Morning all.

Jesus, what a crap market - returned from 2 weeks away and it's hardly budged! Still long hte, emg, ukx

C&W eyes Thus as it prepares to spend

ALASTAIR REED


CABLE & Wireless chief executive Francesco Caio yesterday signalled that the 132-year-old telecoms group is gearing up for a spate of acquisitions, and warned that smaller operators - such as Glasgow-based Thus - were likely to be swallowed up in the fight for market share.

With local loop unbundling (LLU) set to transform the telecoms industry within the next couple of years, Caio told The Scotsman yesterday that the industry had now reached a point where consolidation was inevitable. C&W, he said, was banking on being one of the consolidators, rather than the consolidated.

"During the next 12 to 18 months, there will be large-scale consolidation," he said. "Whether in the form of mergers, retrenchment into niches or straightforward acquisitions, there are simply too many players, and I see LLU as the ideal catalyst for change."

LLU is the process by which operators are given access to incumbent BTs local exchanges - essentially giving them direct access to the customer. So far, about 20,000 local exchanges have been unbundled and the recently appointed independent Telecoms Adjudicator, Peter Black, is aiming for a figure closer to one million by 2006.

Speaking ahead of the boards first meeting in Scotland for years, Ciao said the telecoms industry has for too long relied on rising demand to fuel growth. He said it has the capacity for no more than "two or three big players, with maybe one or two smaller ones".

He added: "This is a critical moment for the industry to develop a sustainable future. And only those that can afford to invest in both scale and access will come out on top."

C&W has been persistently linked with a move for Thus, whose shares have dropped more than 60 per cent since mid-February.

Yesterday, Caio denied that any contact had been made with the Glasgow operator and would not comment on whether Thus was a potential target, but added: "Whenever we think of our presence in Scotland, we have to consider Thus, because it is a very important part of that landscape.

"I would be wrong to rule anyone in or out at this stage. Like many players, Thus has its strong points and its challenges. But its important to remember how quickly the industry changes, and I think those players with small-scale and limited access are going to face a pretty large challenge in the coming months and years."

C&W has a cash pile in the region of 1 billion, but to the displeasure of the City, has not made any major buys, limiting itself to the 18.6 million acquisition of Bulldog, the small internet service provider, and the 108m purchase of a controlling share in Monaco Telecom.

Despite persistent speculation about "the next big deal", Caio said the industry was still largely overvalued.

"Anyone looking from the outside would assume that wed be looking to strengthen our balance sheet through acquisitions," he said. "But Im happy not to have consolidated anything so far. Values have been coming down for a year, and could get even lower."

C&Ws ambitions come just two years after it was largely written off as the basket case of the telecoms industry, following an unsuccessful expansion into the US under former chief executive Graham Wallace. Since then, it has cut about 1,500 jobs, sold assets and undergone a dramatic restructuring and, under Caio, has found its way back to profitability. Last month is announced it was returning 250m to shareholders, in a clear move to curry favour with both the City and investors.

Travis Perkins issuing 5,000,000 new shares today at a minimum 1500p per share