Cable & Wireless Communications has slipped back on talk the Panamanian government may be considering selling part of its stake in the company's operations in the country.
The government owns 49% of CWC Panama, and local reports suggests it may dispose of around 5%, which would be worth around $70m. The funds would be used to finance infrastructure projects in the country, including improvements to its drinking water systems.
CWC would be likely to get first refusal on any shares sold, and analysts at Espirito Santo said:
As CWC has management control of the asset we believe it would try to acquire this stake, at the right price. CWC is likely to look at a deal like this on a cash-relative basis, considering reduced cash leakage as well as upfront cost, but it shouldn't have any implications for potential dividend payments going forward. We note across CWC's portfolio of assets there are a number of other government stakes which could be sold down to raise funds in the same way.
The company's recent trading update showed a weaker than expected performance in Panama, mainly due to increased competition in mobile following the introduction of number portability. CWC has been investing more in gaining new subscribers and retaining existing ones, as well as launching new products such as the iPhone. Espirito Santo said:
We believe this strategy will squeeze the other operators in the market such that one of them may be forced to exit because of mounting cash flow losses which would be positive for CWC (four mobile players is not sustainable in the longer term). CWC Panama should still be viewed as a good business which is generating strong cash returns, in our view.
CWC shares are currently down 0.24p at 32.09p. Meanwhile its one time partner Cable & Wireless Worldwide has fallen 1.05p to 36.95p after the idea of an imminent cash offer from potential predator Tata Communications was played down.
