Vodafone buys Cable & Wireless for enterprise boost

Vodafone has signed a deal to buy communications provider Cable & Wireless Worldwide for just over £1bn.

Vodafone has announced plans to buy Cable & Wireless Worldwide for £1.04bn. Image credit: Jon Yeomans

The companies unveiled the agreement on Monday, after Tata Communications abandoned its bid last week. Valued at £1.04bn, the deal is intended to strengthen Vodafone's enterprise and international services, and will let the mobile operator offload increasing mobile traffic onto the Cable & Wireless Worldwide (CWW) fibre network in the UK.

"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," Vodafone chief Vittorio Colao said in a statement.

CWW chairman John Barton said the 38p-per-share cash offer represented good value for the company's shareholders, as it was above trading levels.

"Furthermore, the combination with Vodafone represents an exciting opportunity for Cable & Wireless Worldwide's customers, employees, partners and other stakeholders to benefit from the many advantages that will come from being part of the Vodafone Group," Barton said in the statement.

CWW profile

CWW offers data and hosting services, as well as legacy voice services. The acquisition will, by revenue, help Vodafone leapfrog rivals O2 and Everything Everywhere to become the second-largest telco in the UK after BT.

According to a presentation (PDF) published by Vodafone on Monday, CWW pulls in £2.3bn in revenue each year globally, with 38 percent of that coming from UK businesses. (CWW is separate from Cable & Wireless Communications, also a UK-based multinational telco, as the two demerged in 2010.)

The deal represents an "opportunity for enterprise customers to purchase advanced total communications services from a single provider", Vodafone said in its presentation.

According to Vodafone, the UK fibre network also "fits well" with the siting of the mobile operator's base stations and will allow Vodafone to "considerably" lower its backhaul costs — backhaul being the industry term for the core-network connectivity that underlies mobile data services.

CWW's fibre network is 20,500km long in the UK, and 425,000km long internationally, with 127 points of presence in 35 countries. The company owns a number of submarine cables around the world, along with many datacentres.

The two companies said that, pending regulatory approval, they expect the deal to close in the third quarter of the year.