The agreement, revealed in The Independent last week, involves C&W buying the 24.5 per cent shareholding in the company, Optus Communications, for A$980m (pounds 445m) from its long-standing investor, BellSouth of the US. C&W already owns another 24.5 per cent of Optus, taking its total shareholding in the Sydney-based group to 49 per cent.
The deal is the latest in a string of agreements secured since Dick Brown, C&W's chief executive, joined the company a year ago. The news helped push its shares 18p higher in yesterday's buoyant trading to 570.5p.
C&W recently took over management control by appointing Peter Howell- Davies, former head of Mercury, as chief executive. Two other senior UK managers moved across to Australia at the same time.
C&W has also gained an option to increase its stake in Optus up to 51.5 per cent and Robert Lerwell, finance director, hinted it could increase its holding. "We don't think it's essential, but we'd have to look at the time. We may do it if it was good value and assuming the Australian government was happy for us to go higher."
Another 25 per cent Optus shareholder, Mayne Nickless, has also indicated it wanted to reduce its stake. Optus had been expected to float itself later this year, enabling Mayne Nickless to find an exit route, but Mr Lerwell suggested this could be delayed. "It could be one year, two years or three years. We don't know."
Created in 1992, Optus has 18 per cent of the country's long distance phone market, with 1.9 million customers and 32 per cent of the mobile market. Its cable network also offers pay television services to 180,000 homes. Optus made its first full-year profit last year of A$60m.
Mr Lerwell said C&W would fund the acquisition partly with the proceeds of the sale of a 5.5 per cent stake in Hongkong Telecom, which raised pounds 770m at the current exchange rate. The Australian deal, coupled with C&W's $652m (pounds 407.5m) purchase of Panama's telephones operator, meant C&W's gearing would rise to almost 70 per cent.