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.

LONDON (Dow Jones)--Thus Group PLC (THUS.L), the Scotland-based telecommunications company, Thursday said it has won a contract with the National Air Traffic Services.

NATS provides air traffic control services to aircraft flying in U.K. airspace.

Thus will connect NATS' remote radar and radio sites in the Western Isles in Scotland and its air traffic control center in Prestwick. Thus already supports a number of NATS sites in the Scottish Isles.

Good posts Bugsy
Within 2005 15p is going to look real cheap

CW. holders are enjoying the news more.

THUS have continued to suprise me this year. Or, more correctly, the attitude of investors toward THUS has continued to suprise me. Of all the 2nd tier telcos, THUS are the only company whose earnings year on year have steadily increased such that this year they are finally cash positive. This company is in credit!

Now with the latest ruling out regarding the local loop unbundling issues, telcos such as THUS will be required to pay a much smaller handling fee to use BT's cable network. This will mean improved profit margins for the company.

These two facts alone should be enough to see the sp head north, and so it is not suprising that maybe C&W are interested in acquiring this upside operator.

As per, dyor. I am long (well, 6-footish actually :>).

Comms regulator Ofcom has cut the amount that BT can charge other telecoms groups for access to local exchanges.

As a result of the new charges, the cost of unbundled shared access to the local loop will be around 70% below the level that BT charged in May. And fully unbundled access to local telephone exchanges will be some 60% below the May level, according to the regulator.

Which as I make it 70% reduction in favour of Thus...

That is a considerable saving to Thus, which will go straight to the bottom line

BRITANNIA, after traversing the globe in its former life as the Royal Yacht, is now forever berthed in Leiths revitalised docklands, earning its keep mainly as a corporate hospitality venue. And the ship doesnt come cheap. So it was interesting to see Cable & Wireless (C&W) blow some of its reported 1.5 billion cash pile on a glittering bash there. Interesting because apart from the odd office, C&W is barely on the map north of the border. Lord Robertson ex-Nato, ex-MoD who became C&W deputy chairman earlier this year, may have been looking for an excuse to dust down his dress kilt. Or perhaps C&W has its eye on BT Scotlands market share. Or maybe it was putting its tanks on the lawn of Thus, Scotlands home-grown telecoms specialist. Not surprisingly, the Thus chief executive Bill Allan, a former C&W chief himself, was not on board.

Thus, the Scottish telecoms company led by chief executive Bill Allan, will merge with a rival, probably via a private equity company acquiring both.

Tip for 2005 from the Scotsman! Will continue to hold.