Tata move could spark £1bn battle for C&W Worldwide

A £1BN takeover battle for Cable & Wireless Worldwide could emerge after India’s Tata Group declared an interest in the struggling firm.

If an offer is made it would put tea-to-technology Tata head to head against mobile phone giant Vodafone.

Troubled C&W Worldwide has fixed telephone lines that can be used to relieve pressure on mobile networks.

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The company, which employs over 250 staff at a data centre in Leeds, provides high-speed telecoms services to the police and companies such as Tesco and Next.

It also has an international cable network connecting more than 150 countries, as well as five offices and 150 customers in India, which analysts said could be of particular interest to Tata Communications.

A successful bid by Tata would be the biggest British acquisition by an Indian firm since sister company Tata Motors bought Jaguar Land Rover for £12bn in 2008.

Tata bought steelmaker Corus for £13.1bn in 2007.

The Indian company said that its plans for an all-cash bid are “at a very preliminary stage” and said it will decide on whether to make an offer or not by March 29.

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Last month Vodafone said it was in the early stages of looking at a bid for C&W Worldwide.

Vodafone has until March 12 to declare whether it intends to make an offer, although it could be granted an extension at the behest of C&W Worldwide if it thinks an approach has merit.

C&W Worldwide has performed poorly since it split from the Caribbean-focused Cable & Wireless Communications in March 2010.

The company has issued a string of profit warnings and is now on its third chief executive.

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The group has been hit by the squeeze on Government spending and the weak economy, leading it to report heavy losses for the six months to September 30 and warn of no dividend payments in a bid to build up its balance sheet.

As well as tough trading conditions, the group’s chief executive Gavin Darby said last month that the business telecoms firm is over-complex and blighted by under-investment.

C&W Worldwide issued a statement yesterday noting Tata’s interest. A spokesman said the company had not received an approach. Tata, whose main focus is on emerging markets, has one of the world’s largest undersea cable networks.

Macquarie Securities analyst Guy Peddy said there is a strategic rationale for Tata buying C&W Worldwide, which has links with India going back to 1870.

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However, Tata Communications’ poor financial results – it has posted losses in the past two fiscal years to March 2011 and also in the first nine months of the current fiscal year – and the Indian government’s substantial stake could restrict it from bidding aggressively.

Tata Group took a 50 per cent stake in the former Indian state monopoly in 2002.

The Indian government still owns 26 per cent of the firm, which also has a New York listing, and has nominee directors on the company’s board.

One banker said buying C&W Worldwide would be a stretch for Tata.

The Indian group already has net debt of £940m.

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Mr Peddy said Vodafone is better placed to take advantage of C&W Worldwide’s tax losses, which he said were worth up to 30p a share.

He also said a joint bid is a possibility.

“Vodafone could parcel the international connectivity for Tata and keep the UK assets,” he said.

“This would require process and asset engineering to separate the business, but it is not impossible.”

Tata is understood to be undecided about its next step.

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