UK-based fibre operator Cable & Wireless Worldwide (CWW) has a new suitor in Indian fixed-line telco Tata Communications, which has hired Standard Chartered to consider a bid.
Tata said on 1 March that it was at a “very preliminary stage” in…
UK-based fibre operator Cable & Wireless Worldwide (CWW) has a new suitor in Indian fixed-line telco Tata Communications, which has hired Standard Chartered to consider a bid.
Tata said on 1 March that it was at a “very preliminary stage” in evaluating a possible cash offer for the group. In accordance with takeover rules, it must declare firm intentions by 29 March.
The Indian operator now joins British mobile giant Vodafone, which expressed its interest to bid for CWW on 13 February and is being advised by UBS. Vodafone must announce a decision on whether it will make an offer by 12 March.
CWW’s shares, which have already been inflated following confirmation of Vodafone’s interest, have soared even further since Tata’s announcement, as investors hope that a bidding war could now be on the horizon. CWW’s shares jumped 25% at one point in early trade on 1 March. As TelecomFinance was going to press, its stock was trading at around 32p, which is nearly 150% above the 52 week low of 13p set on 22 November 2011.
Before the first expression of interest from Vodafone, CWW’s shares had been weighed down by a series of profit warnings and reports of managerial disputes. Indeed, CWW has been the subject of routine takeover speculation ever since it demerged from Cable & Wireless in 2009.
But hopes that a bidding war could break out between the two very different potential buyers could be premature. Dismissing the possibility, one banker pointed to how “Tata can not replicate the significant tax benefits that Vodafone would have from any transaction”, adding that if the Indian group was looking to grow internationally, then perhaps telcos Reliance Globalcom or Pacnet would provide better options.
However, Ovum analyst David Molony said that although there was clear potential for Vodafone to benefit from the transaction, through picking up enterprise customers and cable assets, Tata’s operations would be more easily integrated with those of CWW.
“A Tata/CWW tie-up would be an easier fit, because their networks are a lot more similar. But a Vodafone/CWW combination could be more interesting because there is the potential for fixed/mobile unified communications, which other global operators have struggled with,” said Molony.
He added: “I think it will be more a decision around how well they fit together – how strategically easy or difficult it will be to bash the two pieces together and get them up and running as a single unit. These different partners have different things to offer.”
Both companies will likely have little trouble raising the capital to make the £1bn-plus bid that reports suggest CWW’s shareholders are calling for. Vodafone has recently been subject to multibillion dollar dividends from the Verizon Wireless joint venture it shares with US telco Verizon Communications, and Standard Bank is reportedly already shopping for Tata’s financing.
Meanwhile, rumours that other parties could also look to bid for CWW have also started doing the rounds. As well as the usual private equity suspects, industry spectators have highlighted potential synergies with UK cableco Virgin Media, and even fixed-line operator China Telecom Europe.
