Vodafone confirms interest in CWW bid

Published on Tuesday 14 February 2012 00:00

MOBILE phone giant Vodafone sent shares in Cable & Wireless Worldwide soaring yesterday as it broke cover that it was weighing up a takeover bid for its smaller fixed‑line telecoms rival.

Cable & Wireless Worldwide’s (CWW) shares closed up 44 per cent, or 8.8p, at 28.5p, giving it a market value of more than £750 million after Vodafone’s short stock market announcement.

It followed reports of a possible bid surfacing at the weekend. The company said: “Vodafone notes the recent press speculation regarding CWW. Vodafone regularly reviews opportunities in the sector and confirms that it is in the very early stages of evaluating the merits of a potential offer for CWW.

“There is no certainty that an offer will be made nor as to the terms on which any offer might be made.”

Vodafone said any offer, if it materialised, would be in cash although it reserved the right to alter this.

CWW is also said to be in the sights of private equity firm Apax, with City telecoms analysts believing a takeout price would be between £700m and £770m.

Vodafone had cash reserves of £7 billion at the end of last September, and CWW is seen as vulnerable after issuing a string of profit warnings since its demerger from Cable & Wireless Communications in March 2010.

CWW’s shares, which rose to 98.5p on the day it was spun off from its former parent, hit a low of 18p last November after a raft of asset writedowns, a freeze on dividends and a £590m half-year loss. The company’s lines are used by sizeable British businesses including Next, Tesco and United Utilities, and government departments. But it has been hit by the UK government’s spending freeze. CWW also has an international cable network connecting more than 150 countries.

Tim Daniels, an analyst at broker Olivetree Securities, said a takeover of CWW by Vodafone could make sense because the mobile phones major had no fixed‑line network in Britain. He said that contrasted to many other markets where Vodafone had integrated fixed‑line and wireless networks.

“Pressure on data networks from smartphones and tablets means that mobile companies can’t cope with all the traffic and have to move some of the overspill on to fixed‑line networks,” Daniels noted.

He added that Vodafone could also get some corporate customers “on the cheap” from taking over CWW. Vodafone’s balance sheet is strong after selling joint venture stakes in China, France, Japan and Poland. Under the City’s Takeover Code, the group has until 12 March to make a firm offer or walk away.

Analysts said the announcement was interestingly timed as Gavin Darby, CWW’s new chief executive and an ex‑Vodafone man, was due to outline a new strategy for the bombed‑out telecoms group at a trading update this Thursday.

Darby became the group’s third chief executive in a year last November, taking over from John Pluthero.

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