Tuesday, February 14, 2012

Vodadone Mulls Billion Dollar Acquisition Substantially Driven by Backhaul Benefits

Vodafone reportedly is considering a £700 million (U.S.$1.1 billion) bid for C&W Worldwide, a supplier of long haul and local business communications, which was spun off from parent firm Cable & Wireless Communications in March 2010.

You might wonder why a wireless service provider would want to buy a “landline services” provider. The key is that C&W Worldwide is a provider of enterprise services, not consumer services.

C&W Worldwide, in principle, would help Vodafone reduce its mobile backhaul costs, in part by limiting the amount of leased access Vodafone has to buy.

The global portion of C&W Worldwide also would help Vodafone better compete for multinational enterprise customer business.

“At the right price, this makes sense for Vodafone,” said Declan Lonergan, research VP who has studied Vodafone's options"

A billion dollars is a lot to spend for backhaul savings, but that seems the immediate and most tangible value of the proposed acquisition. The potential advantages for sales to global enterprises is much more speculative.

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