Broomfield-based Level 3 Communications said Monday it will acquire competitor WilTel Communications Group for $680 million.
The merger is expected to strengthen the 3,100-employee Level 3, which was one of several telecom companies that used fiber-optic line to create a nationwide Internet backbone during the late 1990s.
“This is good news for Level 3. It leverages the strength of both of our companies,” said Kevin O’Hara, chief operating officer. “It should go a long way toward eliminating questions about our future.”
The Tulsa, Okla.-based WilTel delivers voice, data, video and Internet services over a next-generation fiber-optic network.
The acquisition includes all of WilTel’s communications business, including a multi year contract with SBC Communications Inc. and WilTel’s Vyvx video transmission business. It does not include WilTel’s headquarters or the assumption of any of WilTel’s outstanding debt or mortgage obligations.
Level 3 will pay about $370 million in cash and issue 115 million shares of stock worth about $310 million in the deal in which it acquires WilTel from Leucadia National Corp.
O’Hara said WilTel is seen as one of the strongest companies in its sector. The combined Level 3/WilTel will reach 50 new markets and include 3,000 new “route miles” of cable, he said.
The consolidation is just one of several happening across the industry, said John Hodulik, a telecommunications analyst with UBS.
“The best thing players can hope for at this point is consolidation, and we got some of that today,” Hodulik said. “This represents rationalization in the market for wholesale capacity.”
It is too early to tell how the acquisition might affect WilTel’s 1,800 workers, although there is expected to be some layoffs, O’Hara said.
Leucadia shares rose $1.37, or 3.3 percent, to close at $42.96 on Monday on the New York Stock Exchange. Broomfield-based Level 3 shares rose 18 cents to close at $2.88 on the Nasdaq Stock Market.
The Associated Press contributed to this report.
Staff writer Beth Potter can be reached at 303-820-1503 or bpotter@denverpost.com.
