CenturyLink today announced a deal to purchase Level 3 Communications in a merger that would give CenturyLink another 200,000 miles of fiber and make it a bigger player in the business network market. CenturyLink will reportedly pay $25 billion, and the deal is valued at $34 billion when accounting for the Level 3 debt that will be assumed by CenturyLink.
CenturyLink has nearly 6 million residential Internet customers in the US but makes about 60 percent of its revenue selling network services to businesses. Level 3 sells only to businesses, and 76 percent of the combined company’s revenue will come from business customers.
The companies hope to complete the merger by the third quarter of 2017. If approved by the Federal Communications Commission and other regulators, the deal will greatly expand CenturyLink’s fiber footprint in the US and overseas.
“This transaction increases CenturyLink’s network by 200,000 route miles of fiber, which includes 64,000 route miles in 350 metropolitan areas and 33,000 subsea route miles connecting multiple continents,” CenturyLink said. “Accounting for those served by both companies, CenturyLink’s on-net buildings are expected to increase by nearly 75 percent to approximately 75,000, including 10,000 buildings in EMEA and Latin America.”
Currently, CenturyLink says it operates a “250,000-route-mile US fiber network and a 300,000-route-mile international transport network.” Besides Internet access, CenturyLink offers cloud and managed hosting services for enterprises.
CenturyLink’s announcement didn’t make any detailed promises about improving broadband connectivity for US residents but said the merger will provide “increased opportunity to invest” in broadband infrastructure and speeds for small businesses and consumers.
In quarterly results announced today, CenturyLink reported revenue of $4.4 billion and net income of $152 million, while Level 3 reported $2 billion in revenue and net income of $143 million. Level 3’s revenue included $510 million in wholesale network services, $1.42 billion in enterprise network services, and $103 million in wholesale voice services.
CenturyLink will be seeking the FCC’s merger approval at the same time it opposes an FCC plan for changing how it regulates the business data services (also known as “special access”) market. FCC Chairman Tom Wheeler wants to phase in price cap decreases of 11 percent over three years, while CenturyLink argues that the FCC is ignoring evidence that the market is competitive. Business data services provide dedicated network connections for mobile phone providers, devices such as ATMs and credit card readers, and for various businesses, hospitals, schools, and universities.