The Cable & Wireless Communications Plc company being set up by Cable & Wireless Plc, in which the latter will have 52.6% of the equity, is set to axe jobs and lose its Mercury subsidiary brand name as a result of its mammoth cable companies merger last October (CI No 3,026). Yesterday, the company announced its formal share offer to the shareholders of the merger partners – its own Mercury Communications Ltd and UK cable television units of Nynex Corp, Bell Canada International Ltd’s Bell Cablemedia Plc and Videotron Holdings Plc. It also announced its planned stock exchange listing later this month, listing 14.7% of the new company shares in London and New York in the next few weeks. However, the company made it clear that shareholder value was a priority, and the workforce of 12,500 faces significant cuts. The merged company, Cable & Wireless Communications Plc, aims to operate as a single entity, under a single brand, under which the Mercury name is also set to go. We don’t need seven customer care centers, four network control centers or four separate headquarters. We are totally mindful of profitability in an industry that has been short on profitability, said chief executive officer Dick Brown. Holders of each Bell Cablemedia share will receive 0.69389 of a share in the new company; the exchange ratio for Nynex CableComms unit is 0.36746 shares in the new company for each share held. Videotron is being acquired outright. The partial float will give the market an opportunity to value the company, which has assets worth 4.5bn pounds, better. At present, analysts estimate that Cable & Wireless Communications will be worth between 4.0bn pounds and 7.0bn. The complex merger agreement will add access to the local loop within the cable companies’ franchise areas for Mercury Communications’ national trunk network, which until the deal had to rely on British Telecommunications Plc for all local loop traffic, although savings from not having to pay Telecom are not expected to be substantial, says finance director Nicholas Mearing-Smith. It will serve about 1.2 million telephony and 580,000 cable television customers, and aims to provide a broad range of local, national and international speech and data services, and in some regions, multichannel television and Internet access. Cable & Wireless Communications’ pro forma revenue for the year to March 31 1996 was 1.90bn, on which it made 44m pounds net profit.
The new company says it might seek further acquisitions, but adds that it sees no need to be bigger. France Telecom SA and Deutsche Telekom AG are expected to use the new company as their vehicle into the UK market, and some of the corporate shareholdings are thought to be less than solid, with Bell Canada in particular being seen to be open to offers for its 14.2% stake, although Cable & Wireless is thought not to want to go below 50%. Britain will be the new company’s short-term focus, but the group is looking at continental Europe too. With government tax incentives for cable companies, Mercury should see its tax bill cut to zero, saving it 100m pounds over the next two years, and it will also benefit from additional interest rate savings, providing a further 20m pound boost over the same period. The closing date for the offers is April 25, and the listing will immediately follow completion.