Could CenturyLink and Level3 Communication be the next mega telecoms merger?
Hot on the heels of the AT&T-Time Warner deal (here), sources are awash with rumors that the next super telecoms merger is on the way. According to people in the know, the deal would create an enterprise telecommunications player worth more than $50 billion, including debt.
Unlike the AT&T-Time Warner deal, this telecoms merger is focused squarely on the enterprise opportunity. It would combine Level 3’s enterprise services with CenturyLink’s network that provides Internet and telephone offerings to millions of customers.
The market for corporate customers’ voice and data services has been estimated by analysts to be worth anywhere from $57 billion to $100 billion in revenue per year.
The deal could be announced as soon as next week.
CenturyLink, traditionally a rural local-phone-service provider, has sought to upgrade its network with fiber-optic lines in a bid to compete with AT&T Inc., Verizon Communications Inc. and rivals in the cable industry. The company has also branched into hosting and cloud services, though lately it has been looking to sell some of its data centers. CenturyLink operates more than 55 data centers, according to its website.
The US wireline business of running telephone and internet lines has suffered from brutal competition over the past 15 years, hurt by plummeting prices for network bandwidth and high capital costs.
The possible telecoms merger also illustrates both companies’ dwindling acquisition opportunities in the sector after years of consolidation. Both companies have historically been acquisitive. In 2014, Level 3 bought TW Telecom for about $6 billion. In 2011, it bought rival Global Crossing Ltd. for roughly $2 billion.
CenturyLink, formerly called CenturyTel, has also been a voracious acquirer. In 2011, it bought Qwest Communications International for $11 billion and Savvis Inc. for about $2 billion, two years after it purchased Embarq Corp. for about $6 billion. [WSJ]