British mobile phone group Vodafone Plc
Buying CWW, which has issued three profit warnings since it split from the former Cable & Wireless in March 2010, would give Vodafone fixed lines that could relieve pressure on its wireless network and strengthen its position in corporate telecoms.
Vodafone is the last known suitor for the corporate telecoms group, whose shares closed down 2p or 5.9 percent at 33p, after India's Tata Communications Ltd
Analysts and hedge funds said Tata had indicated it would offer around 35 pence a share for CWW, compared to a range of 35 pence to 40 pence from Vodafone.
I think any offer needs to hit at least 40 pence to secure a recommendation, said one hedge fund. The fact that (Vodafone) got a third extension with such a short timeframe tells me the gap between them is close. They would not have continued talks otherwise.
Vodafone has until 1100 GMT on Monday to submit a bid or walk away.
A Cable & Wireless spokesman said: We are in advanced discussions. We are working towards a recommended offer.
One London-based analyst, who did not want to be named, said Vodafone was firmly in the driving seat in terms of pricing: If there's no bid, the shares will go back below 20 pence.
Analysts say the extra network capacity and boost to its enterprise business that Vodafone would gain by buying CWW had to be weighed against the amount of management time it would take to sort out the troubled group.
Investors could also be wary that it was the start of an M&A trend for Vodafone, they said.
I suspect they will come out on the side of bidding, albeit bidding low, one analyst said.
(Reporting by Victoria Howley and Paul Sandle; Editing by David Holmes)