The mobile phone giant is considering paying over £700 million ($1.32 billion) in cash for troubled C&WW, according to reports.
The move is seen as important for C&WW, which analysts said could benefit from a larger scale. It would also give Vodafone strong access to the fixed line market, as well as growth in cloud computing, they said, but could present challenges given C&WW’s recent profit warnings.
In 2010, Cable & Wireless Group demerged into two units: C&WW, which serves businesses with telecoms, hosting, cloud and data services, and Cable & Wireless, which serves consumers. The demerger has been problematic, with C&WW – the business unit – issuing three profit warnings and seeing its share price plummet by 75 percent.
Vodafone said in a statement that it “regularly reviews opportunities in the sector and confirms that it is in the very early stages of evaluating the merits of a potential offer” for C&WW. It added: “There is no certainty that an offer will be made nor as to the terms on which any offer might be made.”
News of the talks sent Vodafone’s share price rocketing almost 30 percent higher in early trading.
David Molony, principal analyst at Ovum, said the move made sense for Vodafone globally. “A merger would give Vodafone significant global network for fixed services to complement or even integrate with its mobile operations worldwide, and give it a significant position in global enterprise services.”
It would also help Vodafone grow in the “business fixed services market in Asia-Pacific” where European and US-owned telecoms service providers have a stronghold, he said.
But he warned that Vodafone’s customers may experience some challenges. Vodafone “has some major contracts with global [multinationals] that get their fixed services from other telcos like BT. Those customers who want more collaboration on fixed-mobile services will wonder where Vodafone’s ownership of CWW leaves them.”
Phil Codling, research director at TechMarketView, said he questioned the wisdom of Vodafone buying the whole of C&WW, given the latter’s problems.
“Naturally Vodafone is aiming to increase wallet share from its enterprise and public sector customers,” he said. “But buying an operation that still needs whipping into shape could be the hard way to go about it, especially when it covers services that would be outside Vodafone’s comms-centric comfort zone.”
“Besides, it’s notoriously hard to make money from the sorts of corporate ICT services that CWW provides – just ask BT Global Services.”