million in damages for losing its exclusive right to provide overseas telephone service to Bermuda.

Finance Minister Grant Gibbons yesterday told the House of Assembly that C&W had begun legal action against Government and revealed that the compensation sought amounted to almost one-fifth of Government's $500 million Budget.

Government and C&W officials have refused to comment on the amount the company was seeking in damages, but Dr. Gibbons' statement confirmed reports that the amount was $100 million -- although he stopped short of giving the actual figure.

And Dr. Gibbons repeated Technology Minister Sen. E.T. (Bob) Richards' claims earlier this week that company bosses were using the threat of job cuts as an emotive weapon in a desperate bid to regain full market share.

Speaking to a packed House of Assembly yesterday, Mr. Gibbons said: "I can reveal that Cable and Wireless is seeking, through arbitration, compensation for the loss of their exclusivity of service in Bermuda.

"The amount they are seeking is large -- almost one fifth of this Government's annual budget. I would like to inform this Honourable House that the Government will vigorously oppose this action.'' Any legal action will centre on how much notice C&W received that it would be losing its exclusive licence. C&W says that under its incorporating act, it should have received three years' notice.

Cable and Wireless bosses are now in redundancy talks with unions, claiming they have had to downsize their operation after losing a slice of the overseas market to rivals TeleBermuda International Ltd.

Dr. Gibbons said: "In June of 1995, Government publicly articulated its policy to introduce competition in the overseas telephone market.

"Public hearings involving potential applicants for licences had started a year before that. It was then universally recognised that overseas telephone rates in Bermuda were unacceptably high and the only way for Bermuda's residents to benefit from lower rates was to introduce competition.

"Cable and Wireless had ample opportunity to downsize staff in an orderly fashion, an action that would make it easier for displaced staff to find alternate employment in the expanding telecommunications marketplace and elsewhere.

"The timing and magnitude of their recently announced downsizing move suggests that their intention is to callously use staff as quasi-political pawns rather than showing genuine sensitivity for their needs.'' Dr. Gibbons also dismissed claims that opening up the market to competition would result in job losses for Bermudians.