Level 3 to acquire Global Crossing for $3 billion

Level 3 to acquire Global Crossing for $3 billion

Summary: With the combination, Level 3 will operate networks in 50 countries with connections to 70 countries overall. The combined companies have more than $6 billion in annual revenue with adjusted EBITDA of $1.57 billion after cost savings.

TOPICS: Networking

Level 3 Communications said Monday it will buy Global Crossing in a stock swap valued at $3 billion.

The merger illustrates how the telecom market is rapidly consolidating. AT&T gobbled up T-Mobile just last month.

With the combination, Level 3 will operate networks in 50 countries with connections to 70 countries overall. The combined companies have more than $6 billion in annual revenue with adjusted EBITDA of $1.57 billion after cost savings.

Under the terms of the deal, Global Crossing shareholders get 16 shares of Level 3 for every share they own. The deal is values Global Crossing at $23.04 a share.

According to the companies, the new Level 3 will be able to cater to the local, national and global markets. It can also better target the enterprise.

Level 3 CEO Jim Crowe said in a statement that there's a "complementary fit between the two companies’ networks, service portfolios and customers." Level 3 said it expects to boost earnings via $2.5 billion in total synergies. Of that sum, 39 percent are network savings and another 49 percent from operating expenses. The companies only expect to save 12 percent of that $2.5 billion from the capital spending cuts.

One item to watch in this deal will be the impact on Level 3's content delivery business. Level 3 won Netflix over Akamai and Global Crossing could give the company a much larger footprint. The upshot: Akamai may increasingly look like a nice takeover target for a large telecom player.

Jeff Storey, president of Level 3, said on a conference call:

The whole CDN capability that -- both around the world now to really capitalize on the content markets, over the top, broadcast producer services, you will optimize the IP back bone as a result of that CDN capability but allow us to address opportunities with enterprise customers that heretofore we have not had a good offering so I see a significant opportunity there. And then let me round it out with the whole data center solution set which I think as talked to CIOs in the market today, the whole idea of a bit of a turnkey solution for transport hosting cloud-type services et cetera really does become the type of solution that a CIO need to simplify their business operation combined capability of the two companies around the world now will certainly make that a huge opportunity from a revenue point of view.

Topic: Networking

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  • This is good news for Netflix

    Does anyone smell Netflix takeover the world? I bet this will help netflix stick it to the Comcast, TWC, AT&T's. Should allow netflix to become more global and Hollywood will have to 'eat it'. I for one hope that Netflix sticks it to Holloywood studios and their draconian efforts to control content on every freakin' device
    • RE: Level 3 to acquire Global Crossing for $3 billion

      How's this good for Netflix? Their costs and contractual obligations are growing way faster than their cash flow. Having fewer service providers vying for their business, including telcos that compete with Netflix as content providers, does nothing to lower their costs.

      And if anything, it's the studios that are "sticking it" to Netflix with content deals that cost 10X more compared to just two years ago. The part that you're missing is that Netflix cannot exist without the studios, whereas the studios have lots of other streaming providers to sell their content, including Amazon and Dish/Blockbuster.

      Seeking Alpha has a very illuminating article about how unsustainable Netflix's business model has become. Look at the dollars, and with them adding high cost new releases and original programming to the mix, Netflix either looks more like a house of cards ready to collapse or a service ripe for tiered pricing.

  • Wrong

    DSLREPORTS says it's 2 Billion. I am inclined to believe dslreports. Stop inflating numbers for big headlines.
  • Holy S***

    The money is the least interest part of this article - anyone that's ever traced around either of those networks knows how massive this is - don't worry I did so troubleshooting routing issues between clients way back when... anyhow the numbers in the article show international connections but intercontinental ones are far more interesting if you ask me. L3 already has a few of the truly big pipes - wonder what others it just picked up. (Btw there really aren't that many international connections if you look at it from the US perspective. Unlike Europe most of our ties to the 'global' community is through a few big pipes in the ocean and some satellite we can't simply toss a Cat5 cable across a border.)