Big news from the UK this morning: Vodafone, one of Europe’s biggest mobile operators, has made a formal offer to buy up the assets of Cable & Wireless Worldwide  for £1 billion ($1.7 billion), a deal that catapults Vodafone into running its own fixed line network in the UK and specifically will give it a much bigger view to winning enterprise business — a big challenge to BT and a mark of further consolidation in the space.

Cable & Wireless, first founded in the nineteeth century and one of the biggest operators in Europe, has fallen on hard times more recently and has run through three chief executives since a restructuring in 2010.

The deal will make Vodafone the UK’s second-largest operator, with £7 billion ($10.5 billion) in annual revenue.

According to Vodafone’s statement to the market, Vodafone will offer C&W shareholders 38 pence in cash for each C&W share, a premium of 92 percent to C&W’s closing price on February 10 (when Vodafone had first made its offer). It says that both sides have reached agreement on that deal and that C&W directors will recommend the buy to shareholders.

The deal opens a new opportunity for Vodafone to offer networking services for enterprises, which form the core of C&W’s customer base at the moment, but as Vodafone CEO Vittorio Colao noted in the statement Vodafone could also use C&W’s extensive international network to offload its mobile network traffic in other markets and serve enterprises outside the UK, too:

“The acquisition of Cable & Wireless Worldwide creates a leading integrated player in the enterprise segment of the UK communications market and brings attractive cost savings to our UK and international operations. We look forward to working with the management and employees of Cable & Wireless Worldwide to combine our expertise for the benefit of our customers and shareholders.”

It will also give Vodafone its first crack at owning a broadband network: that could mean more consumer services from the carrier, too, to compete against incumbent operator BT.

It raises another question, though: currently Vodafone supplies BT with wireless network that it sells on to customers; and BT provides Vodafone with backhaul for its wireless network. For now it looks like business as usual: “I see no reason why our relationship with BT should not continue to be good,” Colao noted in the analyst call earlier today.

The deal is also a setback for another carrier, Tata in India, which had also been angling to buy C&W as part of its international expansion strategy; it withdrew its bid last week.

Cable & Wireless is one of the UK’s oldest carriers. The company was first established from a number of international telegraph assets and in the 1980s became the first carrier to offer a competitive service to BT in the UK. It’s not clear yet what will happen to C&W’s current chief executive, Gavin Darby, although this deal could mark a return of sorts: he had joined C&W in November 2011 having previously worked for Vodafone.

At the moment around one-third of C&W’s revenues come from its international operations, which extend across the UK, Asia Pacific, India, Middle East & Africa, Europe and North America.

In the UK, although C&W had offered retail services (eg broadband and other products like cable) to consumers in the past, more recently the company has been operating as a wholesale carrier, with other operators using its network to deliver broadband to businesses and consumers. It will be interesting to see whether Vodafone plans to continue this business model, or use the network to launch its own broadband operation.

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