Cable & Wireless plc (C&W), the London-based international telecommunications company, reported an 11.4 percent increase in first-half pre-tax profit even as earnings dropped at its Mercury Communications unit.

C&W pre-tax profit rose from 509 million to 567 million ($918.5 million) for the six months ended September 30, 1994, reported Bloomberg financial news service. Analysts had estimated the telecommunications giant would close the half-year similar to 1993.

Operating profit rose from 507 million to 592 million or 16.8 percent.

Hongkong Telecommunications', 57.5 percent-owned by C&W, profit rose 15 percent.

C&W's first-half dividend rose 8.8 percent to 2.83p from 2.60p while earnings per share increased to 11.90 pence from 11.10p, or 7.2 percent. Sales rose 8.8 percent to 2.53 million from 2.33 million.

Shares were down four pence to 395 pence after rising as much as five pence to 404 pence in trading early yesterday, following the earnings report and a surprise change in Mercury leadership.

"The company is adamant that it's not interested in breaking the group up,'' which could stimulate share prices, said Mr. Laurence Heyworth, an analyst at Robert Fleming Securities. "I wouldn't recommend shares to our investors,'' he added.

Operating profit from Mercury, 80 percent-owned by C&W, declined to 96 million from 99 million, after depreciation charges of 114 million, because of pricing pressure, and the high cost of linking up with BT's network.

Analysts said Mercury will take a 100 million hit for the year because of price competition and payments to BT for access deficit charges -- the money users pay BT as compensation for maintaining the network. C&W has consistently fought BT and the Office of Telecommunications, the UK regulatory agency, on the way these charges are calculated.

"Mercury looks pretty unimpressive,'' Heyworth continued, and he predicted Mercury will be down more in the second half.

Mercury competes primarily with British Telecommunications plc, the UK's dominant provider of phone service.

"Although Mercury continues to gain market share -- and is doing so at an increasing rate -- it has been hit by the effects of regulatory changes,'' C&W said. Mercury sales increased 12 percent to 797 million.

The new Mercury chief executive, Mr. Duncan Lewis, now director of business networks and US operations, will replace Mr. Mike Harris who will become chief executive at C&W federal development.

Meanwhile, Mercury One-2-One, a mobile phone venture with US West Inc., "is performing ahead of expectations and our acquisition of BT's marine subsidiary reinforces significantly our position in the growing market for installation and repair of optical fibre submarine cables,'' the company added.