High-speed Internet network operator Level 3 Communications is gobbling up a major competitor in Broadwing Corp. for $1.4 billion in cash and stock.
The deal, announced today, shrinks the number of major independent fiber-optic network operators to three Level 3, GlobalCrossing and XO Communications. The companies own thousands of miles of high-capacity fiber that carry Internet traffic for business customers. They also provide access to the network to smaller phone companies at wholesale prices.
Analysts say consolidation will help the industry compete against larger operators such as AT&T.
We believe the ongoing consolidation is a significant positive for the domestic telecom services industry as a whole, enhancing the value of assets in what were hyper-competitive areas, UBS analyst John Hodulik said wrote in a research note. The deal leaves GlobalCrossing and XO as the two major independent long haul providers on the short list of potential future acquisitions in the space.
Under the terms of the agreement, Broomfield-based Level 3 will pay $8.18 in cash plus 1.3411 shares of Level 3 common stock for each share of Broadwing common stock.
In total, Level 3 expects to pay $744 million in cash and issue 122 million shares.
Broadwing, based in Austin, Texas, delivers data, voice and media solutions to enterprises and service providers over its 19,000 mile intercity fiber network. About half of Broadwing s revenue comes from the wholesale market, with business customers comprising the remaining revenue.
The acquisition of Broadwing is consistent with both the Level 3 wholesale market strategy as well as our more recent entry into the enterprise market, Level 3 chief executive James Crowe said in a statement.
