ANALYSIS: Liberty's move for CWC sharpens focus on the Caribbean

Within months of its $1.85 billion acquisition of Columbus International, Cable & Wireless Communications (CWC) is set to be swallowed up itself, by the Latin American and Caribbean arm of the cable and telecoms empire, Liberty Global.

The latest deal, which is valued at $5.4 billion and is likely to be completed in the second quarter of 2016, will see the final disappearance of Cable & Wireless, the former UK government arm that connected up the old British Empire. Once privatised, C&W positioned itself from the mid-1980s as a competitor to BT in the UK – an ambition that failed. 

Vodafone paid £1 billion in 2012 for Cable & Wireless Worldwide (CWW), the UK arm that owned enterprise networks and global subsea cables, two years after CWW had been hived off from CWC. 

Liberty Global will pay a lot more for CWC, including the 16 full-service businesses in the Caribbean and Panama as well as Columbus International’s services, from cable TV to hosting, across the Caribbean and South and Central America. CWC owns subsea cable networks within the region. 

CWC will be combined with Liberty Global’s LiLAC operation, formed in July 2015 as a tracking stock for the group’s businesses in the region, including its cable TV operations in Chile and Puerto Rico. LiLAC services are available to four million homes in the area and have annual revenues of over $1.2 billion.

The new acquisition will more than double the business in the region, says Mike Fries, CEO of Liberty Global: “Upon completion, the combined business will serve 10 million video, data, voice and mobile subscribers.”

Phil Bentley, CEO of CWC, says that the company has changed in the past two years, since it moved its headquarters from London to Miami. It “has transformed itself into a leading regional quad-play operator”. Former management accountant Bentley was new to the telecoms sector when he joined CWC in 2013. His previous roles were in the drinks and energy industries, most recently as CEO of British Gas. 

Before the move to Florida, CWC sold up many of its non-Caribbean operations. China’s Citic Telecom bought the company’s Macau business. Xavier Niel, who owns French mobile operator Free, bought its 55% stake in Monaco Telecom. Batelco of Bahrain bought its businesses in many British territories, including Guernsey, Ascension Island and elsewhere. 

CWC’s last operation outside the region is in the Seychelles in the Indian Ocean: the islands’ government blocked the sale to Batelco. Cable & Wireless Seychelles remains part of the bundle that Liberty Global is buying. 

The Caribbean is a fragmented market. Each territory or nation has its own telecoms regulatory structure and sizes vary widely, from Panama with 3.8 million people and Puerto Rico with 3.6 million to Montserrat with barely 5,000. Liberty Global and CWC will have to argue the deal through each regulator, including with the FCC in Washington DC. 

CWC’s wholesale networks business is clearly a vital part of the mixture that Liberty Global is buying. It connects carriers and enterprises in 42 countries in the region, with 42,000 kilometres of subsea and terrestrial fibre cables. Alcatel-Lucent Submarine Networks completed the most recent part of that infrastructure, the Pacific Caribbean Cable System, as recently as August 2015 – a 6,000 kilometre system running from Florida to Ecuador, connecting Colombia, Puerto Rico and Panama on the way. 

Just as CWC retained its submarine cables when it was split from CWW in 2010, it also retained its enterprise market. The business solutions division operates in 27 markets, to all sectors. 

The acquisition “represents a watershed moment for our recently created LiLAC platform,” says Fries. “It will add significant scale and management depth to our fast-growing operations in Latin America and the Caribbean.”

Fries has been in cable TV for three decades and helped the international expansion of Liberty Global. The company owns operations in Europe, including Ziggo in the Netherlands and Virgin Media in the UK and Ireland. 

Earlier in 2015, Liberty Global was in serious discussions with Vodafone – the company that bought the other half of the old Cable & Wireless – about a possible exchange of assets in Europe. The idea would have been to create a number of quad-play operations offering TV, broadband, mobile and fixed phone services under single management. 

It wasn’t clear whether a full merger was on the agenda, but the talks foundered, mainly on price. “We were discussing a variety of things,” said Vodafone CEO Vittorio Colao in November. When discussions break up, “more likely than not it’s about value”, he added.