On Friday, there were reports that Oppenheimer's Timothy Horan issued a research note suggesting that Level 3 Communications (NYSE:LVLT, news, filings) return to its acquisitive ways. Hmmm, given that I have beaten this drum more than once over the past year or two - I can't really let that pass without commenting, right? Horan picks glbc as the top target, followed by XO Holdings (news, filings), and then on to Sprint wireline and Qwest longhaul. Very familiar targets obviously, they're always on the list and from a relative likelihood perspective I don't disagree. Each is likely available at the right price, though nobody's quite sure what Icahn's price really is at XO.
On the other hand, while the credit markets have thawed since last year's financial ice age, they remain very chilly compared to those that fueled the telecom M&A markets of 2005-2007. I know that Level 3 would like to follow such a path if the timing is right, but for any of these three targets they would need quite a bit of help. Also, after Level 3's prior integration challenges and last year's tight capex budget, there actually remains a fair amount of work left integrating and tuning their current pile of assets.
So let's throw this open to the peanut gallery:
For now I've limited the choices to these four large backbone operators rather than add in everyone in the sector. To mention some other possibilities:
- Metro fiber - other than XO I this sector is not so underpriced anymore, and therefore it seems an unlikely place for Level 3 to make a move
- CDN - no targets spring to mind that would change things much.
- A CLEC- Revenue heavy targets with little fiber don't seem likely to me at this time, the synergies are there but would be difficult to extract.
- Europe - Hmmm, there are some real possibilities across the pond... Any thoughts?
If you haven't already, please take our Reader Survey! Just 3 questions to help us better understand who is reading Telecom Ramblings so we can serve you better!Categories: Internet Backbones · Mergers and Acquisitions