The Cable & Wireless-MCI Internet backbone deal announced Thursday may have been necessary to assuage government regulators' concerns about an all-too-powerful telecommunications empire emerging from the pending MCI-Worldcom merger, but Cable & Wireless knows a little something about empire building, too.
Cable & Wireless rightly claims to have provided the central nervous system for the British colonial empire in the early 20th century. Today, Cable & Wireless maintains strong links with many of the former British colonies.
But though its tentacles reach around the world, Cable & Wireless is not generally thought to be in the same league as today's modern global telecom players. The company has been actively seeking the type of partner that could reinvigorate its business and ensure its relevance in the 21st century. Thursday's MCI deal could do just that by helping attract a partner like AT&T or Deutsche Telekom.
The US$625 million purchase of MCI's Internet backbone adds to a chapter of the company's history that began in 1996. That was when Dick Brown, who had been chief executive of CompuServe, came on as Cable & Wireless' new chief executive, giving the company a lift and engendering a more aggressive spirit, according to analysts. The company has been talking with many of the world's major global telecommunications companies in an attempt to find a merger partner with which it could fully serve the modern corporate market.
The deal for MCI's Internet backbone gives Cable & Wireless instant credibility with other global players, according to Courtney Munroe, a telecommunications analyst with Probe Research.
"The Internet sector is perhaps the fastest-growing sector of telecom industry," Munroe said. "Basically, every company needs that presence if they want to be a major global player.... This is a major coup for Cable & Wireless. Everyone wanted [MCI's Internet backbone], including GTE, Sprint, ATT. Of course, MCI didn't want them to have it for competitive reasons."
"[This deal] makes [Cable & Wireless] a lot more attractive as a merger partner, and they're already one of the most talked about takeover targets on a global basis," Munroe said.
Here are selected highlights from Cable & Wireless' storied company history:
- In 1869, John Pender, director of the Atlantic Telegraph Co. and founder of the cable manufacturing company Telcon, created the British Indian Submarine Telegraph Co. with the intention of laying a cable to India. By 1870, it was complete, and in 1872 the company was merged into the Eastern Telegraph Co. By 1877 the British Indian Submarine had 60 percent of telegram traffic to India and 80 percent from India to China, Java, and Australia.
- By the time World War I began, the Eastern Telegraph Co. operated six out of the nine lines of communication with India and the Far East.
- At the end of World War I, the British Empire encompassed more than a quarter of the world's population and land surface. The communications network built by the Eastern Telegraph Co. grew to be the nerve system of this Empire.
- In 1934, Imperial and International Communications, formerly the Eastern Telegraph Co., became Cable & Wireless. The new name was designed to more clearly reflect the combined radio and cable services that it offered, without reference to the Empire.
- After World War II, the formation of the British Commonwealth, an association of sovereign states, led to the establishment of a number of communications companies around the globe. Cable & Wireless was required to hand over operations to these national bodies as they were established.
- At the Imperial Communications Conference held in London in 1945, the government set up a Commonwealth Telecommunications Board and the Chancellor of the Exchequer announced the Cabinet's decision to transfer the telecommunications services operated by Cable & Wireless to public ownership.
- In November 1981, under the conservative government elected two years before, Cable & Wireless was reprivatized, and through the formation of Mercury Communications Ltd., began gaining market share in the United Kingdom. In the years following the decline of the British Empire, the company leveraged its entrenched positions around the globe. Today it remains a dominant presence in a number of the former colonies, especially in Hong Kong, where it is the largest telecommunications provider and the leading Internet service provider. It has also re-emerged as a major competitor to British Telecom in the United Kingdom, where it is in the process of building a backbone to handle integrated voice, data, and Internet services.
