C&W predicts private equity bid

The chairman of the UK telecom group has suggested a buyout firm could snap up the business in light of its alleged under-valuation by the stock market.

Richard Lapthorne, chairman, C&W

Richard Lapthorne, chairman of UK telecom group Cable & Wireless, has taken the unusual step of warning of likely private equity bids for the firm despite no details having yet emerged of any interest from that quarter.

A report in UK newspaper the Daily Telegraph said Lapthorne had vowed to stop worrying about the concerns of short-term City investors, and quoted his opinion that “life does not drop into accounting periods”.

The firm, which has been forced to cut costs and hundreds of jobs in the face of falling prices and growing competition, is currently investing in a new voice and data network that will be cheaper to run but take three to four years to complete.

Given this long-term focus, Lapthorne said private equity firms were “almost certainly doing the numbers on the company” in the hope of exploiting a gap between its stock market valuation and a “sum of its parts” valuation. The firm is currently capitalised at around £2.9 billion (€4.2 billion; $5 billion).

C&W has experienced particular problems with its Bulldog consumer broadband business. The unit, which was forced to pay compensation by industry regulators after complaints from customers, delivered an operating loss of £49 million in its latest half-yearly results.

In April, C&W announced plans to invest £190 million over the next three years to transform its UK core network and associated IT systems and processes. The firm is currently integrating Energis, a rival UK telecom firm it acquired in August for £674 million.