warning yesterday, citing tumbling prices in the United States and Japan, in a statement that angered the market and wiped 20 percent off its share price.

Only minutes after assuring investors it did not have any bad news up its sleeve, C&W said its profits would fall short of forecasts this year and said it would cut 4,000 jobs over the next 12 months -- the latest dose of gloom from a telecom giant.

C&W, which operates the third-largest global network for Internet services and is one of two companies offering long distance phone service in Bermuda, said it expected to earn 14-16 pence a share in the year ending this month.

Analysts had been forecasting 17 pence on average.

Its shares dropped 20 percent to close at a two-and-a- half-year low of 545 pence.

Analysts were surprised by the speed at which C&W's markets had slumped.

"It's concerning that the trading environment seems to have deteriorated so fast in terms of revenue and margins, said Karen Robertson, telecoms fund manager for Standard Life Investments, one of C&W's largest shareholders.

C&W said its core Global division, created this financial year following the sale of its Hong Kong business, would miss its forecast for 15 percent revenue growth, achieving only 12 percent.

It also said it would take exceptional charges of 950 million ($1.38 billion) relating to reorganisation costs and outdated technology.

C&W blamed the profits warning on falling prices for companies that carry telecoms traffic for other operators.

"Certain sectors of Cable & Wireless Global's market are experiencing severe price reductions,'' chief executive Graham Wallace said in a statement.

In the United States, prices for Internet connectivity have reduced by up to 50 percent a year, while in Japan, international voice prices have declined by 40 percent in the last ten months.

It said its profit margins were under pressure in all markets and that Global's gross margins in the second half of the current year would be around 39 percent.

The 4,000 job cuts will come as C&W reduces to five its 47 network operation centres over the next two years and outsources back office processes.

The cuts coincided with the loss of 7,000 jobs at Motorola Inc, the second largest mobile phone maker, also announced yesterday.

Asked before the trading statement if C&W planned to give an update on the impact of the US economic slowdown on the group, spokesman Peter Eustace told Reuters: "There are no plans to make a pre-announcement.

"The whole thing is extraordinary,'' said one dealer. "I guess they felt they had to say something but it has been very badly handled.''