Various reports yesterday said that Vodafone expects the integration of its newly purchased Cable & Wireless Worldwide assets to cost as much as £500M ($800M+) over the next four years. That's definitely not chump change, in fact it's nearly half of what they paid to buy the company in the first place.
The big bill comes largely from the work that Vodafone will be doing to graft its wireless backhaul needs onto the 20K route kilometers of intercity, regional, and metro fiber C&W has in the UK. In other words, by acquiring C&WW Vodafone bought 2/3 of the wireline network it needs to power its UK wireless business and will spend the next four years building out the other 1/3.
When done, they hope to be saving £200M ($320M+) in annualized 'cash flow synergies'. But there's more to this deal than synergies, it's about a long term strategy to have the necessary infrastructure for the wireless data tsunami -- in the UK at least. Vodafone fought pretty hard to make this deal happen, so it makes sense that they are willing to put real effort into bringing it all together. Investors didn't seem surprised at the big 4 year integration spending plan, as the stock was up yesterday.
As for the international corporate and wholesale business, Vodafone will be looking to stabilize them first. After that we'll see if they see opportunities for new investment or not. Or, for that matter, additional wireline M&A.
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