CenturyLink recently announced the completion of its acquisition of Level 3, so we decided to explore the process behind the acquisition and our thoughts on what it could mean for the industry.

Growing The Network

Level 3 is a fiber company with a very strong global presence, and the network extends throughout the U.S. and across South America, Asia, and Europe. According to the press release from CenturyLink, the completion of this merger will create “a leading global communications company with extensive global footprint, and a strong product and IT services portfolio.” It is giving two public companies who would have struggled to compete with AT&T and Verizon a chance to be the second-biggest telecom force in the nation. There is no doubt that adding Level 3’s business-focused fiber services, including colocation, voice, and IP-based services to CenturyLink’s portfolio as a competitive LEC in many states would give customers another option when weighing network decisions. CenturyLink’s network now connects more than 350 metro areas, and includes 100,000 on-net buildings globally. That, added with the fact that CenturyLink has predicted a combined revenue of $24 billion, means that this merger has the potential to shake things up in the service provider realm. The press release from CenturyLink projects that 75% of the core revenue will come from business customers and strategic services.

*maps included are network maps from the company websites of CenturyLink and Level 3. From top to bottom: CenturyLink fiber network, Level 3 fiber network, combined network after merger.

 

Paths to Success

However, there will be challenges to overcome for this merger to bring the level of success they are forecasting. Both of these companies have already gone through a number of acquisitions before reaching this point – in the last 10 years, CenturyLink has acquired 6 smaller companies and Level 3 has acquired 3. That means that within these two (still separate) companies, there are different operating factions that require customers to know exactly what they need in order to get to the right services quickly. Now that these companies will be combined, the success of the merger will rely entirely on the success of the integration plan.

An important detail to consider with this merger is the issue of redundancy. With the combination of these 2 networks, any customer who was utilizing both will lose network redundancy. This means that any company that had routes with CenturyLink and Level 3 for the distinct reason that they were separate routes and companies (for failover in case of an outage) will want to consider a different plan once their contracts are up. Since the main thing driving a merger like this is maximizing network efficiency, the companies will likely move capacity around the new combined network and may not be able to maintain old contracted routes in their original state. Utilizing a third-party broker will be a customer’s best option, as they will be able to find another route or connectivity option that is closest to the current contracts.

CenturyLink has expressed confidence that the integration will be completed within a year. In order for that goal to be reached, they will have to sort out the new company leaders, eliminate duplicity of departments, and sort out their offerings and services before they will be ready for customers to purchase directly from them. These steps often do not follow a strict timeline, as there is a lot of trial and error and multiple avenues to inspect before they can be declared completed. For example, the first step when combining two companies into one in terms of staffing is often to offer early retirement to those who are close to that mark.  Unfortunately,  these staff members have often been at the company the longest and are therefore the most knowledgeable. This can slow down later steps in the process, as those who had been around for previous mergers are now no longer there for guidance. It is worth mentioning that these complications exist even without any FCC intervention, and anyone in the industry knows that following through with FCC standards can also be a complicated part of the process. This merger took 190 days to be approved by enough states, and that delayed a process that CenturyLink originally wanted approved by the end of September. In order for the deal to pass the United States Department of Justice, Level 3 also had to sell some of its telecom holdings in 3 different states. This will add another level of complication, as this changes the network slightly and operations for this change will have to be decided.

Planning for the Merger

Customers who want to take advantage of this merger would be smart to leverage a broker like NEF. Because these companies are both coming from a list of recent mergers separately, the assimilation of the services offered is not always customer-service friendly. Utilizing a broker who has known the companies separately and can get you an accurate quote or plan efficiently will make it easier for businesses to make the most out of this merger.

To learn more about  how NEF can help you plan or audit your network, contact us today.

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