Tiny Monaco thwarting CWC efforts to focus on pan-American strategy

Cable & Wireless Communications said gaining government approval for the sale of Monaco Telecom was proving more difficult than expected, but the company said it has alternative options if the sale to Bahrain's Batelco falls through, Reuters reported.

The British company's strategy is to focus on providing mobile, fixed and broadband services to customers in the Caribbean and Central America, divesting itself of operations in Europe and elsewhere in the process. The last step in this strategy is to withdraw from Monaco as part of the sale of the Monaco & Islands division, but resistance from the Principality of Monaco, which is wary of a change of ownership for one of its strategic assets, is providing an obstacle to this goal.

CFO Tim Pennington said the company knew that getting approval for the Monaco sale would be complicated, according to Reuters. The company has therefore given itself until 2014 to see it through.

"We are less confident than we were [that it will be cleared], but we have plenty of options," Reuters cited Pennington as saying. "The underlying business [in Monaco] is performing well, so it's a good problem to have."

CWC has already sold a 25 per cent stake in Compagnie Monegasque de Communication, which in turns owns 55 per cent of Monaco Telecom, to Batelco, with an option for Batelco to buy the other 75 per cent stake.

"We have had interaction with the Principality of Monaco on the required transfer consents for the remaining 75 per cent of CMC to Batelco and the feedback has not been as positive as we expected," CWC said in a statement on its first-quarter results. "CWC and Batelco are also considering the alternative options available given the uncertainty of receiving the required approvals."

Reuters quoted analysts at Jefferies as saying that CWC would receive $445 million from Batelco in two stages if the deal goes ahead. "If CWC is forced to look for other bidders, we believe Monaco would stimulate decent interest, insulated as it is from EU macro pressures, and generating clean OpFCF (operating free cash flow) margins of about 20 per cent," they said.

The update on Monaco Telecom came as CWC reported a 1 per cent rise in full-year core earnings and said it would cut costs. CEO Tony Rice said he would make $100 million of annual savings within two years to improve margins and cash flow, particularly in its Caribbean business.

CWC was one of two standalone units in Cable & Wireless until 2010, when Cable & Wireless Worldwide separated from CWC through a demerger in March 2010. Cable & Wireless Worldwide focuses on the provision of enterprise services and was subsequently purchased by Vodafone last year.

The strategy of Cable & Wireless Communications has been to develop a strong regional position in pan-America (Central America and the Caribbean). As a result, between 2010-2012 CWC disposed of a series of assets including its interests in Bermuda, Vanuatu, Fiji and Africa. It also acquired a 51 per cent shareholding in the Bahamas Telecommunications Company, the only full service telecoms operator in The Bahamas.

As well as agreeing to sell the majority of Monaco & Islands to Batelco, CWC has also agreed to sell its shareholding in Macau-based CTM to Citic Telecom International Holdings Limited and said it is making good progress towards obtaining the approvals required for completion of the Macau disposal. "We continue to expect the transaction to close between July and October 2013," the company added in the results statement.

*It was also reported that as part of the strategy to focus on its pan-America activities, CWC is to leave the UK after 140 years as a British company. CWC is relocating its headquarters from Holborn in central London to southern Florida, transferring about 100 jobs to the United States.

For more:
- see this CWC results statement
- see this Reuters article
- see this Guardian article

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