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It looks like another big round of consolidation in the telecom industry with Thursday's news that CenturyLink and Level 3 communications are in advanced merger talks.
The Wall Street Journal, citing "people familiar with the matter," first reported that negotiations were taking place between CenturyLink and Level 3. On the heels of AT&T's announcement on Monday that it wants to buy Time Warner for $85.4 billion, this could be a second multi-billion merger. (See Merger Musings: TW + AT&T = ?)
The Wall Street Journal wasn't able to obtain any of the terms for the prospective deal or provide any insight on which company's leadership team would take the helm if the merger reaches fruition.
CenturyLink Inc. (NYSE: CTL) and Level 3 Communications Inc. (NYSE: LVLT) took vastly different paths to reach where they are today. CenturLink, which is headquartered in Monroe, La., started out as a rural phone provider before picking up Embarq in 2008 and Qwest in 2011. (Where have you gone, Joe Nacchio? A nation doesn't turn its lonely eyes to you.) Those deals propelled CenturyLink into the third-largest telco in the nation behind AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ), respectively.
Broomfield, Colo.-based Level 3 got its start in 1998 after it split off from a construction company. Level 3 was poised to be a major backbone player, but the dotcom bust took the wind out of its sales.
Despite nearly going bankrupt in the early 2000s, Level 3 found its footing in the enterprise space and turned itself into a large communications company with its purchases of rivals Global Crossing in 2011 and tw Telecom in 2014.
While CenturyLink has traditionally served residential customers with phone, Internet and, in some places, video services, it has been branching out into the business sector, which includes the launch earlier this year of its SD-WAN service, by installing more fiber.
In addition to its large fiber footprint in North America, Level 3 offers managed security, network, voice and data services across networks in Europe, Asia, Latin America and Africa, as well as dark fiber services.
While a hookup of CenturyLink and Level 3 would have been hard to fathom in the early 2000s (along with the current presidential election), both companies have firmly committed to virtualization in their networks. (See Level 3's Dugan: SDN/NFV Key to Enterprises' Digital Transformations and CenturyLink CTO Hussain Maps Out Virtualization.)
— Mike Robuck, Editor, Telco Transformation
