C&W, whose key Hong Kong business Cable and Wireless HKT last week reported a near 30 percent drop in net half-year profits before exceptionals, said profits before tax and charges dropped by 39 percent to 539 million pounds ($875.7 million).

However, more than 3.0 billion pounds in one-off gains lifted profit after exceptionals to 3.46 billion for the six months to September 30, 208 percent higher than a year earlier, due to disposals.

"In the short term, the difficult economic and market conditions in Hong Kong, coupled with our major capital programmes and revenue investments, are expected to reduce significantly full-year underlying earnings compared with the last financial year," the group stated. Ahead of an analysts meeting at 0930 GMT, the shares shed 1.61 percent after the results, down 12 pence to 673P by 0813 GMT. Analysts polled by Reuters had predicted pre-exceptional profits of 499-524 million pounds.

"The headline pre-tax number is above the range and that looks good for the shares," said one telecommunications analyst.

"But the focus at the analysts' meeting will be the global operations division and growth going forward, and IP (Internet Protocol) services."The group raised its half year dividend by 10 percent to 4.5P per share in a mark of confidence in future growth after a well-flagged year of transformation.

C&W realised profits of 4.4 billion pounds from a string of disposals - including the sale of its 50 percent stake in British mobile phone group One2One to Deutsche Telekom - as the company recasts itself as a global corporate Internet and data services company.

The group says the disposals have simplified its corporate structure and helped reduce gearing to seven percent. A review of C&W's asset base has also resulted in a write down of 1.4 billion pounds as it accelerates its investment in new markets.

C&W also released half year results from its British cable business, Cable and Wireless Communications Plc, whose UK cable assets are being sold to peer NTL Inc.

C&W said CWC's proforma, pre-tax profits in the half year fell to 55 million pounds from 73 million and warned that a hefty network upgrade would constrain business revenue growth over the next six months.