FCC Clears CenturyLink-Level 3 Combination

By Drew FitzGerald and John D. McKinnon

CenturyLink Inc. and Level 3 Communications Inc.'s proposed merger cleared its last government hurdle nearly a year after the two telecommunications companies announced their combination.

The Federal Communications Commission approved the deal Monday after similar nods by state regulators and the U.S. Department of Justice earlier this year.

Worth $25 billion when it was announced in 2016, the deal's close was delayed for weeks as regulators took their time to review its competitive effects. The Justice Department approved it earlier in October after executives agreed to sell off some of the companies' fiber-optic infrastructure.

CenturyLink Chief Executive Glen Post plans to run the company, which will keep its CenturyLink name, until 2019, when he hands its management over to Level 3's CEO, Jeff Storey. The companies, which together employ more than 50,000 people, agreed to the succession plan in response to pressure from large investors.

The merger will create a global telecom giant that gets roughly three-quarters of its revenue from business customers, though that market has also challenged both companies.

CenturyLink's shares have slid more than 25% this year as its residential phone customers switch to cable service. Level 3's revenue has also wavered as competition cut into prices for telephone service and internet bandwidth. Its shares are down nearly 10% this year.

The cash-and-stock deal, structured as a CenturyLink takeover but closer to a merger of equals, prompted investors to question who would steer the new company and where it would be based. The companies settled the issue earlier this year, leaving headquarters at CenturyLink's Monroe, La., campus but putting Level 3's Colorado-based boss Mr. Storey in line to eventually assume the top job.

"I'm not moving to Monroe," Mr. Storey said in an interview earlier this month. "I will remain in Denver, but we're a global company. We're going to locate people where it makes sense for the business."

Meanwhile, Mr. Post said in the interview, the company hasn't determined how many jobs it will cut but expects that most of the savings from the deal will come from merging infrastructure, "creating a foundation for future growth."

Mr. Post also said the company is committed to maintaining residential service in the states where it operates. CenturyLink's fiber-optic service has taken some broadband customers away from local cable companies, though its video service has been a drag on earnings.

"The content costs have gone up significantly in the video business," Mr. Post said, adding that the company needs to find ways to partner with other companies to deliver cable-like video service more efficiently.

Write to Drew FitzGerald at andrew.fitzgerald@wsj.com and John D. McKinnon at john.mckinnon@wsj.com

(END) Dow Jones Newswires

October 30, 2017 15:59 ET (19:59 GMT)

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