British telecommunications giant Cable & Wireless yesterday announced the completion of its acquisition of MCI Commumications' Internet business for $1.75 billion, marking the beginning of the company's global expansion with one of the premier networks in the world.
But while the telecommunications giant, which traces its roots back to the heyday of the British empire, is trying to recreate that clout and reach, most analysts agree the company will not be able to reach the top by itself.
"It's an uphill battle if [Cable & Wireless] wants to be a telecommunications world power," said Phil Wolh, a telecommunications analyst at S&P Equity Group. "If they want to be a niche player, fine. But if they want to be a world power, they need to get together with an American company."
Analysts speculate that the Cable & Wireless may look at Sprint as a possible merger partner. The company's push into the United States has been underway for some time. According to sources, the telco has considered buying a Baby Bell, and also has toyed with the idea of joining forces with a high-speed Internet access provider like @Home.
Although no such deal has been consummated, Cable & Wireless's purchase of MCI's Internet backbone will give it the ability to provide state-of-the-art integrated voice, data, and Internet services to consumers and business on a global scale.
"The Internet is the fastest growing communications medium in history, and in keeping with this dynamic industry, Cable & Wireless has targeted the Internet as the vital element of our worldwide growth engine,'' said the company's western hemisphere CEO Carl J. Grivner. "It is clear Cable & Wireless is making the right investments at the right time,'' Grivner added.
Indeed, the time is right as deregulation and the merging of voice and data systems are driving the consolidation of the telecom industry in general.
Cable & Wireless has undergone other major transitions. In 1979, for example, the telco was targeted as a candidate for privatization, a process that was completed in November 1981.
The company now has operations in 70 countries on five continents, and 17 million customers. They are centered around hubs in Asia, the Caribbean, North America, and Europe. Cable & Wireless, which employs about 37,000 people worldwide, was a pioneer in mobile communications, having built and operated the world's first cellular network in Qatar in 1978. Its global businesses offer a range of services spanning interactive entertainment and information, broadband data, Internet access, and broadcast television, as well as fixed and mobile voice. Cable & Wireless reports it is one of the world's largest carriers of international traffic.
Although the company reports a global presence, analysts question how deep and strong their involvement is in these regions.
"[Cable & Wireless] is a nice company, but they are even behind British Telecom at this point," Wolh said.
The recent alliance between AT&T and British Telecom is going to make it even harder for Cable & Wireless to compete on a global scale. Also the Federal Communications Commission yesterday said it had cleared WorldCom's acquisition of MCI, subject to MCI completing the divestiture of its Internet assets.
"They can survive on their own, but they won't excel by themselves while all these telcos merge or form alliances," Wolh said. "They need to become more global and that will only be accomplished through an American partner."
Shares in the company were down 1.09 percent today at 34. The stock has traded as high as 45.94 and as low as 22.5 during the past 52 weeks.