Analysts agree that enterprises will benefit from the planned acquisition of Cable & Wireless Worldwide (CWW) by mobile network operator Vodafone Global Enterprise. Corporate customers could be among the winners if the operator’s M2M service delivery costs are cut as a result.
The Board-agreed deal (which is still subject to shareholder approval) values CWW at just over UK£1 billion (US$1.7 billion) and the offer of 38 pence per share represents a premium of over 90% compared to February levels. Years of changeable investment strategy and indifferent results at Cable & Wireless have led to steady share price decline, then separation from its UK-focused sibling Cable & Wireless Communications.
Now, however, CWW could be joining a strong and profitable parent with a growing enterprise offering, one that includes a leading position in the machine-to-machine (M2M) communications sector. (See also: M2M service providers: How they stack up in 2012 — new report, and Vodafone stays top of Machina Research’s M2M Leaderboard, AT&T misses second place through US technology choices.)
The benefits for Vodafone are clear: the operator would obtain a comprehensive fixed network in the UK and beyond, key to its objectives of becoming a ‘total telecommunications’ player and ramping up its enterprise business.
“If the £1 billion cash offer is successful, it will trigger a competitive shake-up that’s long been needed. Not least, it creates a communications service provider that’s increasingly capable of serving multinationals’ diverse ICT needs, but is also serious about small enterprises,” says Camille Mendler (pictured), principal analyst at Informa Telecoms & Media.
“Globally, Vodafone’s move also underscores the fact that consumer revenue growth is tapped out in many telecoms markets: The new frontier of monetisable opportunity is the enterprise,” she adds.
Mendler points out that Vodafone, which currently serves 560 multinational customers and 34 million small enterprises, gains a powerful foothold in the FTSE 100 listing and the UK government market via CWW if the deal goes through as expected. The MNO can also slash its UK and international wholesale service delivery costs with CWW’s fibre connectivity and global IP backbone.
However, Mendler says the biggest benefit is that this is ‘fresh meat’ for Vodafone’s enterprise mobility services, a business sector which, according to Informa surveys, is a leading ICT (information & communications technology) investment priority for large enterprises. Multinational enterprises want to mobilise their employees, but also their physical assets. And she is certain that Vodafone’s global M2M business – which manages more than 7 million M2M SIMs – will also gain from the C&WW deal.
Nor is Informa alone in this view, as M2M Now has found.
Adrian Drozd, a research manager and principal analyst, ICT Europe, at global consultancy Frost & Sullivan, says, “From a global perspective, the deal is particularly significant for Vodafone Global Enterprise (VGE). Adding CWW’s network presence (127 points of presence across 35 countries) and service offerings (integrated communication and data hosting) will allow VGE to compete on a more even footing with some of the leading fixed-line players such as Orange and Telefonica.”
“Although Vodafone’s mobile coverage and capabilities have allowed the company to develop a leading role in the managed communication arena, the addition of CWW’s fixed coverage and capabilities will doubtless open up new opportunities with clients seeking to fulfil their total telecoms and unified communications needs from a single provider. Furthermore, by leveraging CWW’s established network presence, Vodafone will be able reduce its reliance on third-party network providers, potentially delivering significant cost benefit,” adds Drozd.
Asked by M2M Now what impact the planned deal would have on the M2M sector, Drozd says, “Vodafone is already a leading player in M2M in Europe. In the M2M market, revenue opportunities extend far further than cellular connectivity. Vodafone already has a strong M2M platform and extensive partnerships with both technology providers and systems integrators – the CWW acquisition adds fixed connectivity coverage (including backhaul).
“The addition of CWW’s capabilities will allow Vodafone to catch up with what other leading telecoms operators are doing around smart opportunities – adding a comprehensive fixed network footprint offers will provide a strong foundation for further development in this regard. The benefits may be most strongly felt in the UK, but CWW’s global presence will also deliver wider geographic opportunities,” Drozd concludes.
