Cable & Wireless Worldwide, the telecoms provider that was spun off from Cable & Wireless Communications, has issued a warning that full-year earnings would be negatively impacted by austerity cuts sendings its shares sliding 16 pct.

The group which has found a niche in the public sector market, currently has contracts with the NHS, Ministry of Justice and NHS all of which will be directly affected by spending cuts announced in the Government's June 'Emergency Budget'.

"Nevertheless we are supportive of the overall approach being adopted by the government and believe that our unique product set provides us with significant opportunity in this area over the medium term." said the group's statement.

"Overall, we expect somewhat slower growth in EBITDA for the full year, with out forecast now around the lower end of expectations." they said, EDITDA consensus had been £452 to £484m.

C&W Worldwide said it would also look into cost reducing including cut the number of non-payroll staff and staff bonuses, whilst operating costs are said to have been reduced by the fact there will be less bidding.

"According to CWW, BT held 85% market share in this space over the course of the last year, while CWW cornered only 12%." said Morten Singleton, analyst at stockbrokers, Collins Stewart, "We have heard from management that the government iskeen to reduce the dependence on one key supplier, and CWW should bea net beneficiary of such a move."

"There is no point trying to push a positive story when the near term harbours unquantified pain." added Morten though, downgrading the telecoms group to Hold.