Cable and Wireless has had troubled times of late. Two years ago, in an attempt to address and solve its difficulties, it split consumer and business telecoms functions into Cable & Wireless Communications and Cable and Wireless Worldwide (CWW) respectively.
When CIO met CWW’s director of IT operations Richard Wilson in August last year, he had already been through an extensive round of streamlining; he had introduced more efficient IT processes and his ‘team-desking’ has cut office costs.
Even so the company had found it hard to make its mark against huge rivals like BT and as a result CWW looked like a prime target for acquisition.
Sure enough, early this year a race began between Indian telco Tata Communications and mobile phone behemoth Vodafone.
By the end of April Vodafone had become the sole remaining bidder, putting in a bid of 38p for each share. This offer has already been endorsed by the CWW board and some key shareholders and is being put to remaining shareholders for approval.
One key shareholder, Orbis, holds 19 per cent of CWW’s shares and remains a fly in the ointment. Orbis is holding out against Vodafone’s terms, thinking the valuation of just over £1bn too low.
As Vodafone needs a 75 per cent shareholder agreement to go ahead, Orbis’ continued reluctance would put the deal in the hands of a small number of shareholders.
If the deal does go ahead, exactly what will Vodafone have bought and how will it complement its own lines?
Last year CWW revenue was split equally between voice and legacy and IP and data traffic, and in spite of CWW’s recent push in hosting and apps, such products still represent just 12 per cent of revenue.
So Vodafone is not buying CWW’s products, but its infrastructure.
In acquiring CWW, Vodafone gains access to over 200km of UK fibre infrastructure. This essential fibre capacity will help it reduce costs, increasing control and allowing network rationalisation.