Tue, Apr 24, 2012 - Page 10 News List

Vodafone to buy Cable & Wireless for US$1.7 billion

Bloomberg

Vodafone Group PLC agreed to acquire Cable & Wireless Worldwide PLC for £1.04 billion (US$1.7 billion) in cash, adding a UK fixed-line network to its mobile-phone system and gaining business customers.

The world’s largest wireless operator will pay £0.38 a share in an offer recommended by Cable & Wireless directors, the companies said in a statement yesterday.

Vodafone became the sole bidder for London-based Cable & Wireless after Tata Communications Ltd last week failed to agree on a price and decided against making an offer.

Newbury, England-based Vodafone is pursuing a European fixed-line acquisition for the first time since 2010, when it ended talks to buy Germany’s Kabel Deutschland Holding AG.

“It’s an opportunistic deal and in keeping with their need to grow the UK business,” said Nick Brown, an analyst at Espirito Santo Investment Bank in London. “For them, it’s about cost savings.”

Cable & Wireless, tracing its roots to 1866 when the first submarine cable across the Atlantic Ocean was laid, has holdings in more than 60 global cable systems. It also owns the largest UK fiber system for businesses, which Vodafone may use to relieve the strain of surging data traffic on its own mobile- phone network.

“The acquisition of Cable & Wireless Worldwide creates a leading integrated player in the enterprise segment of the UK communications market and brings attractive cost savings to our UK and international operations,” Vodafone CEO Vittorio Colao said in the statement.

Vodafone said Cable & Wireless investors representing 18.6 percent of the shares have already agreed to the purchase. The largest shareholder, Orbis Holdings Ltd, has not yet made a commitment.

By gaining its own fiber network, Vodafone will avoid paying fees to access those of rivals — including BT Group PLC — to whom it pays £200 million a year, according to Sanford C. Bernstein analysts.

Vodafone will also gain British customers, including Tesco PLC.

Gavin Darby, a former Vodafone executive who replaced John Pluthero as Cable & Wireless’s CEO in November, said on Feb. 16 that he would be prepared to consider “significant, strategic decisions” as part of plans to restructure the business.

Vodafone yesterday said it would cut headcount at the company.

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