Cable & Wireless (C&W), the international telecoms carrier, confirmed today that it had made a bid approach for its rival Thus after a 12 per cent jump in the share price of the Scottish business telecoms company.

C&W is keen to remove competition in the UK where its business has struggled to make a profit. Last week it revealed UK full year profit of just £45 million on turnover of £1.9 billion.

Bill Allen, chief executive of Thus, has also frequently complained about rivals undercutting prices in the UK market. The company has never made a profit although full-year figures published last week showed that losses were reducing and cashflow would soon turn positive.

In a statement that acknowledged the Cable & Wireless approach, Thus said it was confident in its future as an independent group.

"The board remains focused on delivering maximum value for shareholders and will evaluate any proposal from any third party against the value that the company can deliver as an independent group," the company said.

It added that there could be no assurance that any offer would be forthcoming and urged shareholders to take no action.

Thus recently completed the integration of two acquisitions and has little debt. Its shares rose further on confirmation of the bid and were up 20 per cent, or 21.5p, at 131.5p by 1.20pm, putting its market value at around £220 million.

The telecoms group, which employs 1,700 people, was part of ScottishPower until it was floated in 1999. It owns Demon broadband and counts as clients large businesses and public sector bodies.

C&W has £243 million of cash and is in talks to sell its £2 billion pension fund. A combination of Thus and the pensions-free C&W could clear the way for a break-up of C&W into its loss-making UK arm and its cash-generative international business.

C&W shares edged down 2p to 162p on the news.

Separately, C&W announced today that it has signed a five-year £100 million contract with Tesco to create a new telecommunications network for the retailer.

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