FCC, DOJ Finally Give Level 3 and Global Crossing the Green Light

September 29th, 2011 by · 10 Comments

It took five and a half months, but Level 3 Communications (NYSE:LVLT, news, filings) finally got what it has been waiting for.  The FCC and the DOJ have now approved the company’s purchase of Global Crossing.  The two companies now say they may complete the merger as early as next week.  Certainly they won’t waste any time. Actually, I had always thought the timing might work out for an October 1 close – it had always seemed like a likely target date for all concerned.  

What I did not expect was that it was the US regulatory process that held things up this far, considering the consolidation of so much of the very dynamic IP transit world under one roof in one fell swoop.  Apparently the South American countries that slowed Global Crossing’s Impsat purchase a few years back were rather more nimble on their feet.

Whatever.  Now the integration begins.

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Categories: Internet Backbones · Mergers and Acquisitions

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10 Comments So Far

  • Carlk says:

    This is great news for U.S. and global citizens who just got a boost to their internet connections including expanding their eye balls further around the globe.

    Considering the mammoth task of measuring and monitoring this transaction, I think a well deserved round of applause should be directed at all Federal, State and International agencies who worked so hard at approving the deal.

    Same goes for the Level 3 and Global Crossing management teams.

    Then of course, Morton, who watched that arbitrage spread like a hawk and whose prediction far exceeded certain Wall Street analysts, like Donna Jaegers, of DAD. I think she owes (3) an upgrade! 🙂

  • anon says:

    Congrats to the L3 team. The L3-GX-Broadwing-WilTel-ICG-Progress-Telcove-Genuity roll up now stands as perhaps the largest and most pervasive fiber optic network on earth. Great map, great assets, extra conduits and multiple paths.

    But… those darn accountants say that the Company has negative Return on Assets, no ROE, $12B in negative “retained earnings”, NO NET TANGIBLE ASSETS AT ALL and LT debt that is somewhere around 8x or 9x EBITDA (depends on what is measured and which period, forward vs trailing, etc).

    Which leaves the $10 Billion Dollar Question: Can this outstanding collection of assets make money??

  • Dan says:

    I’m betting it can make money, and that it will be going gangbusters within a year.

  • Papa says:

    I predict a smooth integration ( lots of experience), an aggressive expansion into prime markets, and a triple of the stock within 3 years. Pull your pants up and get your boots on. This will be an exciting ride up. Crowe is no fool, this is what he has been building 10 years for.

  • Carlk says:

    Hmm, nearly five years later from $6.50 pps, and more than 50 percent conservative PP&E to $37.5 PP&E since merging with GLBC’s assets, and $4.50 is your target?

    Are you certain that Crowe is not a fool for enduring such an abysmal return on investment capital?


    Maybe it’s the fact that his skin in owners’ game comes off of the backs of other peoples real money only because of the grace of a corporate printing machine administered by a compensation committee of masochists pulling from the “stock shelf” for jobs poorly done?

    For that he’s no fool, I guess, in what has continued to be a “lather, rinse and repeat the process” while “kicking the can” further down the road, not to mention “relying on the kindness of strangers” who during the last “integration mess,” took their pound of flesh in fifteen percent of the company’s value during that snapshot in time.

    But adjusting for that, the stock price would be 20 percent higher than your target to $5.50 pps excluding Global Crossing.


    Note to Storey: Silence is golden, but especially when having been focused “maniacally” on sales with seamless end to end global connections makes the ROI’s turn heads in “shock and awe” commensurate with such great “risk.”

    Just remember that, Jim Crowe knows, “We don’t sell cotton candy” at Big (3)!

  • Carlk says:

    Did I say $37.5B as in BILLION of “conservative” property, plant and equipment?

    Not at first forgetting the B, but “You’re Damn Right!” as in Charlie Munger.

    For students of the market who care to know and learn about the dubious insider game that it is–“rigged,” as Jack Bogle called it recently–what can be gleaned from thid ongoing LVLT story or saga inside the modern financial markets are the fact behind understanding the various forces inside and outside the organization that continuously play tug a war while gnawing and tearing away from public market pools’ “wealth.”

    There should be laws against it, or at least the right checks and balances internally that will not tolerate compensation of any type or kind in concert with under performance!

    Back to this masochistic compensation committee, a seemingly good ole boys network intent on practicing a form of nepotism at Level 3. 🙁

    One hundred billion dollar addressable markets working from a paltry base of $6B? It’s damn well time to prove it with a FACTORY that’s HUMMING at burning BITS 24/7!

    In Deutschland where TMobile is born from, their shareholders would have said, Genug!, to Jim Crowe a long time ago!

  • anon says:

    it is great to hope and declare that L3 will produce profits in excess of their cost of capital. to date, they have not done so. the issue appears to be customers and revenues, vs “assets” and “plant” which are no doubt substantial. but GM had alot of assets, too

  • Carlk says:

    You dismiss nearly 100 years of GM history when implying in your analogy that GM had never been an American iconic brand nor considered a bellwether company by “Mr. Market” standards. They were at various periods of their cycle before and after The Great Depression.

    On the other hand, Big (3), remains a perpetual down story excluding the period of when it remained just an IDEA, and the $37.5B build out was still thirteen years in front of them!

    Please be more careful in making analogies without taking into account century long historical comparisons of the companies you choose to compare and contrast.


    General Motors stock was first publicly traded on the NYSE (New York Stock Exchange) on December 20, 1916.

    During the Stock Market top in 1929, General Motors reached a high of $91.75 per share, then fell to $40.00 after the Black Monday and Black Tuesday meltdown in October of 1929 to finally settle at $10.125 on July 28, 1932 which was towards the bottom of the greatest Bear Market in history.

  • anon says:

    thanks Carlk. Not dismissing GM in the 1920’s or whatever. i don’t care about ancient history — making a completely different point. Which is that “great assets” does not equal or create a great business.

    Plenty of companies claim to have great assets, but the cost basis of those assets and the associated revenue/earnings production of the assets are the key areas of focus. if one has $1B in “great assets” but $3B in liabilities, the great assets owner is insolvent. if a company has alot of assets and a (let’s say) 10% cost of capital, then using those assets to generate a (let’s say) 6% return on assets does not add value (it serially destroys value, see, e.g., CLECs).

    The open question remains whether L3-GX-BRW-ICG-ETC can accomplish together what each (spectacularly) failed to achieve apart..

  • Carlk says:

    anon, that’s great stuff! Thank you.

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