Level 3’s 2012 UK Acquisition: FibreSpan

February 18th, 2013 by · 10 Comments

During Level 3's earnings call last week, the company mentioned an acquisition if fiber in London they made in 2012. The deal wasn't  big enough to make the news, and there apparently wasn't enough revenue to be material in a financial sense - so it slipped between the news cracks. But it's not often a deal goes by without a mention here, so it's time to belatedly note that in August Level 3 acquired FibreSpan.

FiberSpan had metro fiber in London, a portion of which was leased from Scottish and Southern Energy Telecommunications relatively recently. They then leased some of that fiber a couple years ago to a subsidiary, AlgoSpan, a company that serves the financial vertical - specifically the HFT guys. Level 3 seems to have acquired the parent, and probably become the supplier to AlgoSpan while gaining the extra metro footprint while gaining substantial metro depth in the process.

I heard rumors of this transaction, actually, but never saw the news so I didn't follow up.  But FibreSpan's website directs to Level 3's now, so it did happen.  While it's a small deal in the grand scheme of things, Level 3's purchase reflects a type of M&A opportunity available in Europe that isn't well known here. There are many smaller regional or single market fiber assets like this that could be available elsewhere in Europe, and not just to Level 3.

A wave of consolidation in Europe seems to be starting to build, but most people are looking at combinations of incumbent providers and their various subsidiaries. The smaller stuff gets ignored, but could allow the relatively few independent pan-European operators to add enterprise depth and thus challenge those incumbents over ever wider geographies.

As for Level 3's earnings news itself, I'm still digesting the results and guidance and trying to update my model to reflect it.  The difficulty revolves around a hit to their costs beyond the one time items and beyond the Sandy/healthcare impact.  In simple terms, if revenue growth was decent and integration has been great, then EBITDA ex one time items plus Sandy and all that still should have been $15M higher and I don't know where it went.  And given the forward guidance for EBITDA of low double digit growth, it seems they're expecting it to not be a short term thing.  Updating of my model is still in progress, but the preliminary 2013 EBITDA outlook I come up with is rather less rosy than it was before - which is no doubt why the market has punished their stock price.

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Categories: Financials · Mergers and Acquisitions · Metro fiber

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10 Comments So Far


  • Kyus says:

    Hi Telecom Ramblings.

    I would like to point out that the article on Fibrespan is incorrect. Fibrespan has a network in Soho (central London) as opposed to Docklands. The article below is a lot more acurate.

    Kyus

    http://www.waterstechnology.com/inside-market-data/news/2208546/level-3-buys-fibrespan-to-bolster-london-metro-network-hedge-fund-services

  • Anonymous says:

    “Updating of my model is still in progress, but the preliminary 2013 EBITDA outlook I come up with is rather less rosy than it was before – which is no doubt why the market has punished their stock price.”

    What else is new with this pos company?

  • Anonymous says:

    Breauninger and Pang are the only hope for l3

  • CarlK says:

     So, what has Crowe done wrong?

     Charlie Munger gave me the courage to sell some time back, and I have never looked back while keeping a smaller stake for posterity. You might think about his sage advice also: “Walter Scott is a great guy, but Level 3 is too hard to figure.” And, Charles T. Munger is usually “Damn Right!” 

    I only have one thousand shares left for WEB to buy, and he can have them for $50.

    • therealcarlK says:

      WRONG, a thousand times WRONG I say, you scurrilous stooge. I have 1,200 shares. Soon the forces of Wrong Street and their like, basing their fortunes on cheap Portuguese labor and the manipulation of currencies across the “FREE” world will get what’s coming to them and …. sorry, I just lost my train of thought.

      Anyway, Munger said “Walter Scott is too hard to figure, but Level 3 is a great company” and not what you said– at least I think that’s what I heard.

      In closing, LOL IMO.

  • Anonymous says:

    omg…carlk, do you cyber-stalk every LVLT comment on the internet you find and add your senseless drivel?

    I clicked on the seekingalpha.com link someone posted above and you’re like a cyber-guerilla badgering the writer and everyone else who posted a comment, including the author when he responded to other commentors.

    I’ve never seen anything like it. To readers of TR your just some nut job who has this unnatural obsession with LVLT, and we’ve been forced to accept you just as we do the strange guy we all see outside the 7/11 holding a weird sign. But man, stalking every LVLT post you find on the internet is just too weird for words.

    I’m tired of reading your comments and quotes about Charlie Munger, Walter Scott and Warren Buffet like you’re their nephew. I’m tired of reading your never-ending WS conspiracy theories. If WS is bad, they’re bad for all companies, not just LVLT, so get over it already.

    Can you PLEASE just stick to facts and respond to people’s comments. Your tirades are distracting. You post comments that are so far off-topic and then respond to your own off-topic comments like their relevant. It’s all a bit too Norman Bates for me and I’m sure for others as well.

  • CarlK says:

    I’m seeking help for my Level 3 addiction. As of today, my doctor is committing me to a metro facility in Omaha. I will receive treatment for the next six months. Also, I am taking a prescribed medication called Zayo, which I take (3) times a day. Hopefully this cures my senseless drivel that I post on message boards. I apologize for saying all the wrong things that belong in the gutter of Wall Street. Especially, I’d like to say I’m very very sorry Enron Hubbard for saying bad things about you. Please forgive me.

    • Anonymous says:

      hah, outstanding, but way too coherent for carlk to write it. Not enough random CAPS, indecipherable phrases, mixed metaphors, incomplete thoughts, nonsequitors, professed loved for Scott, Buffet & Munger, vitriolic hate for Wall Street, and, of course, knee dropping mouth drooling love for LVLT.

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