Telecoms firm Cable & Wireless (C&W) is to buy privately-owned rival Energis for about £674m to step up its challenge to the BT Group.
The UK’s second-largest fixed-line telecoms operator said it would pay £594m in cash, as well as an additional sum in cash or shares in the third year after completion, depending on the level of its share price.
Analysts have long been looking for consolidation in the UK’s fragmented telecoms sector, ahead of much-needed investment in new networks.
C&W said buying Energis would boost earnings in the first full year of ownership and beyond, and the deal would generate £55m of annual operating cost and capital spending savings in 2006/07, rising to £80m in 2007/08.
C&W said it expected to cut around 700 jobs by March 2008.