revenue flow - with first quarter income of $5.84 billion compared with $5.81 billion during the second quarter. Moreover, he argued, much of the fall-off in profit during the six months came in the second quarter -- a period in which there was significant retrenchment and marketing costs. During the July 1 to September 30 quarter, profit stood at $345 million, compared with $500 million the previous quarter, and $1 billion the similar period a year earlier.

"To a very great extent it is associated with an unusual or one-off costs associated with reorganisation," said Barrrow. "A lot of these costs are associated with redundancies. Some of the costs result in setting up of our new GSM network and costs to protect the long term interest of the company."

In its six-month financial statement, C&W said that combined, these costs amounted to $600 million.

But Barrow gave C&W shareholders hope for the possibility of a billion dollar revenue windfall that could arise out of a court ruling on the company's tax liability.

The Supreme Court case relates to the revised capital allowance rates which the company said it negotiated with the tax authorities. If approved, the result would be "a one-off adjustment relating to taxation previously accrued in March 31, 2000".

The company apparently sought judicial review because the government apparently disagrees with how the rates should be applied to that period and has therefore challenged the rebate.

If the court rules against C&W - an outturn which the company says is unlikely - its revenue would be slashed by $134 million.

"We have been awaiting a ruling since last year," said Andrew Cherry, C&W senior vice president of finance.

The company has made no provision for this potential loss.

"These charges have not been provided for as the directors consider it unlikely, given the circumstances, that these charges will crystallise," explained the annual report.

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