The head office of Cable & Wireless Jamaica, in Kingston. Reports on Tuesday suggested that Deutsche Telekom is likely to make a bid for C&W Plc. - File

A rival firm Deutsche Telekom is making a bid for Cable & Wireless Plc, according to unconfirmed reports on Tuesday.

Neither company would comment on the speculation which emanated from Germany, according to Reuters.

"The rumour is Deutsche Telekom from the German end," one trader said in a Reuters report. "They (C&W) have got a few niche markets ... they could be combined very easily into someone else." But on Thursday a source inside Cable & Wireless Jamaica told the Financial Gleaner that the rumours have surfaced every year for the past four years, prompting a denial from C&W Plc at one point.

The British telecoms with annual revenues topping £3 billion is the United Kingdom's second biggest provider of corporate telecoms services.

The U.K. business accounted for more than half of group revenues at £1.09 billion in its half-year to September 2006, while its international business comprising C&W's overseas operations in 34 countries, Jamaica included, posted revenues of £620 million.

Jamaica's annual contribution to revenue has topped J$22 billion in the past two years (approximately £195 million).

The Caribbean had revenues of £289 million over the April to September 2006 period; Jamaica's share was J$12.2 billion (£99 million) or just about 16 per cent of international revenues.

Importance of Jamaica

At the end of January, C&W's top boys visited Kingston for board meetings of its two main divisions (U.K. and international) - its first outside of London in eight years - signalling the importance of Jamaica to the group and confidence in president Rodney Davis.

C&W Plc's shares rose on the takeover news Tuesday, but fell back by 2.0 pence to £1.775 in early morning trades Thursday, pushing its market cap to £4.2 billion.

"You can never say never, though Telekom has a new CEO, and it would be a punchy move," said another trader, quoted by Reuters. "Cable & Wireless is a good restructuring story."

The cost of insuring debt from C&W fell Tuesday as the talk of a Deutsche Telekom bid did the rounds.

Five-year default swaps on C&W also fell five basis points, meaning that it cost £177,000 to insure €10 million of the company's debt against default.

C&W is rated 'junk', while Deutsche is investment grade, which means any deal would probably lift C&W's credit quality.

- Gleaner and Reuters reports