Cable & Wireless Hits the Ground Running with THUS Integration

| Feb 17, 2009 | Business Telecom Services - Europe | Competitive Update

| Analyst: Dustin Kehoe

Current Perspective: Positive
Vendor Importance: High
Market Impact: High

Event Summary

February 12, 2009 -- Cable & Wireless has began the integration with THUS and set its strategy on a new course. THUS’ top 500 customers and 550 employees will be transferred to Cable & Wireless and will contribute GBP 370 million in revenue. THUS will maintain 550 employees and support 1,700 SME customers as well as 130,000 consumer and SOHO accounts (via Demon). Cable & Wireless will be its default supplier for network services and will move all products onto its platforms. THUS will operate independently under the name ‘THUS, a Cable & Wireless company,’ and all integration will be complete by June 2010.

Analytical Summary

• Current Perspective: Positive on Cable & Wireless integrating THUS into its organisation, as the company will be a much stronger operator in the national market as it takes over THUS’ top 500 customers. Also, by keeping the THUS brand as a standalone organisation focusing on the SME market, Cable & Wireless does not lose any focus on serving the government sector, large enterprises and MNCs with UK and cross-border IP and data communication requirements.

• Vendor Importance: High to Cable & Wireless, because the company needed to make a speedy and transparent integration in order to keep the company focussed on its business objectives. The added rationale behind the THUS acquisition is to strengthen C&W’s business in the UK ahead of a likely demerger of its UK (Europe, US and Asia) and international divisions (mainly focused on the Caribbean) into separate stock exchange listings. A split is expected to take effect in H1 2009.

• Market Impact: High on the UK business telecom services market, because this boosts C&W’s market share, takes out a key competitor in the managed services space and makes C&W the leading credible alternative to BT for large enterprise customers in the UK. At the same time, keeping THUS as a separate entity keeps a strong challenger in the mid-market.

Recommended Competitor Actions

• Competitors should see Cable & Wireless’ market consolidation as a sign that the company will be a much stronger player in the UK market, taking over 500 enterprise customers, which include the likes of HSBC, Southern Water, Scottish Power and United Utilities. THUS had no active MPLS interconnects and did not offer any international services, but this will also change, as Cable & Wireless will attempt to grow some of these accounts.

• Competitors should also be aware that the new THUS will continue to target the mid-market accounts with a focus on accounts ranging between 50 and 500 employees and including a telecom spend of at least GBP 10,000 per annum. The operator claims 1,700 customers, but it has a heavy concentration in Northern England and Scotland. Having access to Cable & Wireless’ network could pave the way for it to become a ‘national’ provider in the mid-market segment.

• With THUS gaining access to the Cable & Wireless Multi-Service Platform, the company can make a lot of new marketing claims around NGN to its customers, such as the ability to provision circuits faster as well as improved fault detection and resolution times. With this in mind, competitors such as COLT Telecom and ntl:Telewest Business need to promote their respective NGN and Telecom 2.0 strategies. The market is at a stage of high awareness and UK businesses are beginning to link a provider’s NGN investment and strategy to tangible business benefits.

• Competitors could take a swipe at Cable & Wireless’ move to re-enter the SME market, portraying it as a reversal from previous announcements about its intentions to exit this business. It has shed customers, going from 30,000 down to around 6,000 today. There are some pockets of customers that would be reluctant to go back to Cable & Wireless (or an operating company under another brand), having been turned away once before. They could also raise the prospect of THUS’ SME business being resold now that it is essentially a separate entity.

CLIENTS ONLY

Competitive Positives and Concerns

Recommended Vendor Actions

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