Vodafone buys Cable & Wireless in 'major step up'

U.K. mobile giant's US$1.6 billion purchase a "major step up" for its global services, potentially creating major world telco with fixed and mobile services in global network, analyst says.
Written by Jamie Yap, Contributor

United Kingdom mobile phone giant, Vodafone, has agreed to fork out 1.04 billion pounds (US$1.68 billion) to purchase ailing telecommunications company Cable & Wireless Worldwide (CWW), also based in the United Kingom.

In a joint statement Monday, both companies said they were they had reached an agreement "on the terms of a recommended cash offer, pursuant to which Vodafone will acquire the entire issued and to be issued ordinary share capital of CWW". The offer values the entire issued ordinary share capital of CWW at approximately "1,044 million pounds", the statement added.

Vodafone said the acquisition would strengthen its enterprise business in the U.K. and internationally, as well as present "attractive network" and other cost saving opportunities for the company.

Vodafone Group CEO Vittorio Colao said: "We are pleased to reach agreement with the board of Cable & Wireless Worldwide who unanimously recommend our offer. The acquisition of Cable & Wireless Worldwide creates a leading integrated player in the enterprise segment of the U.K. communications market and brings attractive cost savings to our U.K. and international operations."

Ovum principal analyst, David Molony, noted in a commentary Tuesday: "[The merger] potentially introduces a major world telco into the global telecoms marketplace with the combination of fixed and mobile services in a global network." He further cautioned that any significant sale of operations would need to be carefully considered so it does not put this global strategy at risk.

Molony called the Vodafone's acquisition a "major step up" for the company's global services business, which will now have significant new enterprise customers worldwide as well as a substantial international network systems and relationships that CWW built up over several years.

At the same time, the acquisition "goes a long way" for CWW in securing its position as the second-biggest business service provider in the U.K., with potential funding for its aging datacenter network, the Ovum analyst said. It also gives CWW's global network a new mission statement, which is to take unified communications to global MNCs (multinational corporations) and large enterprises worldwide and to expand services in emerging markets, he added.

News of Vodafone's acquisition of CWW comes after India's Tata Communications withdrew its bid last Wednesday, leaving Vodafone the sole bidder. In March, Tata was reportedly seeking a US$2 billion loan to finance its bid for CWW.

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