Centurylink to Buy Level 3 for $34B in Cash, Stock

CenturyLink Inc. is set to buy Level 3 Communications Inc. for around $34 billion in its efforts to become a more competive player with AT&T and Verizon in the rapidly increasing heavy internet traffic for businesses.

The Level 3 acquisition values its stock at $66.50 a share which is over a 40% increase on previous trading levels. Centurylink and Level 3 have both had issues keeping pace with AT&T and Verizon in the corporate services market.

“We see this as addressing the opportunities in the enterprise business,” Level 3 Chief Executive Officer Jeff Storey said in an interview. “This is very consistent with the strategies at CenturyLink,” and will help us respond to things like the accelerating demand for network bandwidth, he said.

Relatedly, Zayo Group states that it isn’t afraid of CenturyLink’s pending acquisition of Level 3, but rather sees it as an opportunity to become one of the last largest independent fiber providers in the United States and pursue more network diversity.

Dan Caruso, CEO of Zayo, told investors recently that if CenturyLink completes the acquisition of Level 3, the service provider becomes less of a threat to its own customers.

“If you focused on the U.S. alone, it leaves us as the only independent provider who has significant fiber across the broadly defined U.S. with deep dense fiber network and intercity fiber and across many of the city routes,” Caruso said during the earnings call, according to a Seeking Alpha transcript. “I think that's really good for Zayo, I think that puts us in a position where we're kind of neutral, we're kind of an enabler of a broader set of customers, less of a rival to our key customers than say Level 3 would have been, had it not been combined into CenturyLink.”

Caruso added that with CenturyLink taking up a larger share of fiber throughout the U.S., some of their customers could potentially turn to Zayo to provide a secondary redundant route for their traffic.