Daniel Thomas, Telecoms Correspondent From Financial Times

The sun is setting on Cable & Wireless, the trail blazing cable company that was set up more than century ago to connect the far-flung parts of the British empire.

The agreement to sell Cable & Wireless Communications to Liberty Global on Monday night will mark the end of one of Britain’s oldest companies, which at its peak employed 54,000 people around the world.

“I almost joined Cable & Wireless in 1981 rather than BP,” admits Phil Bentley, who has been chief executive of CWC for the past two years — after a career at BP and Centrica — and has overseen the sale to Liberty.

“It was a bigger company than BP and was working across so many countries.”

Cable & Wireless Communications will combine telecoms, TV and broadband businesses in the Caribbean and Panama with Liberty’s Latin American operations to better challenge rivals such as Digicel and America Movil.

Mr Bentley insists the company never hoisted the “for sale” sign. But for many long term investors and analysts the deal marks an almost inevitable end to the group following a disastrous start to the new millennium.

The standing of the Cable & Wireless group as one of the only remaining founders of the original FTSE 30 stock exchange had become much diminished long before a demerger of its British and international businesses in 2010.

“C&W has been lurching from crisis to crisis for the past twenty years,” says Steve Malcolm, analyst at Arrete. “Selling the businesses was always the preferred end game.”

At the start of 2000, C&W group was worth about £38bn. By the time of the demerger, its market capitalisation had fallen to £4bn.

The separate UK arm operated by Cable & Wireless Worldwide and the international telecoms business of CWC were therefore easily digestible for rivals that were yet to start trading when the group was celebrating its centennial year.

Vodafone acquired CWW for just over £1bn in 2012, while Liberty is paying £3.5bn and assuming £1.8bn of debt for CWC.

The investors in CWW, Mr Malcolm says, “paid the price as it was sold as a distressed asset to Vodafone”. But he adds that the management of CWC has done well to sell off non-core assets since the demerger, which has allowed them to get a “good price” from Liberty.

The complex offer from Liberty is equivalent to 81p per CWC share — according to analysts at Mirabaud Securities — a premium of more than 40 per cent against the undisturbed price of 58p per share.

Shareholders will hope that the transaction will look better in hindsight than previous deals by C&W, which was itself created through various mergers from the British telegraph companies in the 1860s.

The group was bolstered by a merger with Marconi in the 1930s to become Imperial and International Communications, which was then renamed Cable and Wireless. The company was nationalised after the second world war but privatised by Margaret Thatcher in 1981.

A succession of acquisitions and disposals followed in the next two decades, but the company suffered during the post-dotcom period.

A lucrative management payment scheme based on private equity-like incentives, meant the company then became a byword among some investors for high corporate remuneration and poorly executed M&A.

The policy attracted shareholder protest votes between 2006 and 2009.

Mr Malcolm says: “The company was in deep trouble by 2003. Swift action to repair the balance sheet brought respite but the purchase of Energis, and the infamously egregious management ‘LTIP’ incentive scheme nearly brought financial disaster as the company underinvested, over-promised and loaded up the balance sheet with debt to pay uncovered dividends.”

At the time Sir Richard Lapthorne, then chairman, defended the payment scheme as necessary to retain and incentivise management.

Mr Bentley sees broader problems in hindsight. He suggests the company had been distracted by operating in so many different parts of the world — in effect creating little fiefdoms overseen by local management. He sought to change this by narrowing CWC’s focus to Latin America and the Caribbean, and selling other operations.

He also says the company had needed to invest more in its networks to provide comparable quality and breadth of services to rivals — something echoed by executives at Vodafone following its acquisition of CWW.

“We were getting smashed by [rival] Digicel,” he says, adding that the company had regained leadership in its markets owing to significant investment, cost cutting and the acquisition of additional TV and cable services with Columbus earlier this year.

That deal also helped pave the way for the takeover by Liberty by giving John Malone and his fellow Columbus shareholders a 36 per cent stake in CWC. Their backing for the Liberty approach means that it is unlikely to fall through now.

Shareholders might be glad the rollercoaster is coming to a stop.

For more on this story go to: http://www.ft.com/intl/cms/s/0/5b9a967c-8d46-11e5-8be4-3506bf20cc2b.html#axzz3s39vq6YK