There has been renewed speculation that enterprise telco Cable & Wireless Worldwide (CWW) will be an acquisition target for a mobile operator.
In addition to usual suspects AT&T and Verizon of the US, UK mobile operators Vodafone and O2 have also now -…
There has been renewed speculation that enterprise telco Cable & Wireless Worldwide (CWW) will be an acquisition target for a mobile operator.
In addition to usual suspects AT&T and Verizon of the US, UK mobile operators Vodafone and O2 have also now – speculatively – entered the frame.
Reports pointing to how an acquisition of CWW would enable operators such as Vodafone or O2 to offset some of the pressures caused by fast-growing consumer internet traffic, by transferring it to CWW’s fixed network, helped to inflate this share price to around 49.63p on 6 May.
CWW is also present in the fashionable cloud market, offering it as part of its Enterprise business.
Speaking at the TelecomFinance 2011 Conference in January, Matt Key, managing director of the enterprise division at CWW, said that cloud computing could represent “the beginning of the death of the classic telco”. Indeed, operators able to carve out a space for themselves in the cloud will be able to compete with tech-focused IT services companies and systems integrators, as well as ever more present rivals such Apple and Google, he said.
Before the renewed acquisition rumours, CWW’s stock had declined to almost 50% of their 92p year-high, closing at 46.83p on 5 May, on the back of a profit warning and reports of managerial disputes.
CWW said it would not comment on market speculation.
Takeover rumours since 2009 demerger
CWW, along with regional operator Cable & Wireless Communications, emerged from the demerger of Cable & Wireless in 2009. Rothschild and Gleacher Shacklock acted as joint sponsors, while Allen & Overy was legal adviser.
Gleacher Shacklock refused to comment. Rothschild and Allen & Overy did not reply to questions before the press deadline.
Financial advisers on the demerger were Barclays Capital, BNP Paribas, JP Morgan, Lloyds TSB and RBS.
CWW provides voice, data and IP-based services to companies and governments around the world. It also claims to have the UK’s biggest fibre network dedicated to business customers.
Takeover rumours have surrounded Cable & Wireless since before its demerger, and since it, speculation has dogged CWW.
AT&T and Verizon have been touted as the most likely potential buyers, but bankers have cautioned that the US telcos are prone to “window shopping”.
New speculative subject Vodafone would make a sensiblesuitor because of its current strategy of focusing on markets where it already has a presence.
It has sold – or is in the process of selling out – minority stakes in China Mobile, SFR and Polkomtel. In March the company announced that it would be paying the Indian conglomerate Essar E5bn to buy its 33% stake in their Indian JV, Vodafone Essar.
Vodafone Italia is also demonstrating its interest in fixed-line by participating in the auction for the Italian fibre network owner Metroweb.
Persistent reports in 2010 also suggested that Vodafone was considering an attempt to acquire the UK fixed-line operator TalkTalk.
AT&T declined to comment. Verizon and Vodafone did not reply to questions before the press deadline. A spokesman for Spanish incumbent Telefonica, which owns O2, said: “There are no plans whatsoever for Telefonica to acquire Cable & Wireless.”
Profit warning and managerial disputes
In March, CWW released a statement saying it expected EBITDA for 2011/12 to be at the same level for 2010/11.
This was interpreted as a profit warning by many, sending the share price down around 14%.
CWW CFO Tim Weller resigned in March, reportedly after threatening to quit after the board ignored his advice to lower its profit guidance.
The company said that he would be leaving his job on 1 July in order to “pursue new challenges”.
CWW will release its 2010/11 annual report later in May.
Its EBITDA for the year 2009/10 was £377m, up from £250m for 2008/9. Its profit for 2009/10 was £1m, up from a loss of £32m in 2008/9.
