Cable & Wireless plc last night offered $205 million cash for 100 percent of KeyTech Limited ? parent company of Bermuda Telephone Company, M3 Wireless, Logic Communications, Bermuda Yellow Pages and part-owner of QuoVadis and Cablevision. The board of the Bermuda telecommunications company said it would oppose the offer as "not in the best interests of shareholders".

The Bermuda arm of Cable & Wireless, has been involved in ongoing discussions with KeyTech for some eight months, according to chief executive Eddie Saints who late yesterday was keen to expound the merits of the proposed offer.

By valuing each KeyTech share at $17, representing a premium of 35 percent over the 30 day weighted average closing price of $12.61, it is an offer designed not only in the interests of the shareholders, but in the interests of being able to move the proposal to point of conclusion, he said.

"We feel strongly the proposal is very attractive, creates unique value and by bringing together these two organisations we provide some benefits in the area of the proper scope and scale of operation that encourages and supports major investment that is needed in our telecommunications networks both domestic and international," he said.

The proposal to buy KeyTech culminated from a series of preliminary meetings that took place between the two companies over the past eight months. However KeyTech's board responded to what it called an "unsolicited proposal" from Cable & Wireless with a short statement late yesterday which said: "The KeyTech Board of Directors has been approached by Cable & Wireless, plc with various proposals. After due consideration, the Board does not consider such proposals to be in the shareholders' best interest."

The board is not the only obstacle in the way. The proposal is still subject to due diligence, numerous regulatory obstacles and shareholder approval.

Whether or not Government will support selling off another local company to a foreign entity remains to be seen. However, Mr. Saints said that the company has kept the Minister of Telecommunications and e-Commerce Michael Scott engaged from the beginning of the process.

In a statement yesterday, Minister Scott noted that the proposed acquisition had the potential to impact Bermuda 's Telecommunications competitive scene and industry in ways that are far reaching.

"The Ministry of Telecommunications & E Commerce will be monitoring this telecommunications development in the usual way and respond appropriately as events unfold. The island's national telecommunications interest will be the prime consideration, through out the process," said Minister Scott. Shadow Minister of Telecommunications Senator Bob Richards could certainly see why the deal was attractive for Cable and Wireless since he said there is more margin in the local telephone, Internet and mobile businesses.

KeyTech posted income of $11.7 million for the fiscal year ending March 31, 2006, a 16 percent increase over the previous year's return.

However, from a Bermuda perspective, he questioned what Cable & Wireless could bring to to the table besides its offer to shareholders.

"The only thing it will do is put Cable & Wireless in the position it is already in in many islands in the Caribbean where they have an integrated presence, where they have long distance and a local loop and ISD and mobile. That is what they are looking to do here but what it has shown is that model may be good for Cable & Wireless in the Caribbean but it's not good for customers in the Caribbean because they all pay higher rates than we do," he said.

Senator Richards also questioned how Government policy will deal with the offer. The 60/40 ownership rule will be one issue of concern.

While Cable & Wireless Bermuda is exempted from the 60/40 ownership rule under what is called a 1114B licence, the exemption only applies to its operation and will not provide any benefit to the proposal on KeyTech, according to Mr Saints.

"We recognise that this proposal is a test for challenging the current regulatory framework, structure, companies act the whole bit but those are not show stoppers. They just require the full engagement by all the stakeholders in working through a very complex arrangement and maze of issues," he said.

In actual fact there already an understanding in place in the telecommunications sector that instead of a 60/40 law, telecoms are able to have foreign involvement up to 60 percent, according to Senator Richards. However an application to exceed that ratio was recently denied by Government.

Despite the many obstacles, Mr. Saints said last night that the combining of the companies is very necessary not only to create a unified customer service environment to satisfy telecommunications needs, but also so the companies can continue to make important infrastructure investments and bring in new and developing technologies.

He did not know what the proposed acquisition will mean to the 408 employees in the KeyTech Group of Companies and the 55 employees at Cable & Wireless Bermuda. While he said the merger will certainly create opportunities for career development, his company has not yet engaged in a review of how these two entities would be brought together.

"We look at it as a positive experience for all of us and we'll deal with the really hard choices as we need to but we can reassure you that it will be done respectively with transparency and by engaging all the key stakeholders ? unions, the employees, the management ? so that we work through all this together," he said.

It will likely be months before the proposal can be put to KeyTech shareholders for a vote since all of the general and regulatory issues must be overcome first. However the subject is certain to be much talked about this Friday when shareholders are due to convene for KeyTech's annual general meeting.