The joint venture between Cable and Wireless Communications (CWC) and Columbus Networks will result in the combination of 42,000 kilometres of cable connecting 42 countries in the Caribbean, the US and Central America.
Columbus will have 72.5 per cent stake in, and management control of, the joint venture, called CNL-CWC Networks, with CWC controlling the remaining 27.5 per cent share “with appropriate minority protections”, apparently reflecting the asset value of the respective companies.
CWC’s assets subject to the joint venture arrangement had a gross asset value of US$108.2 million, and recorded a loss before tax of US$0.9 million in the year to March 31, 2013, while Columbus’s assets were valued at US$304.6 million and recorded a profit before tax of US$29.3 million in the year to December 31, 2012.
“The alliance positions CWC strongly to meet the data capacity demands of its retail operations in the future, as well as optimizing its capital expenditure commitment to its undersea cable networks,” said a statement from CWC. “Demand for data capacity is growing rapidly in this region, driven by the increasing availability of, and consumer demand for, mobile data and fixed broadband services.”
Both companies have recently significantly strengthened their capital bases to pursue expansion opportunities.
The UK-based telecommunications company inked a deal in January to sell its business in Macau for US$750 million, following a December agreement to dispose of its businesses within its Monaco & Islands division for US$680 million, from which it received US$601 million last month, while it still awaits approval for the transfer of CWC’s business in the Seychelles.
Columbus has been aggressively pursuing regional expansion since in started operations in 2005, while more recently it raised capital through the sale of new shares, representing more than 20 per cent in the company, to billionaire, cable TV pioneer and telecommunications veteran Dr John Malone.
The net proceeds from the issue of new shares will help Columbus capitalise on near-term opportunities and provide additional flexibility to prudently manage its financial position, according to the company.
It will also be used to “accelerate the completion of its current capital plans, fund potential future acquisitions, enhance balance sheet liquidity and flexibility and for general corporate purposes”.
“We have budgeted close to US$200 million to further invest in 2013 with a huge focus on cloud-based services,” said Brendan Paddick, chairman and chief executive officer of Columbus. “Since its inception in 2005, Columbus has invested well over US$1.2 billion in capital expenditures… we remain committed to building the region’s most robust terrestrial network.”
Already this year, Columbus inked a deal to acquire Kelcom International Limited, an Eastern Caribbean telecommunications provider that operates in St Lucia, St Vincent & the Grenadines and Antigua under the name Karib Cable.
It also announced plans to build out broadband infrastructure across 100 per cent of homes in Barbados over the next three years.
The telecommunications company, which has already invested US$60 million there, expects that 30 per cent of the roll-out will be completed by year-end.
CWC has also put itself in a strong cash position to “be able to make value-enhancing investments, both organic and inorganic, in the targeted pan-America region”, according to its CEO, Tony Rice.
CNL-CWC Networks, which launched yesterday, will initially operate on an agency basis by providing joint sales and marketing services for each of CWC’s and Columbus’ international wholesale capacity services.
The alliance will be broadened within the next two years with Columbus and CWC contributing their sub-sea and related assets into the joint venture company, subject to obtaining regulatory approvals and certain other conditions being met.
Once the applicable approval requirements and conditions have been met, the joint venture will then assume ownership and management control of the international wholesale capacity operations of CWC and Columbus and all new investments in infrastructure will be made, and owned by it.
Until then, Columbus and CWC will retain complete ownership and control of their respective existing networks in the region.
In addition to the joint venture, CWC Wholesale Solutions, a subsidiary of CWC, has entered into a separate services agreement with Columbus, under which Columbus will provide CWC Wholesale Solutions certain operation and monitoring services.
“Wholesale customers will be able to take advantage of expanded network reach and service benefits by doing business with a company that can provide more bandwidth and broader reach, faster and better,” said Paul Scott, president of Columbus Networks. “With this joint venture, one plus one equals three.”
In the coming months, customers will begin to enjoy much greater route choice, improved reliability and higher performance as the joint venture rolls out innovative, new service offerings spanning clear channel services, IP transit, carrier Ethernet and carrier MPLS.
“We have been investing heavily in recent years to upgrade existing networks and build entirely new subsea links such as CBUS and East West Cable,” said Simeon Irvine, chief executive of CWC Wholesale Solutions. “By creating this joint venture, CWC Wholesale Solutions can expand its network reach and increase the diversity and security of supply for our customers and those of Columbus.”