Vodafone pays over £1bn for C&W Worldwide
Giant cellco gains UK business base and fiber network, reducing fees to British Telecom
Published: 23 April, 2012
Vodafone has finalized its awaited acquisition of Cable & Wireless Worldwide, gaining itself a UK fixed line network plus a business base. The company will pay £1.04bn ($1.7bn) in cash, or 38 pence a share, far higher than the £700mm originally predicted by analysts when Vodafone showed its hand earlier this year.
The stock has gained 88% since Vodafone first expressed interest in C&W Worldwide (CWW) in mid-February but the path for the UK cellco giant was cleared recently when rival bidder Tata of India pulled out. Previously, CWW had also been linked with Pacnet and Telecom Italia, among others.
Vodafone CEO Vittorio Colao said in a statement: "The acquisition of Cable & Wireless Worldwide creates a leading integrated player in the enterprise segment of the UK communications market and brings attractive cost savings to our UK and international operations." Expanding its enterprise base is an important aspect of Vodafone's growth strategy as it sees its European consumer heartlands saturating.
However, Vodafone had recently been pulling away from an earlier strategy of acquiring major fixed line businesses to complement the mobile-only model which once gained it such plaudits. Looking to be a more general broadband and quad play operator, it snapped up wireline units in various countries, but signalled a change of heart in 2010 when it called off talks with Germany's Kabel Deutschland Holding (KD8).
Some analysts see the CWW transaction as pragmatic rather than strategic. It has the UK's largest business fiber network, which could be valuable for relieving data pressure on the wireless infrastructure and for backhaul, saving it fees to use BT fiber. Nick Brown of Espirito Santo Investment Bank told Bloomberg: "It's an opportunistic deal and in keeping with their need to grow the UK business. For them, it's about cost savings." Vodafone has so far secured the support of the CWW board and the holders of 18.6% of the shares but is awaiting approval from the largest stockholder, Orbis Holdings.
Cable & Wireless was founded in 1886 and in 2010 was split into two companies - the traditional business offering telecoms services in the Caribbean and many other island territories, and CWW. The latter has been going through extensive reorganization after a string of three profit warnings within a year, facing the decline of its international submarine cable business, but it still brings Vodafone expanded landline and backbone capacity as well as a UK data center and managed networks arm. A former Vodafone executive, Gavin Darby, took over as C&W Worldwide CEO in November, the firm's third chief in a year.