The Motley Fool

Why Shares In Cable and Wireless Communications Plc Fell Today

Shares in Cable & Wireless (LSE: CWC) plunged by more than 7.5% this morning, following a raft of news from the telecommunications company.

First up we had half-time results, which saw group revenue lift by 1% (2% at constant currency), the first time Cable & Wireless has seen revenue growth across the group. Chief executive Phil Bentley attributed this to faster and more reliable networks, leading to growing numbers of mobile subscribers and data uptake (mobile revenue nudged up by 3%, while mobile data jumped 10%). Elsewhere, group operating costs were lowered by 2%, with management stating that plans are on track to achieve cost reductions of $100m.

So far, so good for investors. News on the interim dividend was middling, however, remaining the same as the six-month period ending 30 September 2013 at $1.33 per share, despite a significant growth in earnings per share to $1.90.

What contributed to sending the shares down in early trade, though, was news that the company has agreed terms to acquire Columbus International, a leading privately-owned fibre-based telecommunications and technology services provider operating in the Caribbean, Central America and the Andean region. The deal is likely to cost in the region of $1.85bn ,with Cable & Wireless raising part of the funds by placing up to 252,812,284 new shares of 5 cents each, constituting approximately 9.99% of its outstanding share capital.

As is so often the case, the market hasn’t exactly welcomed this short-term albeit significant hit on the company’s coffers. But long-term Foolish investors might consider today’s fall in share price as a buying opportunity; following the proposed acquisition, Cable & Wireless expects the enlarged group to achieve significant cost savings and “additional revenue benefits”. As such, today’s news could be grounds for further research into the company to see if it represents a good investment at the current price.

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Sam does not own shares in Cable & Wireless.