Savvis and Global Crossing: Could That Work?

June 15th, 2009 by · 1 Comment

Last week, comments by CEO John Legere of glbc  about M&A in the telecom sector were all but drowned out by the Sprint/Level3 joint venture rumor.  Certainly I let them pass at first, if only because they echoed earlier comments of his from several months ago.  It certainly does seem that the whole sector is available to talk consolidation right now, if unable to actually do anything about it.  But Legere did mention one rather intriguing option for his own company that I hadn’t put any thought into:  Savvis (news, filings) [a subsidiary of CenturyLink (NYSE:CTL, news, filings)] . 

Actually, such a combination would bring along some irony.  Savvis’s main assets these days are its hosting and colocation businesses that it purchased from Cable & Wireless when that company fled the US market.  Cable & Wireless had purchased them out of the Exodus bankruptcy, and of course it was Exodus that bought some 32 datacenters for something like $10B from, yes, Global Crossing back in 2000.  For those assets to travel as far as they have, only to come back home…  it’s almost like a story right out of AT&T (NYSE:T, news, filings), haha.

A combination of Global Crossing and Savvis does make sense on some levels.  The customer bases are mostly complementary, with Savvis’s strength in the financial sector adding to Global Crossing’s large corporate customers.  Savvis’s tier-1 network has become less important of late, but it is still out there and would definitely give Global Crossing’s IP network some extra scale in the transit market.  Finally, while I have made more of their need for metro fiber in the USA to cut costs, Global Crossing’s lack of a substantial colocation footprint in the US is also a source of higher costs.

That being said, the synergies from a GLBC/SVVS merger just don’t seem like they would be on the same level as those which might be achievable with another carrier.  Also, given the financials of the two companies, it is rather hard to see either one as the buyer.  A facilitator with deep pockets would be required, and those are hard to come by right now.  The problem right now is not finding viable combinations, you can’t throw a lasso at CompTel without roping two or three together that make sense.  It’s finding the money to make it happen that is hard.

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Categories: Datacenter · Internet Backbones · Mergers and Acquisitions

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  • Ronin says:

    Interesting post Rob. Given how leveraged GLBC is, SVVS has a slightly higher equity value. To your point, it is unlikley GLBC could finance a cash acquisition, but I doubt SVVS would want to sell for cash at these levels anyway. If the combination logic makes sense, who knows, they could propose a merger of equals and let both shareholders enjoy the upside.

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