Liberty Global to acquire CWC for $5.3 billion

Liberty Global has agreed to acquire Cable & Wireless Communications (CWC) for approximately $5.3 billion in a cash-and-share deal.

The deal values CWC at 86.82 pence a share, representing a premium of approximately 50% the day before Liberty Global’s interest in acquiring CWC became public. CWC’s shareholders will receive a special dividend of 3 pence per share.

Liberty Global presently has nearly 27 million subscribers and is generating around $18 billion of annual revenues, with operations mainly in Europe and growing ambitions in Latin America and the Caribbean.

According to Liberty Global, both companies will combine their high growth assets in Latin America and the Caribbean, improving their ability to provide products and services to customers.

"And by adding their strength and 1.5 million customers in Puerto Rico and Chile, backed by our strengths in adjoining markets and in leading submarine and terrestrial fibre networks, together we expect to grow our consumer and B2B offers even faster," added Liberty Global.

Phil Bentley, CEO of CWC, said that the disposal of Monaco, the creation of its regional hub in Miami and its recent acquisition of Columbus has accelerated its competitive positioning while generating significant value for shareholders.

"Liberty Global offers scale and world class capabilities and will be an outstanding custodian of our business, both for our people and our customers. The years ahead should bring new opportunities for further success, faster growth and enhanced customer benefits, built on the strong foundation we have created," said Bentley.

Source:  Capacity Magazine

JRC ANALYSIS:  In 2014, Liberty Global lost out to CWC in a competitive bid for Caribbean network operator, Columbus Networks, a deal which consolidated the assets of the two dominant telecom service providers in the Caribbean. CWC paid US$1.85 billion for the Columbus Networks assets and assumed just over US$1 billion of its debt. The fact that Liberty Global is now paying double that price for the consolidated businesses reflects the company's desire to establish a strong base in the Caribbean and Latin America for its over-the-top services.

This transaction also marks the end of the "Cable & Wireless" brand name which has been in existence for over 150 years but, more importantly, it highlights the growing trend of content providers vertically integrating into the infrastructure layers of the telecom industry, and adding to the perception that the days of the telecom carriers are numbered.

There may be some regulatory hurdles that Liberty Global will have to overcome, notably in the US where CWC's network interconnects at several points, but it should be possible to demonstrate that the combination of pan-regional infrastructure with global sourcing of content will result in better, though not necessarily cheaper, services for end users in the Caribbean and certain parts of Latin America.