CenturyLink, Level 3 In Talks to Combine -- WSJ
October 28 2016 - 3:03AM
Dow Jones News
By Dana Mattioli and Dana Cimilluca
CenturyLink Inc. is in advanced talks to merge with Level 3
Communications Inc., a deal that would give the
business-telecommunications companies greater heft in a brutally
competitive industry.
A deal could be announced in the coming weeks, according to
people familiar with the matter. As always, there is a possibility
the talks could fall apart.
Terms of the deal couldn't be learned. As of Thursday afternoon
before the Journal's report of the talks, Level 3, based in
Broomfield, Colo., had a market value of $16.8 billion.
CenturyLink, based in Monroe, La., was worth $15.2 billion.
Shares in Level 3 were up 11% at $52.28, while CenturyLink
shares were up 8.3% at $30.58 on Thursday afternoon after the
Journal's report.
CenturyLink gets about two-thirds of its revenue from business
customers, while Level 3's comes entirely from that segment.
Level 3, which traditionally focused on so-called enterprise
customers, was one of the biggest telecom operators to survive the
dot-com bust. The company runs one of the largest internet
backbones in the world but has turned its focus increasingly to
small and midsize business in an attempt to reverse slowing sales
growth in its core business.
Year to date, the company's stock had fallen more than 14%
before the talks were reported. Singapore state investment firm
Temasek Holdings Pte. Ltd. is Level 3's largest shareholder, with
18% of its stock, according to FactSet. Level 3 is scheduled to
report third-quarter earnings next week.
CenturyLink, traditionally a rural local-phone-service provider,
has sought to upgrade its network with fiber-optic lines in a bid
to compete with AT&T Inc., Verizon Communications Inc. and
rivals in the cable industry. The company has also branched into
hosting and cloud services, though lately it has been looking to
sell some of its data centers. CenturyLink operates more than 55
data centers, according to its website.
The so-called wireline business of running telephone and
internet lines has suffered from brutal competition over the past
15 years, hurt by plummeting prices for network bandwidth and high
capital costs.
The possible deal also illustrates both companies' dwindling
acquisition opportunities in the sector after years of
consolidation.
Both companies have historically been acquisitive. In 2014,
Level 3 bought TW Telecom for about $6 billion. In 2011, it bought
rival Global Crossing Ltd. for roughly $2 billion.
CenturyLink, formerly called CenturyTel, has also been a
voracious acquirer. In 2011, it bought Qwest Communications
International for $11 billion and Savvis Inc. for about $2 billion,
two years after it purchased Embarq Corp. for about $6 billion.
There has been a wave of deal making among technology, media and
telecom companies in the past couple years, with more than $750
billion struck globally just this year, according to Dealogic.
While that lags behind the tally up to this point last year, which
represented a high mark for mergers and acquisitions across the
board, it is more than in any other year since 2000.
On Thursday, semiconductor company Qualcomm Inc. agreed to buy
NXP Semiconductors NV in a $39 billion deal. It is the largest chip
merger to date and the second-largest marriage of technology
companies, after Dell Inc.'s recent acquisition of EMC Corp. for
$67 billion.
Overall deal volume is down from last year, but the gap is
closing as a number of blockbusters have been agreed to in the past
week, including AT&T Inc.'s $85 billion plan to buy Time Warner
Inc.
--Drew FitzGerald contributed to this article.
Write to Dana Mattioli at dana.mattioli@wsj.com and Dana
Cimilluca at dana.cimilluca@wsj.com
(END) Dow Jones Newswires
October 28, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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