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Vodafone weighs up bid for Cable & Wireless Worldwide
(Guardian (UK) Via Acquire Media NewsEdge) Vodafone has confirmed it is considering a cash offer for Cable & Wireless Worldwide, expected to be worth around pounds 700m.
The offer for Britain's second largest fixed-line telecoms group - which has suffered a series of profit warnings and two changes of chief executive in the last year - comes as Vodafone seeks to bolster its network to cope with the explosion of internet traffic on mobile phones.
Shares in CWW surged 45% to 29p during trading, valuing the company at nearly pounds 800m, before settling at 25.5p, a 30% premium to Friday's closing price. As recently as April 2010, CWW was worth pounds 2.5bn.
"Vodafone regularly reviews opportunities in the sector and confirms it is in the very early stages of evaluating the merits of a potential offer for CWW," the firm said in a statement. "Any offer, if made, will be in cash, but Vodafone reserves the right to change the specie of consideration." CWW said it noted Vodafone's announcement and was "in the very early stages of evaluating the merits of a potential offer".
Vodafone's shares nudged up 0.9% to 174p. With the growing popularity of smartphones and tablets, the volume of internet traffic over mobile phones has surged, forcing Vodafone and other mobile operators to rent miles of backhaul - the cables that connect mast networks to the internet - from BT Group and CWW.
"Vodafone already pays the likes of CWW for backhaul, so they can offset that saving against the purchase price," said Mark James, a telecoms analyst at the broker Liberum Capital.
Cable and Wireless owns 425,000km of cables around the world. Around a third of its pounds 2.2bn in revenues come from carrying internet and voice traffic for other telecoms groups, including mobile networks.
Vodafone's move marks a shift in strategy by the chief executive, Vittorio Colao, who has spent his three and a half years at the head of one of the world's largest mobile operators slimming it down by selling minority stakes in overseas operators.
Under Colao's predecessor, Arun Sarin, Vodafone invested billions in an Indian network, and under former chief executive Sir Christopher Gent became known as one of the most aggressive British acquirers of overseas assets. Its acquisition of Germany's Mannesmann in 2000 set a record as the largest corporate deal in history.
"These guys are incredibly gun-shy about mergers and acquisitions, and if this gets into a bidding war they are likely to back away," said Robin Bienenstock, an analyst at the broker Sanford Bernstein.
CWW could be acquired for between pounds 700m and pounds 900m, Bienenstock said, implying at the higher valuation a price per share of around 33p.
Vodafone has until 5pm on 12 March to make a firm offer or withdraw. Other groups that could take an interest in CWW's assets include the private equity firm Apax Partners, which is investing in telecoms and recently bought the Orange network in Switzerland.
Virgin Media could be attracted to CWW's corporate client base, having vowed to expand its business services division at a faster rate than the rest of the company over the coming years. Both Apax and Virgin declined to comment.
Captions:
Vodafone wants to bolster its network to cover growing mobile internet usage
(c) 2012 Guardian Newspapers Limited.
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