After months of wrangling, Cable & Wireless Worldwide has finally chosen a suitor. Well, we say ‘chosen’ – Vodafone was the last man standing. Rival bidder Tata Communications pulled out of the running last week. Vodafone will pay 38p per share for C&WW, valuing the business at a cool £1.044bn.
This is a tasty acquisition for Vodafone: C&WW’s fixed lined network will bolster Vodafone’s existing mobile operation nicely. And while £1bn may seem a lot to pay for a firm that has issued several profit warnings in recent months and is now onto its third chief executive since 2010, C&WW comes with a little earner thrown in. Its undersea network cables, of little use to Vodafone, are hot property. They were the principle reason that Tata entered the bidding and MT reckons the JLR owner may yet nab them at a decent price, perhaps as a ‘golden thank you’ for backing off C&WW...
What really pushes Vodafone’s buttons about C&WW is this: the fixed line network will give Vodafone a real crack at the wider enterprise market in the UK, making it a real challenger to BT. Vodafone now has a direct line into C&WW’s big UK clients, Tesco and the UK police service included. And its international business is none too shabby, with consumer and enterprise customers in around 30 markets, from Jersey to Panama.
And there's another reason why BT is threatened by this deal: Vodafone may try now its hand at becoming a big player in broadband too. It has bought into some formidable infrastructure as CW&W owns the biggest fibre optic network in the UK.
The deal will complicate the historically chummy relationship between the telecoms giants: Vodafone currently gives BT access to its wireless network while its customers get to jump on the ubiquitous BT Openzone for mobile surfing. The consolidation will also displease other players focussing on the enterprise space - expect howls of rage from the big cheeses over at Virgin Media Business this morning.
Make no mistake, this deal is ringing in the changes for the UK telecoms market. Vodafone will become the UK’s second-largest telecoms operator, with total revenues of £7bn. And with that kind of challenge to BT’s dominance, expect a raft of big deals over the coming months as the incumbent tries to shore up its position.