Cable & Wireless shares fell 35.75 pence to 47.75 pence in London, after Moody's Investors Service downgraded C&W's long-term debt rating to junk status(no longer investment grade) Friday, triggering a clause in a 1999 agreement under which it promised to indemnify Deutsche Telekom against any potential tax liabilities arising from C&W's sale of its stake in a mobile-phone company to the German group.

Moody's struck the blow on Friday on the back of increasing fears about the scale of losses at C&W Global, the group's international telecoms division. Cable & Wireless said Monday that any potential liabilities could take "several years" to resolve.

C&W is the parent company of Cable & Wireless Jamaica(C&WJ), but spokesmen for the local company were unavailable for comment yesterday evening.

Cable & Wireless over the weekend was locked in crisis talks with bankers to secure a 1.5 billion-pound (sterling) loan guarantee following the downgrading of its debt. The downgrade by Moody's forced the telecoms group to allocate 1.5bn of its dwindling cash to a special fund to protect the interests of Deutsche Telekom.

Cable & Wireless had made an agreement with the German group that, should its credit rating fall below investment grade, it would set aside 1.5bn to cover potential tax liabilities arising in future years.

Given the difficult conditions in the telecommunications sector, Cable & Wireless needs access to all its cash, so the freezing of this substantial pool of funds could undermine its liquidity.

The company was expected to open talks with Deutsche Telekom yesterday, in an attempt to reduce the amount of the contingency or to gain time to reach agreement with the banks.

Unless the group can secure a guarantee, it must put the entire amount, which accounts for the bulk of its 2.2bn cash holdings, into an escrow account.

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