In an SEC filing today, lvlt announced a major new contract [1] with a ‘major multinational customer’ whose name they can’t tell us. The contract, apparently signed June 4, has a 20 year term and a minimum commitment of $140M in the first four years – that’s pretty substantial as contracts go. In the hours since the filing, I have been peppered with emails asking for comment on a) who it might be, and b) what it might be for. Now, I have no inside information on the subject, but since I’ve never let that slow me down before here are some brief thoughts:
- What’s it for? One doesn’t sign a 20 year contract unless its for long term infrastructure. Other services, like voice or IP transit or CDN, have markets that are too dynamic. They might be part of the overall package, but the core of the deal is likely about fiber and raw transport on a nationwide basis. Given how longhaul capacity is a commodity these days, this is probably all about metro access nationwide for someone needing to build out a network ASAP – i.e. wireless backhaul.
- Who could it be? A long term infrastructure deal like this seems to be is likely to come from someone who feels that it isn’t likely to find favorable deals with vz or t, i.e. working with them long term may be strategically flawed.
- Is it Sprint? It’s possible, but only if the rumors of joint venture discussions were wrong or rather late. It would imply that the ‘network sharing’ discussions came first and were already fruitful, and that the JV idea [2] came afterward and the sources the WSJ depended on were clueless. Possible? Yes. But I actually doubt it happened that way.
- If not Sprint, then who? My immediate guess would be a wireless carrier with major nationwide 3G and 4backhaul needs and no ILEC to supply it. In other words, probably T-Mobile but in theory it could also be Clearwire I guess.
- Is this a huge deal for Level 3? It very well might be. On the other hand, it is possible that the customer is already spending this much money ($35M/year) with Level 3, and that this simply writes existing revenue into a new contract vehicle. Frankly, it’s most likely somewhere in between.
We won’t be able to tell the real impact of this deal until we see actual revenue growth result from it. But of course, any big contract win at Level 3 is a good thing for them these days.
19 Comments To "Level 3 Lands a Big Fish"
#1 Comment By Brendan On June 17, 2009 @ 9:59 pm
Rob,
To me it makes sense that it could be Sprint. You talked in your previous article about the possibility of Sprint using the Level 3 network at discount. Doesn’t this deal fit that description? They set a minimum value, which would make sense if Level 3 is giving them a type of “wholesale” rate. If they have been talking to Sprint for nearly a month, this seems to be a reasonable time frame for this deal to happen.
#2 Comment By Rob Powell On June 18, 2009 @ 3:12 am
As I said, it’s possible. It fits in some ways, but not others. I would think that a Sprint outsourcing would be larger. Also, it would likely involve a whole lot of backbone wavelengths, so if true we will probably see it quickly in Infinera’s books.
#3 Comment By Bill On June 17, 2009 @ 10:39 pm
Telefonica
#4 Comment By Rob Powell On June 18, 2009 @ 3:08 am
But we already have the Telefonica contract by name, why would the contract terms allow the publicity initially and not later?
#5 Comment By SS On June 18, 2009 @ 1:03 am
Doesnt Sprint have its own backbone? or it that full?
#6 Comment By skibare On June 18, 2009 @ 7:52 am
any win for 3Pig is a Wind Wind situation……..ok, cheap plug 4me
my bet is just like U, Tmobile 4Europe and America……..run piggie run!!!
#7 Comment By NoVA On June 18, 2009 @ 8:54 am
Probably Time Warner Cable. Level 3 bid on providing a national dark fiber network for them several months ago along with a few other carriers & L3 was thought to have won the contract.
#8 Comment By Rob Powell On June 18, 2009 @ 9:19 am
As ES says, I wouldn’t classify TWC as a multinational. However, thank you for that tidbit on the dark fiber RFP, it is interesting in its own right.
#9 Comment By ES On June 18, 2009 @ 9:15 am
TWC is not a multi-national. Rob is right about Telefonica. Tmobile is probably a very good guess.
The other interesting point to ponder is that this deal almost makes the Sprint deal more likely given the peculiar timing. Why strike this deal when you did and announce it weeks later unless you were trying to gain the upper hand in negotiations with Sprint or even Qwest.
#10 Comment By Level14er On June 18, 2009 @ 10:03 am
My guesses are Google or Time-Warner Cable on a Dark Fiber contract. The standard Term for DF is 20 years.
#11 Comment By Dave Rusin On June 18, 2009 @ 10:16 am
How about a partnership with a global integrator of IT — like IBM?
#12 Comment By Rob Powell On June 18, 2009 @ 10:19 am
I think an IBM contract would not promise revenue in advance of actual sales to its own customers. Unless they are building a network of their own…
#13 Comment By ES On June 18, 2009 @ 11:13 am
IBM also signed a deal with Qwest here recently.
#14 Comment By Bill On June 18, 2009 @ 11:41 am
I estimate the residual SBC voice revenue was approximately $35 million in Q1 2009. Most likely T does not have network to carry this traffic and it wants to avoid cap ex spending. Finally T would a strong interest in keeping such a contract secret.
#15 Comment By Frank A. Coluccio On June 18, 2009 @ 2:39 pm
It’s probably a long shot, but like yourself, Rob, that never stopped me either 😉
As for the who and why combined, possibly the NYSE direct, or through the agency of one of the metro players already mentioned. See:
[3]
#16 Comment By Anonymous On June 19, 2009 @ 10:49 am
It is Google Voice.
#17 Comment By MBW On June 19, 2009 @ 1:53 pm
I would guess it is a reterm of the FT backbone.
#18 Comment By ES On June 19, 2009 @ 5:57 pm
I said it before but the way that press release reads, between the line feels like Google. Google voice though doesn’t seem to have capacity needs – the only datapoint you could try and draw a trend to is the recent WiMax conference and the news that there would be MVNOs begun this year by at least one operator.
#19 Comment By Brendan On June 20, 2009 @ 1:32 am
Rob,
Any guesses on whether this Google Voice rollout could be the recent contract?