Vodafone confirms talks with C&WW

Shares in Cable & Wireless Worldwide rose by almost 30 per cent after Vodafone confirmed that it was in early stage talks to buy the troubled telecoms group in a deal worth more than £700m.

The FTSE 100 mobile operator on Monday said it was “in the very early stages of evaluating the merits of a potential offer for C&WW”, but added that there was no certainty of an offer being made.

Vodafone said any bid for the company, which was split from Cable & Wireless Communication in 2012, would be in cash.

Confirmation of Vodafone’s approach pushed up shares in C&WW to 25¼p in early London trading. C&WW shares closed at 19¾p on Friday before news of the talks surfaced, valuing the telecoms group’s equity at £530m.

The takeover of C&WW may come as a relief to investors in the group, which has struggled since the Cable & Wireless Group demerger – a move that split the company into a corporate-facing business (C&WW), and a consumer-facing business called Cable & Wireless Communications.

Since the demerger, investors in C&WW have seen the group hit with three profit warnings, a £143m pension deficit, and a halving of the 2011-12 dividend.

C&WW has blamed its poor performance variously on slower than expected sales, competitive pressures and cutbacks in public-sector spending. Its languishing share price – down 75 per cent over the past 12 months – has made it a takeover target.

Apax Partners, the private equity firm, has also been rumoured to be interested in an approach for C&WW, and analysts have suggested that the telecoms group would be worth more if it were broken up and sold off piece by piece.

C&WW’s sluggish performance also claimed the job of Jim Marsh from the chief executive role, and of John Pluthero, who replaced Mr Marsh after shifting across from chairman.

Before he departed C&WW in November, Mr Pluthero was the architect behind a turnround of the business that has failed to lift the group’s share price.

He and Mr Marsh received millions of pounds of bonuses under a remuneration plan implemented at the old Cable and Wireless group – a move that met opposition from several large investors.

C&WW serves the telecoms needs of companies and public sector bodies, but analysts’ have criticised the group for lacking the scale to compete against BT and other large rivals including AT&T, Telefónica and Vodafone.

The group, which is scheduled to update the market with a trading statement on Thursday, owns a cable network, data centres, a UK broadband operation, and has branched out into cloud computing.

Last week, Vodafone reported a slip in European third-quarter revenues as the economic woes of Italy and Spain damped consumer spending.

However, analysts expect Vodafone to generate more than £11.5bn in cash flow for the 12 months to March 31.