Defying the lack of confidence in the telecommunications sector, Cable & Wireless is prepared to spend up to £1.7 billion buying up to 15 per cent of its shares and offer remaining investors a special 11.5p a share dividend.

The funds to do this would come from its £4.7 billion cash pile.

Cable & Wireless, which employs about 150 people at its internet solutions centre on the Windmill Hill Business park in West Swindon, has been under pressure to use the cash reserves gained after the sale of its Australian business Optus, completed in September.

Chief executive Graham Wallace said the buyback and dividend left the company with plenty of room to move, including through acquisitions: "The group remains in an extremely strong financial position, allowing us considerable strategic flexibility," he said.

"We think it's a sensible allocation of our capital and we expect to maintain an efficient and conservative balance sheet."

The move came as Cable & Wireless released half-year figures confirming downbeat forecasts issued in September.

Group revenues fell to £3.31 billion from £4.42 billion a year earlier, while pre-tax profits before one-off items slipped to £83 million from the £537 million achieved last time.

Including one-off costs linked to the sale of Optus and the acquisition of Digital Ireland, Cable & Wireless recorded a pre-tax loss of £291 million, compared with £4.83 billion profit last year.

As expected, revenues in Global, a division providing services to businesses, fell five per cent to £1.84 billion despite seeing strong demand from larger corporate customers.

The company has already responded to the economic downturn by reducing its workforce at Global to around 12,000.

Revenues at Regional, the overseas-based retail telecoms business, rose 11 per cent to £717 million during the period.