Communications giant Cable & Wireless have threatened to sue the Bermuda Government over plans to open up the Island's phone system to competition.

The firm wants three years' notice to prepare for competitors -- a legal right, according to its lawyers -- or damages, which could total millions of dollars.

The legal broadside is the opening shot in a battle by Cable & Wireless -- currently the sole overseas call provider in Bermuda -- to protect itself against rivals.

But yesterday a spokesman for Cable & Wireless was tight-lipped over the letter, which Telecommunications Minister John Barritt received on Friday.

The spokesman said: "I am aware of a letter which was sent to the Minister on Friday.

"But we must decline to comment on any correspondence between us and the Ministry of Information and Technology.'' But it is understood the document quotes the letter of the law -- which Cable & Wireless lawyers claim means that the current deregulation plans are against the Bermuda Constitution and the act which allows the firm to operate.

The Royal Gazette believes that Cable & Wireless want to hold Government to what they say is a legally watertight three-year grace period before competition can be introduced.

And they say the Island's Constitution forbids Government from insisting that it share its network with anyone -- as suggested by Government until TeleBermuda have their own set-up in place.

Mr. Barritt said last night that he had got a letter from Cable & Wireless, the implications of which were still being considered.

But he declined to discuss the specifics of the letter or any threat of legal action.

Mr. Barritt added: "We have ongoing discussions with Cable & Wireless and we have ongoing correspondence about what we want to do in the field of telecommunications.

"I will try to seek clarification from them as to what their position is.

Beyond that I don't wish to comment at this stage.'' But Mr. Barritt did confirm that Cable & Wireless was not going to get three years' warning before competition kicked in.

He said: "We did not think there was a need for this for two reasons -- firstly, because of our considered interpretation of what is and is not permissible within the terms of the statutory licence Cable & Wireless enjoys.

"And secondly, because of the company's position to date on competition generally, which is they welcome it, coupled with their participation in ongoing discussions on how to facilitate competition.'' Cable & Wireless is also believed to be furious over delays to its plan to bring down the price of calls to a total of 80 overseas destinations.

It had been planned to introduce the lower rates by the start of November.

One company insider claimed TeleBermuda had lodged an objection to the plan -- despite protestations that the new contender wanted lower prices for foreign calls.

TeleBermuda already has permission from the US State Department to land a $8 million cable from Bermuda and plans to set up a telecommunications satellite dish near Kindley Field Road are well advanced.

No-one at TeleBermuda's Toronto offices could be contacted for comment last night.