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C&W wins mating dance with Energis

Now plans to go toe-to-toe with BT

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Cable & Wireless claims it will be able to reduce its reliance on BT’s infrastructure after sealing its acquisition of rival telco Energis yesterday.

The company will pay £594m in upfront cash for Energis, with up to £80m more in cash or shares three years after the deal is completed. C&W will also inject £35m into the Energis business, to cover short-term working capital requirements, which it expects to recover within a year.

Energis boss John Pluthero will head the combined UK business, and he will also join the C&W board. At the other end of the personnel scale, the combined firm will cut 700 jobs group by March, 2008.

C&W’s bid, announced on Friday, had a deadline of 5.00pm on Monday. Some Energis shareholders had been holding out for more, while Thus Plc revealed early yesterday that it too was interested in buying the company.

However, C&W clearly convinced the 75 per cent of Energis shareholders it needed by the time the deadline came round.

C&W seemed at pains to reassure the world that it was not wearing rose-coloured spectacles when it decided to take on Energis.

“We are realistic about the short-term prospects of the combined business. The transaction will not alter the fundamental trends affecting legacy services of continued pricing pressure and a high level of competition,” it said.

But, it said, “additional scale will allow us to further reduce unit costs to mitigate this pricing pressure… and, in the mid-term it will drive better returns on our strategic investment.”

C&W said the deal will allow it to reposition itself as “the alternative to the UK incumbent”. In a customer FAQ it claimed that customers want a competitor that can consistently compete toe to toe with BT, and the combined company will do this. At the same time, it said, it will have a “less BT-reliant infrastructure.”®

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