C&W Worldwide says ta ta to the independent life: gets tucked under Vodafone's wing

Cable & Wireless Worldwide (CWW), the UK-based enterprise and infrastructure piece of the former Cable & Wireless, has recently been the subject of a biddng war between Indian IT giant, Tata, and Vodafone. This morning it was announced that Vodafone had won with a bid of £1.04 billion, giving long-suffering CWW shareholders 38p per share, a handy premium over the Friday closing price of 32p and a significant improvement on the mid-20s price Tata was rumoured to be offering.

Observers and deal participants alike agree that this - surely the final hurrah for the UK operation - is synergistic and all the good things that acquisitions should be. Vodafone gets UK fixed infrastructure (good for backhaul), extensive undersea cable, some solid government contracts and generally beefs up its ability to become a global fixed/mobile enterprise provider - a strategy it has been steadily pursuing for some time.

Vodafone also wins the tax relief that comes with CWW's historic losses (a valuable asset for a company that seems to get into regular tax trouble). 

AS for CWW, its life and times reads like a Dickensian orphan story with so many implausible twists and turns that even the great Victorian master would have hesitated to bake them into a novel.

Are you sitting comfortably dear reader? Then we'll begin.

Fast track back to 1866 (when Dickens was still at it) and the first successful transatlantic telegraph cable saw the establishment of what was to become C&W. The company went on to wire up the British Empire for undersea (mostly) telegraphy and in the 1920s it was also charged with administering the then up and coming wireless telegraphy for the empire, developed of course by Marconi  (see our Special Report on Marconi and the Titanic). 

Not for the last time, the imperial company was being directed by the UK government of the day... some would say misdirected.

In the immediate post-war period C&W was nationalised complete with its extensive telephony services in places like the Caribbean and Far East. The UK bits went into the Post Office (the UK PTT) and C&W continued to administer the overseas assets. Things stayed that way until the early 1980s when it was privatised again and set up to compete with what was by then called BT (also about to be privatised) in the home market.

Then the Dickens plot really speeds up (as they do). Imperial legacy C&W was clearly an anomaly in what had became the fast-changing global telecoms business.

Too old and established to be a thrusting upstart, too sub-scale and unfocused to be stolid incumbent, C&W spent the next 30 years flipping and flopping from one strategy to another, each one just a tad more late or misdirected than the one before.

The usual problem was that by the time the next big thing had been identified, intercepted and invested in, the market had lurched on leaving C&W holding another white elephant and looking for a buyer, a new strategy and (often) a new CEO.

For instance, in the early 1980s it was decided that it would be allowed to build a fibre network (down the railway lines was the way it was headlined at the time) and would use BT's access network to compete for the residential phone business while at the same time tackling the enterprise market for voice and data.

Sounds good, but in the end it didn't work out, in part because the Government then put its weight behind the UK cable businesses, allowing the emerging cablecos to also 'do voice'. So C&W got the hint and bought a few of those -  that didn't work out either and they were sold as a block.  Mobile was tried, turned bad and disposed of too.

At the same time C&W was flipping the other way to buy more overseas telecoms interests, then flopping back and buying up UK rivals such as alternative telco Energis. Nothing seemed to work and in 2009 a de-merger was announced.

Confusingly what came to be called C&W International (all the overseas colonial bits) was to be called C&W Communications while the UK-based global services and UK infrastructure arm was to become C&W Worldwide. 

As it has turned out, C&W Worldwide wasn't large or stable enough to exist on its own in a consolidating  market and its share price collapsed following the 2010 demerger. The UK government sector, in particular, was squeezed by spending cuts and that lead to the heavy losses reported last year.

Time for a new strategy - enter Tata and then finally Vodafone.

According to  Vittorio Colao, Vodafone Group chief executive, the acquisition "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 expects to win a reduction in its total headcount by rationalising locations and staff where there is overlap. CWW has around 20,500 kilometres of UK fibre which makes a nice fit with Vodafone's base stations.

In addition, Vodafone 'may' be looking to sell off the 260,000 miles of undersea cables CWW ironically still owns and which is where, dear reader, our back story started.  That would bring in £500 million (about half the total outlay) but would no doubt be structured in such a way that Vodafone could keep those valuable tax credits.