Cable & Wireless broadens horizons with Columbus deal

By Paul Sandle

LONDON (Reuters) - Cable & Wireless Communications (CWC.L) has agreed a deal to buy Columbus International, a fibre-based telecoms provider backed by cable TV billionaire John Malone, for $1.85 billion (1.13 billion British poundS) to boost its mobile, fixed line, broadband and TV offer in the Caribbean.

London-listed C&W, which sold its operations in Monaco and Macau in the past two years, said the deal would accelerate its push into multiple services, particularly with Malone on board.

Malone, chairman of cable group Liberty Global (LBTYA.O), will own about 13 percent of C&W after the acquisition. Privately owned Columbus's other major stakeholders are co-founders John Risley and Brendan Paddick, who will also become C&W shareholders.

C&W Chief Executive Phil Bentley said that Columbus would inject "state-of-the-art TV and broadband technology" into C&W.

"We will have the premier mobile network, the best fibre network and the best backhaul submarine networks (which support data capacity) across the region," he said on Thursday.

C&W, which has operations in Panama, the Seychelles and the Caribbean, will assume Columbus's debt, which was $1.17 billion at June 30, and issue nearly 10 percent of its equity in new shares to fund the deal's $707.5 million cash element.

Analysts at Espirito Santo said the multiple C&W is paying, of about 12.3 times core earnings before cost savings, looks high.

Bentley, however, said that Columbus's growth rate would reduce that to about 10 times by the time the deal closed next March. Including the boost to earnings from expected cost savings, the multiple would drop to about eight, he added.

By comparison, Orange (ORAN.PA) sold its Dominican Republic business last year at an earnings multiple of about eight times.

"For a quality set of assets this is a great deal," Bentley said.

SHARES DROP

The market appeared less convinced. Shares in C&W, which said the deal would be earnings neutral in the first year after acquisition and add to earnings after that, were down a shade less than 6 percent at 46 pence by 1236 London time.

Analysts at Jefferies said the deal would accelerate C&W's push into multiple services under its Project Marlin plan.

"Acquiring Columbus International should allow C&W to reach the end-game that Marlin was intended to deliver faster and with less execution risk," they said.

Columbus, which provides triple-play cable TV, telephony and broadband over its own fibre optic network in the Caribbean, has about 700,000 residential customers.

It also provides backhaul connectivity to 42 countries in the region, as well as capacity and IT services, corporate data solutions and data centre services in South and Central America.

Separately, C&W said that its first-half revenue rose for the first time since the group was demerged from the former Cable & Wireless in 2010. Demand for mobile broadband helped to lift revenue by 1 percent to $848 million and its core earnings by 5 percent to $277 million.

The company added that it expects growth to accelerate in the second half.

(Editing by David Goodman)