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This morning Vodafone has made a recommended cash offer for Cable & Wireless Worldwide (CWW). At £1.04bn in total, the 38p per share offer represents a 92% premium on the value of CWW before Vodafone officially declared its interest in February, and is 19% better than its closing price on Friday.
So after the distraction and delay caused by TCL’s non-bid (start with Tata walks away from CWW and work backwards), Vodafone finally gets its target. CWW ticks several boxes for the mobile giant. Firstly, its fibre network provides a quick and relatively cheap way of backhauling some of the multiplying volume of 3G (and eventually 4G) data traffic that threatens to clog up its mobile network. Secondly we have the less clear possibility for Vodafone to offset prior CWW tax losses against its own tax bill, although one has to wonder what damage such a move might do to the Vodafone brand in the UK.
Thirdly, and less murkily, Vodafone will get to expand its ability to deliver services to large enterprises and public sector clients, giving it a boost in areas such as data services and unified comms to complement its own strength in mobile. That said, it is buying a somewhat underperforming operation in CWW, so we suspect a lot more than “lift and shift” will be required before it begins to realise the full benefits of integration. The arrival of BYOT is set to loosen the grip of the mobile operators on large accounts, as we point out in our report BYOT: opportunities and threats from disruption. For Vodafone, it makes a lot of sense to expand into other service lines in order to penetrate deeper into those accounts.
