Today, CenturyLink announced that it is acquiring Level 3 Communications in $34 billion deal that will result in the creation of the second largest domestic communications provider for global enterprise
customers, according to the companies. Both are pitching the latest major telecom merger as an opportunity for enterprise clients.
“The combined company will have the ability to offer CenturyLink’s larger enterprise customer base the benefits of Level 3’s global footprint with a combined presence in more than 60 countries,” the firms said in a statement today. “In addition, the combined company will be positioned to further invest in the reach and speeds of its broadband infrastructure for small businesses and consumers.”
Expanded Footprint
Level 3 Communications is a provider of local, national, and global communications services to enterprise, government, and carrier clients, while CenturyLink is a global communications, hosting, cloud, and IT services company. Both have global footprints, with CenturyLink owning more than 55 data centers in North America, Europe, and Asia, while Level 3 services customers in more than 60 countries.
The newly merged entity will be better positioned to respond to and meet the evolving needs of its enterprise customers, according to Jeff Storey, president and CEO of Level 3, The acquisition will expand CenturyLink’s fiber optic network by some 200,000 miles, including 64,000 miles in 350 metropolitan areas and 33,000 subsea route miles connecting multiple continents.
“Overall, the complementary domestic and international networks will provide cost efficiencies by focusing capital investment on increasing capacity and extending the reach of the combined company’s high-bandwidth fiber network,” the company said.
Enterprise Client Powerhouse
The merger will also create an enterprise Internet service provider powerhouse, with 76 percent of the company’s combined revenues expected to come from enterprise clients. Given the complementary nature of the portfolios, the combined company will offer a broader range of services and solutions with more bandwidth and new applications, the companies said.
The merger is expected to close sometime during the third quarter of next year. However, Level 3 and CenturyLink will have to jump through a number of regulatory hurdles before the deal is approved, including an antitrust review under the Hart-Scott-Rodino Act, and a review by the Federal Communications Commission (FCC). Some state and local regulators may also want to weigh in on the merger, particularly in areas where the two may have overlapping footprints that could give them monopoly or near-monopoly status.
Such hurdles won’t necessarily prove to be deal-breakers in this type of situation, however. If the FCC (or Congress, in the case of the anti-trust review) decide that the merger gives the combined entity too much control over specific areas or markets, the deal could still be approved on the condition that they spin-off or sell certain assets.
