After HSBC Plc bought the Bank of Bermuda, there were predictions that it would lead to a wave of takeovers of Bermuda-owned companies by foreign multinationals.

While little has happened since, the bid by Cable & Wireless to buy KeyTech announced late yesterday probably would not have happened if not for the HSBC deal.

The similarities are quite striking, and leaving aside the current opposition of KeyTech's board to the bid, opposition to the deal from the Government on 60:40 grounds is likely to come unstuck.

Cable & Wireless is an international telecommunications business with broad and wide experience. It also has a large amount of cash that it could use to invest in Bermuda's telecommunications infrastructure which is advanced, but also reportedly needs massive investment.

C&W also has a long and generally good relationship with Bermuda, an exemplary record of Bermudianisation and has been a "good corporate citizen".

Both KeyTech and Cable & Wireless have struggled to adapt to deregulation in Bermuda, although C&W has faced greater regulatory restrictions because the Government has largely restricted its ability to compete outside of overseas calling and business Internet services while allowing smaller and newer rivals to cut into its overseas calling business.

KeyTech has not faced the same restrictions, but has struggled to develop a cohesive strategy for its disparate investments in the Bermuda Telephone Company, Logic Communications, CableVision, M3 Wireless and now QuoVadis, in which it has a minority stake.

Although the group produced a strong profit this year it was not long ago that only a windfall from its pension fund saved it from recording a net loss for the group.

So it would appear that KeyTech would benefit from a takeover. It is not clear whether its board is opposed to the deal because it would lose control or because it is holding out for a higher bid than the $205 million offered. That represents a 35 percent premium on the price KeyTech is now trading at and a higher premium on its quoted book value, which many shareholders might well welcome. Still, a higher price might be eked out.

For the regulators and the Government, there are tougher questions. Having thrown the 60:40 baby out with the bath water in the HSBC deal, the real question to be answered is whether C&W's expertise and ability to invest outweighs the risk that a combined KeyTech and C&W would dampen competition and in the long run would lead to higher prices and a return to the bad old days when Bermuda Telephone Company and C&W held a monopoly on phone services.

Prices in Bermuda have come down dramatically in the last decade, but the Ministry of Telecommunications' failure to deregulate further means they could drop even more. Had the Government done that, one could have seen C&W and KeyTech battling it out as competitors with tremendous benefits for consumers in both quality and price instead of facing the possibility of a combined company.

For the economy there is some risk that if the deal goes through, there will be a further injection of much of the $205 million into the local economy which could overheat the already boiling real estate market.