Eyeing fully integrated telecom company status, Vodafone mulls acquiring Cable & Wireless Worldwide

By Telecom Lead Team: Wireless service provider Vodafone is
mulling acquiring the second-largest fixed-line telecom network operator Cable
& Wireless Worldwide (C&WW) in the U.K.

The proposed acquisition will assist Vodafone to become a
full integrated telecom company with focus on mobile, fixed line and long
distance calls. C&WW specializes in providing communication networks and
services to large corporates, governments, carrier customers and resellers. Its
services include managed voice, data and IP-based services and applications
across the UK, Asia Pacific, India, Middle East & Africa, Continental
Europe and North America.

Vodafone is mulling the acquisition after its fixed revenue
grew 3.9 percent in Q3 2011-12, down a little compared to the previous quarter,
with growth slowing in mobile markets such as Germany and Italy. Fixed line
business of Vodafone Italy grew at 4.9 percent during Q3.

In Spain, fixed line telecom growth remains strong, driven
by customer additions.

In Germany, Vodafone is approaching 100,000 customers,
on 1,700 sites which represent more or less 30 percent coverage. The first
focus of Vodafone deployment in Germany was to capture fixed like type of
revenue as a substitute to DSL either in places where there was no DSL or low
quality DSL.

Vodafone is financially in a strong position to bid other
telecom firms. It generated 1.5 billion pounds of free cash flow in the
quarter, bringing the year to date free cash flow to 4.1 billion pounds. In Q3
free cash flow was higher year on year due to the phasing of tax payments. Net
debt of 25.5 billion pounds at the quarter end is stated after Polkomtel
disposable proceeds of 0.8 billion pounds, 1.0 billion pounds spend on
spectrum, principally Italy, and 0.8 billion pounds spend on share buybacks.

C&WW, which has issued a string of profit warnings since
its March 2010 demerger from Cable & Wireless Communications and saw its
stock price lose 70 per cent of its value over the last 12 months, was worth around
700 million pounds on 10 January but its stock soared by 31 per cent to 25
pence in early trading today following the news of Vodafone’s potential
interest.

The Sunday Times newspaper reported that private equity
firm Apax Partners is also evaluating bidding for C&WW.

It owns the UK’s biggest fiber network dedicated to business
users of telecommunications and has an international cable network spanning
approximately 425,000km in length. It reaches across the Atlantic Ocean,
through Europe and on to India and throughout Asia. In conjunction with
satellite, C&WW connects every continent and more than 150 countries.

But since the demerger, it has found it difficult to compete
against its larger rivals British Telecom, AT&T, Telefónica and Vodafone.

Vodafone already pays C&WW for backhaul services, so any
offer can bring int saving on the purchase price, say analysts.

“Vodafone regularly reviews opportunities in the sector
and confirms that it is in the very early stages of evaluating the merits of a
potential offer for CWW. Any offer, if made, will be in cash, but Vodafone
reserves the right to change the specie of consideration,” said Vodafone.

Other potential buyers could be Sir Richard Branson’s Virgin
Media.

[email protected]

 

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