Monday, August 15, 2005

Cable & Wireless to Acquire Energis

Cable & Wireless confirmed plans to acquire Energis, the number-three fixed line operator in the UK, for £674 million. The deal will create a larger competitor to incumbent BT.

Cable & Wireless said the merger would result in OPEX and CAPEX synergies of £55 million in 2006/7 and £80 million in 2008. An estimated 700 jobs are expected to be lost in the restructuring.

Over 75% of Energis stakeholders have approved the deal. Regulatory approvals are still required.

"The acquisition of Energis is a further step in the development of Cable & Wireless in the UK and will accelerate the strategic transformation that we have undertaken in the last 15 months... The timing of this acquisition allows us to exploit the rapid growth in demand for IP-based services and the opportunities presented by the creation of a regulatory framework designed to facilitate infrastructure-based competition," said C&W CEO Francesco Caio.

The Scottish operator Thus had also been in the bidding for Energis. April 2005, Cable and Wireless will invest £190 million over the next three years to transform its UK core network and associated IT systems and processes. The company said it had become clear that significant benefits can be achieved by adopting an NGN architecture.

Key elements of the network transformation plan include:

  • the convergence of five separate service platforms onto a single integrated IP service platform;

  • Reduction of backbone nodes by 50 percent and rationalisation of metro-edge and metro-access nodes;

  • Installation of ten new softswitches to replace the existing seventy legacy voice switches (subject to the timing of traffic switching away from legacy products).

Cable and Wireless said the anticipated capital expenditure for its UK business (excluding Bulldog) had originally been expected to be approximately £160 million per annum over the next three years. The capital expenditure required for Cable & Wireless' NGN is anticipated to amount to £190 million over the next three years, with some £80 million being spent in 2005/06. A large proportion of the NGN expenditure will replace legacy expenditure that would otherwise have been required to maintain the efficiency of the current network, as a result over the three year period a net increase in capital expenditure of approximately £35 million is associated with NGN.

In September 2004, Cable & Wireless announced its intention to pursue the broadband market in the U.K. via local unbundling from BT. In a webcast presentation, Cable & Wireless said its initial plans include:

  • a target to unbundle up to 400 exchanges by the second half of 2005 which will give Cable & Wireless access to approximately 30% of sites in the UK

  • local loop unbundling capital investment is expected to be £40-50 million in the year to 31 March 2005. An additional £15 - 35 million will be required in the year to 31 March 2006, subject to the speed of subscriber growth
    investment will also include operational funding, which is expected to be approximately £30 million in the year to 31 March 2005 and at a similar level in the following year, subject to the speed of subscriber growth

  • annual revenue is expected to be approximately £250 million within 4 years.

See also