That’s the rumor that hit the markets earlier today. The idea that the CenturyLink and Level 3 could come to an agreement on each other’s value is a bit surprising to me, but less so than in the past. The markets are taking it seriously, as both company’s stock prices were up around 10% on the day, though that suggests maybe they aren’t sure who is buying who here. But let’s take this a piece at a time just to lay the idea out there for thought.
First, what would the numbers look like? As of right now, CenturyLink has a $16.9B marketcap and net debt of around $20B, and it’s revenues are in the $17.8B range. Level 3 has a marketcap of $18.65B and net debt of about $10B, and it generates about $8.3B in annual revenue. Combined the two would have $26B or so in revenue and an enterprise value of $65B. That’s a big company, but still nowhere near the AT&T’s and Verizons of the world.
Now, how about the assets? In terms of longhaul assets, such a combination would put a big fraction of the most recently built national longhaul conduit and dark fiber into the hands of one company. All the big dot com era builders under one roof at last… will regulators notice? Meanwhile, Level 3’s national metro depth would be merged with CenturyLink’s incumbent western territories to potentially great effect. And CenturyLink’s cloud and data center assets combined with those of Level 3’s would be similarly interesting, though with unclear resolution. I say interesting, but what I’m really thinking of is the integration. This would be the granddaddy of network integration projects. There would be plenty of synergies to be had, but a whole lot of sweat would go into extracting them.
And how about the people? Level 3 has 12,500 in its organization, give or take a few. CenturyLink has 43,000. All deals like this would mean layoffs of course, and plenty of them. It has to be that way to make enough synergies to get the numbers to work out. But there would be added complications of the different cultures of the two companies to be sure. And of course, 16,000 of CenturyLink’s are unionized.
Do I believe it? I don’t know yet. I mean… the deal could be announced tomorrow, or it could just vanish into the ether like all the rest. I can’t help but feeling there is another shoe somewhere waiting to drop. Is Level 3 + CenturyLink the final product, or just the means to another end that neither can pull off alone?
Here’s one wild speculation for you. Maybe this combination works even better if Google Fiber is combined, with Google as a minority partner but still with a stake and influence and now with real infrastructure expertise to back up the access dreams it has now paused.
Or, if it’s wireless that’s missing, how about Sprint or T-Mobile USA added into the mix. Either one, doesn’t really matter to the broader concept.
Hmmmm… going to be puzzling this one out for a while. Both companies report earnings next week.
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