Vodafone bid could rescue CWW from the doldrums

Shares in CWW soared 30% after the mobile phone giant came clean over its interest in a deal that could value the business at £700 million.

Under the Takeover Code, Vodafone, which is keen to expand its services for multinationals, has until March 12 to make a firm offer or walk away.

It said: "Vodafone regularly reviews opportunities in the sector and confirms that it is in the very early stages of evaluating the merits of a potential offer for CWW."

Investment bankers were rubbing their hands at fresh signs of life in the takeover market. The disclosure also means that Gavin Darby, CWW's new boss, could rip up the new strategy he was expected to outline alongside trading figures this Thursday.

The former Vodafone man took over the reins in November after his predecessor, John Pluthero, admitted the game was up as the company plunged to a £590m half-year loss.

CWW has been on the skids since its international arm was demerged two years ago, with a string of profit warnings that led to the dividend being axed. Despite landing a £10 million bonus for supposedly leading a turnaround, Pluthero failed to win the city over to his vision of creating a cloud-computing company. Instead, investors focused on CWW's weak cashflows and cut-throat competition.

Vodafone could benefit from marrying CWW's fixed-line data services for customers including Aviva and Tesco to its own corporate mobile arm, as well as providing extra capacity for its network. The union could even help Vittorio Colao, the company's chief executive, regain Vodafone's crown in Britain, where it lags behind Orange owner Everything Everywhere and Telefonica, the parent of O2.

However, analysts were wary over whether Vodafone needed CWW. Robin Bienenstock, a senior analyst at Bernstein Research, wrote: "Whilst it is possible to argue that there is some logic to bidding for these assets, which could be margin-accretive, we think that it is by no means certain, nor necessary, for the UK business to do so."

After Colao tidied up Vodafone's asset base by selling stakes in France, Poland, China and Japan, the company has a strong balance sheet. It also extracted a first dividend in more than six years from its American joint venture Verizon Wireless, leading to a £2 billion special payout. Vodafone shares were up 1.48p at 174.1p, valuing it at £89 billion.

It is expected to list its Indian arm later this year, has been linked with the purchase of one of its smaller rivals in Germany and was trying to merge with a competitor in Greece.