C&W prepares for divestment

CABLE & WIRELESS, Britain's third largest telecommunications company, is on the verge of selling two major chunks of its British operations.

It emerged last night that NTL, the UK's number three cable operator, was in talks to secure pounds 5bn funding from France Telecom to launch a pounds 8bn debt-funded offer for Cable & Wireless Communications' residential assets.

NTL's bid, which is likely to be highly leveraged, appears to be an audacious move to bring together the UK cable sector in a manner to dictate terms to the industry's number two player, Telewest Communications.

It was uncertain last night whether the NTL-France Telecom intervention would result in the takeover of C&W's residential cable business.

The understood pounds 8bn valuation concerns the local cable business which had year to March 1999 revenues of just over pounds 600m. That represents a substantial premium on the estimated pounds 6bn price tag that C&W was understood to have been seeking for the sale of its residential cable arm.

Simultaneously, C&W is near to spinning off mobile operator One2One, which it co-owns with MediaOne, a US cable operator. The partners have weighed offers thought to be in the region of pounds 7.0bn-8.0bn from Germany's Mannesman and France Telecom, and others, but are now considering floating One2One to achieve a higher price.

A move to float One2One on the stock exchange could produce the biggest flotation of shares since the 1980s privatisations. One2One's owners want to cash out and would look to sell well over 50 per cent of the mobile operator.

C&W is also looking to raise cash from selling its controlling stake in the residential cable business. Stock in Cable & Wireless Communications soared again yesterday, adding 39p to 696.5p, making a two day gain of 12 per cent, on heavy volume of 15 million shares.

"This stock never trades in that sort of volume," said a trading director with a City firm. "People are getting very excited about a deal in the cable sector."

If both deals come off, C&W could end up with a cash infusion of some pounds 7bn. It plans to invest heavily in its business service division, what used to be known as Mercury Communications, as well as enhancing networks for Internet and and other data transmission applications.

Outlook, above