8 Things To Know About CenturyLink's Blockbuster Acquisition Of Level 3

Joining Forces

Following speculation that the two telecommunications providers were in merger talks late last week, CenturyLink formally said Monday that it would buy Level 3 Communications in a deal worth about $34 billion. The combination will create a new market heavyweight, the second largest domestic communications provider serving global enterprise customers, according to the two companies.

Here are eight things to know about the pending mega-merger, and read more about the CenturyLink-Level 3 deal on CRN.

Terms Of The Deal

CenturyLink agreed to buy Level 3 Communications for about $34 billion in a cash and stock transaction. The deal will give CenturyLink about $10 billion in tax credits that Level 3 currently has on its books. CenturyLink will use less than $2 billion a year of the accumulated net operating losses as credit against taxes, executives for both companies said during a Monday morning conference call about the deal.

The acquisition values Level 3 at $66.50 a share, and the deal was unanimously approved by the board of directors at both companies, CenturyLink and Level 3 said in a statement Monday.

The Level 3 Network

Broomfield, Colo.-based Level 3 has a far-reaching fiber infrastructure that extends more than 100,000 fiber miles across North America, Europe, Latin America and Asia. Its robust footprint also includes 30,000 metro route miles and 35,000 subsea route miles.

Level 3's network, combined with CenturyLink's backbone, will give the new company the ability to offer CenturyLink's services in more than 60 countries.

CenturyLink Services

Monroe, La.-based CenturyLink differs from its carrier competition in that it's been touting itself as a network services provider, not a telecom provider, in recent years.

Today, CenturyLink offers a portfolio of software-defined networking services, as well as cloud and co-location offerings due to its footprint of 55 data center facilities. CenturyLink also has Internet of Things offerings, as well as security and professional services for enterprise and small- to midsize-business customers.

Combined Assets

Fortified with Level 3's fiber footprint, the new CenturyLink will include about 200,000 route miles of fiber. The network will include 64,000 route miles in 350 metropolitan areas and 33,000 subsea route miles that connect multiple continents, according to the two companies.

The merger also will substantially increase CenturyLink's number of on-net buildings -- ones it which it already provides service. The number of on-net buildings will increase by about 75 percent to approximately 75,000, including 10,000 buildings in EMEA and Latin America.

Growth For Business Services

Executives for both companies said the deal will give CenturyLink a greater competitive advantage, especially when it comes to networking services for business customers.

CenturyLink said that it will achieve "significantly improved" network capabilities that will help it become a "world-class enterprise player." In fact, the combined company will derive 76 percent of its revenue from business customers. The carrier added that 65 percent of the combined company's core revenue will be from strategic services.

Channel Strategy

CenturyLink and Level 3 have strong track records of successfully integrating companies, but both will operate as separate companies and it remains business as usual, John Delozier, vice president of CenturyLink's Channel Alliance, told CRN.

Delozier said that the transaction benefits all stakeholders, including CenturyLink's strategic and Channel Alliance partners.

"Once the transaction is complete, our combined company will be able to provide even more opportunities to strengthen our relationships with industry-leading technology providers as the second largest domestic communications provider serving global enterprise customers," he said.

Management Ranks

CenturyLink President and CEO Glen Post (pictured) will continue in his role and preside over the new company after the transaction closes. Sunit Patel, executive vice president and CFO of Level 3, also will remain in his position within the combined company. CenturyLink has agreed to appoint four Level 3 board members when the deal closes.

The new company will be based in CenturyLink's existing Monroe, La., headquarters, but the two companies said it will maintain a "significant presence" in Colorado where Level 3 is based today, within the Denver metropolitan area.

Regulatory Clearance

Some telecom companies have run into regulatory challenges when putting a deal on the table, as evidenced by the Comcast-Time Warner Cable acquisition that fell through in 2015.

But industry pundits – as well as channel partners -- are predicting success for the CenturyLink-Level 3 merger based on the company's sizes and scope. Some partners have told CRN they believe the deal could help give customers a viable option to industry heavyweights AT&T and Verizon.

The deal already has been approved by CenturyLink's and Level 3's board of directors but still will need approval from the Federal Communications Commission and other regulators. CenturyLink and Level 3 expect the deal to close in third-quarter 2017.