Vodafone snaps up Cable & Wireless

Vodafone looks to have succeeded in its ambition to buy up commercial network provider Cable & Wireless for a projected £1.04 billion ($1.76 billion), or about 40% of the estimated break up value of the company.


Assuming it is successful, Vodafone will gain; a national fibre-optic broadband network that is separate from BT or Virgin Media's), a massive portfolio of business customers and a global backbone infrastructure that reaches out to over 160 countries via its network of undersea cables. 


Suggestions are that the latter will probably be sold off so that Vodafone can concentrate on winning more enterprise customers at home, which is probably what they will do.  Though as a long term play, especially if they are interested in servicing large enterprise customers, I think that would be as strategically unwise as the BT forced sale of its mobile phone business...


C&W has a lot of customers but not as many as you might think, remember they have been in serious decline for over 10 years, I rather consider them to be the GEC/Marconi of the UK Telecoms Industry, the parallels are clear.


The real coup with this acquisition is not the customers or the international fibre, it is that UK national fibre infrastructure that they will take possession of as the deal completes.   Since 2010 when the use of smart phones and mobile devices saw the cellular data traffic move ahead of voice the one the largest cost-of-service-delivery items has been the amount of money that Vodafone has had to pay to BT for backhaul, and from here on in the Vodafone will benefit from the coming explosion in mobile (I don;t think mobile is even ouf the gate yet...)


Bottom line. Buying up C&W gives Vodafone its own infrastructure the reduction in backhaul costs will dramatically improve its revenue per user with all the potential advantages that this brings forth customers and investors.

CW to spin-out DEMON Internet

In acquiring THUS, CW got it's hands on a mighty NextGEN network, major MPLS infrastructure and associated high value customer-base, datacentres, a sticky product set, skilled engineering team etc. Essential elements in taking on BT & Verizon in the modern enterprise.

As with any house sale they also got some bits they don't want; where as most of us would have put those on eBay or dropped them off at the tip - reports are coming in that CW management have appointed Rothchild to help them clear out the cupboards. Which almost certainly means Broadband ISP Demon Internet is up for sale. Suggestions of a £75-£80m asking are being floated - a nice 'find' as the daytime presenters would say.

But if history is anything to go by I expect CW to find a lot more value than just the sale price. Those of you with half decent memory will remember Bulldog the CW subsidiary voted as 'Britains worst broadband provider'. After Pluthero and the Energisers got hold of it they sold off Bulldogs customers in a deal that ensured the acquiring company had to lease network from CW in order to serve them.

So, I expect more of the same. Double's all round!

CW Wins £207m National Grid Deal

While BT Global Services is finding it increasingly hard to win major corporate business, CW continue to show that if your focus is outbound, nimble and forward looking  there is still plenty of major projects still out there to be had.  

Hot on the heals of several recent major bid wins; CW today announced that they have been awarded a £207m,  15 year deal to run National Grids core telecommunications infrastructure.  As well as taking over operational management of the existing network CW will undertake design & build the National Grids new NGN based system for the control of electricity distribution.

It's not so long ago that CWs mould breaking (mangling, more like) CEO John Pluthero was being lambasted by all comers for radically downsizing and reorganising the UKs oldest telco, and sending it off on a more energetic modernising agenda - but he has been proved right.  Can BT follow suit? given the size of the problem and economic climate it will be more difficult than if they had done it 3-4 years ago when it really needed addressing.

I've visited the sales floors of both companies lately and whilst one has an air of nervous tension where quarterly job appraisals and voluntary redundancy are the main topic of water-cooler conversation, the other is vibrant, directed and full of people with a sense of purpose.   

And yes, I do know CW are still cutting staff.

Further BT Job Cuts 15,000, this year and more in 2010

Things continue to look gloomy for BT. This mornings announcement seems to have been a bigger surprise than had been expected.

BT suffered a 40% slump in pre-tax profit during the fourth quarter, forcing the firm to slash its dividend and announce plans to axe another 15,000 jobs. Fourth quarter pre-tax profit plunged to £429m from £714m a year ago and by 21% for the full year to £2.08bn.

The firm also reminded us that it had cut 15,000 posts in the last 12 months, 5,000 more than they said they would. This morning they joined Banks & Miners amongst the FTSE's largest fallers.

BT's stated aim is to cut the jobs through natural wastage, non replacement and voluntary redundancy and had no plans for compulsory lay-offs. With some suggestion that it'll be even more agency staff going.

Next Generation Communications platforms, Ethernet-based solutions, unified communications applications, and International Private Leased Circuit (IPLC) are key are to BTs ability to compete at home and abroad. BT cannot afford to fall behind the innovation curve

It seems to me that the right thing to do no matter how painful is to follow C&Ws lead - look at the skills they absolutely must have in their company and organise their people accordingly.

THUS it came to pass, that CW finally squared up to BT...

For a couple of years we've felt Cable & Wireless has been heading in 'sort of' the right direction; focusing on profitable customers, core product lines, win-able business, etc. along with some pretty radical structural and staffing changes.

However, patience seemed to be wearing a bit thin after a business update for City analysts back in March this year, comments were made along the lines of "... this is all good stuff; but on this business plan, we don;t think you can turn it around fast enough!" Here's the presentation, and what you won't see in there, is any reference to plans to grow the customer base in SMB, mid-market, business broadband, or increased infrastructure investment in the UK.

I guess the city feedback must have focused minds on shorter term revenue generation. For just 6 weeks later, in a stunning volte-face CW announced plans to acquire THUS Telecom; possibly the most successful mid-market ISP in the country, Bringing with it customers in each of those categories, as well as £450m in new revenues, some tasty data centres, a mass of IP services expertise and a country wide NextGen IP network.

The change in the market place is profound. BackChannels own research data shows that over the last two years the "re-Energised" C&W has turned the corner; increasingly good at serving the larger corporate market, with significant project wins and a marked decrease in customer churn, they are starting to give Verizon and Sprint a run for their money. In the UK market the merged company forms the only broad-spectrum competitor to BT.

The ability of C&Ws management to listen to its shareholders and then to turn the whole company on a dime, must be keeping a few people awake over at BT Centre.

Hmm... Wonder what they'll do with Demons broadband customers :0)

Wall Street Crash: Upcoming Telco Chaos

With the sudden and forced mergers of some of the worlds largest financial institutions, Telco and ISP major accounts teams will be preparing themselves for several months of travel, client meetings and late nights as they try to make sense of their position in the combined entities.

As overnight bags are stuffed and expense forms dusted off; here are some highlights of the fun to come.

Lloyds TSB has strong links to both C&W and BT.However, the major accounts team at C&W will be less than pleased to find that BT's position has been enhanced by virtue of BT being IP Services provider of choice at HBOS.
On the voice & legacy data side, things are likely to be more complicated, as with 3yrs still to run on Lloyds $1Bn outsource agreement with IBM, you can be sure that the IBM account team will be lobbying hard to get access to HBOS' branch network; currently supplied by "...strategic partner, BT"

That C&W takeover of THUS Telecom people are talking about

As the 30th June deadline looms and THUS Management remain coy about their plans, we take a look at how a combined CW/THUS entity would address the IP services market in the UK.
In this graph we see the customers of each player by turnover. The first thing that strikes you is that where CW is weaker than the market average (0 on the 'Y' axis), THUS is stronger and vice-versa. A combined entity would have a significant increase in market strength across the whole business IP services market.

CWs undeniable success in controlling costs, reducing unplanned churn, and bringing its customer base back to those it finds most profitable to serve; has led to a fall in its 'overall' market strength. It's position in the profitable £2m-£20m Turnover bracket is particularly effected, see below.
For CW being able to leverage THUS' position amongst this group could quickly address the concerns that some analysts recently expressed that CW has pulled back too far, too fast.

Given that unlike India, Big Vision in UK Telco sadly took a pasting in the 2001 crash, What is the Pluthero vision that is big enough to accommodate the acquisition of THUS?

THUS is a strong company, has a lot of potentially profitable customers, a UK wide NextGen powered network, and growing reputation for delivering value to customers & shareholders. CW, is a global brand, has a focus on increasing profit per customer, and access to a global network which makes them increasingly attractive to multinationals transitioning from legacy to all IP NextGen services.

My opinion is that both companies are growing in strength and left to it would thrive independently; together the potential is extraordinary.

New Corporate ISP League Table for 2008

Our New Corporate ISP League Table for 2008, can be picked up free from our here.

This is our January 2008 baseline. It shows you exactly where the UKs largest companies sourced their Internet Services on the 20th of January, 2008.

Your chance to catch up with BT's ongoing battle with Verizon for the top slot. The new league table has been widened to include the Internet services of the companies that make up the "FTSE All Shares Index", including BAe, Tesco and Tomkins.

The big news is, that as the Internet services market suffer it's heaviest downturn since the Tech' Crash, UK based service providers are once again struggling to compete with their US counterparts.

Register when you pick up the league tables and we will send you the figures as soon as we have them.

CW: PanAm or VirginAtlantic

This weeks analyst call was a toughie for CWs pilgrim and his team of Energisers. I just watched webcast; skip the bit about the Caribbean, it's all phone minutes.

Times Online reported one analyst saying: “Their plans are far too long term for this market. They need a quicker fix than this.” Mate! Go find something else to analyse! If you haven't worked out that there is no quick fix for telco, you're' in the wrong job.

It's not a CW specific problem; it is the same for all the Telco's: After 100yrs of selling voice minutes somebody invented the Internet, and that's having the same effect that airliners had on oceanliners. Massive increase in traffic, loads of competition, and a huge drop in revenues per head as customer choice expands.

In todays financial markets this is a recipe for volatility, and volatility = risk. SO, vicious circle; everyone's risk averse, so everyone's looking for the quick fix, and there isn;t one. The answer for the service providers is to sell core services, to valuable customers over their own networks, and, once they have those customers keep them. Not so simple as it sounds.

After years of volatility, crashing stock prices and stranded passengers; the airline industry introduced Revenue Management in the '80's. They filled their planes with the customers who provided the best economic return. First class, business, early bookers, flexi-tickets, block bookers, loyalty card holders, late bookers all became categories that were given quota's, and managed using sophisticated booking models. They didn't invent anything, or come up with fabulous new killer services! They just provided a core service and managed their customers more effectively.

Telco's must do what the airlines did, introduce Revenue Management and fill their networks with valuable customers. It was realising this fact about 4 years ago that caused us to give up the day job and start BackChannel.

So, CW, PanAm or Virgin Atlantic? Personally, left to it's own devices I think CW has the potential to become a truly global telecoms provider; they have the network, the services, the contacts and the mindset to do the job. Question is; Do they have the time?