If reports that Cable & Wireless plc is considering a takeover bid of Sprint Corp. are true, the wireless industry is seeing a sign of things to come.
The Wall Street Journal reported last week that Cable & Wireless met with Sprint’s 10-percent owner France Telecom but has yet to make Sprint, which owns 40 percent of Sprint Spectrum L.P., a formal offer. France Telecom has denied the entire story, Cable & Wireless has not commented and William Esrey, Sprint chairman and chief executive officer, said “a reported deal with Cable & Wireless supported by France Telecom Group could not be possible because of the terms of a standstill agreement Sprint has with France Telecom and Deutsche Telekom.”
France Telecom and Deutsche Telekom AG, which also owns 10-percent of Sprint, last year invested $3.66 billion to acquire about 86 million shares of Sprint’s class A common stock. Early last year, the three companies launched GlobalOne, a global telecommunications venture.
“Basically, what all global supercarriers want to do is establish some type of presence outside the U.S. and Western Europe. It’s a big challenge for all of them,” said David Roddy, chief telecom economist for Deloitte & Touche Consulting Group Inc. “It’s a two-step process in terms of going global. One is to solidify position in Western Europe and the U.S., and two, is to somehow make a presence in East Asia or South America or both. The implication is that [these areas] are largely going to be wireless … Wireless is the jewel of the global carrier’s crown that will make or break your bid to become a supercarrier.”
Cable & Wireless has a wireless presence in Asia as the majority owner of Hongkong Telecom in Hong Kong and is an interest holder in other Southeast Asian countries. The company also is a partner in Mercury One-2-One in the United Kingdom and holds other interests in Western Europe. What it doesn’t have is a big wireless presence in the United States. The company’s subsidiary, Cable & Wireless Inc., operates a long-distance network and has recently signed a reseller agreement with Nextwave Telecom Inc. to provide personal communications services to its business customers.
Roddy said the global market is beginning to mimic local markets in terms of acquisitions, joint ventures and initial public offerings.
The Federal Communications Commission “and the U.S. government are at a point where they really have to allow this because they are going to allow BT and MCI to merge,” he said. In November, MCI Communications Corp. and British Telecommunications plc announced plans to merge. It is monetarily the largest takeover of an American company by a foreign interest at $21 billion.
