Vodafone challenged by Tata over C&W Worldwide bid

The troubled cable operator Cable & Wireless Worldwide (CWW) is in talks with India's Tata Communications over a potential bid for the UK-based company. This move could trigger a takeover battle for the cableco, given Vodafone's interest in acquiring CWW for around £753 million.

Tata Communications, which is part of the giant Tata Group conglomerate, told Reuters its plans for an all-cash bid were "at a very preliminary stage," adding it would decide whether to make an offer by March 29.

Vodafone, which has also confirmed talks are at a preliminary stage, has until March 12 to announce its intentions under U.K. stock market rules.

Initial reaction by analysts raised questions over Tata Communications' ability to make such a large acquisition. The company has posted losses in the past two fiscal years to March 2011, and also in the first nine months of the current fiscal year. Its largest shareholder, the Indian government, might also restrict Tata's flexibility.

According to Macquarie Securities analyst Guy Peddy, Vodafone would be better placed to take advantage of CWW's tax losses, which he said were worth up to 30 pence a share.

Of note, Peddy suggested that a joint bid was 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."

For more:
- see this Reuters article
- see this New York Times article
- see this WSJ article

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