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Summary

CenturyLink just announced its agreement to acquire Level 3 Communications for $34bn, a move that will create a larger fiber-rich national carrier in the US and a larger global challenger for its enterprise business and customers. Both companies have a strong US presence and footprint, but they will combine their global assets to create a stronger global enterprise provider. CenturyLink said it expects the transaction to close in 3Q17, but Ovum expects it will take the full year with all the government oversight, approvals, and regulators involved.

CenturyLink + Level 3 creates a strong US player and stronger global enterprise player

The combination of CenturyLink and Level 3 will be much stronger competition to AT&T and Verizon for the US consumer market and especially the enterprise market. Among other assets, CenturyLink with Level 3 will have major fiber backbone and metro network assets in all major US markets, including the local incumbent footprint of the former US West. This combination will also provide stronger US competition for the network, IT, and managed services needs of federal, state, and other public agencies. Overall enterprise managed services will be enhanced as the merged companies start to integrate managed services, including their hybrid IT solutions portfolios.

Interestingly, both companies were starting to develop stronger portfolios around hybrid IT services for the large enterprise market. Globally, the two firms had some major strengths in connectivity, data centers, managed services, and some hybrid IT services but with some major gaps in coverage and portfolio. The combination won’t fill all the gaps, but it will start to develop a stronger enterprise global challenger in the UK, parts of Western Europe, parts of Asia, and Latin America. Ovum sees the combined entity representing slightly less than 4% of the global managed deals tracked by Ovum’s Global Deals Analysis. Mobility services are still one of the obvious major service gaps that will need to be addressed.

Ovum believes the approval process will take longer than CenturyLink projectsdue to the number of regulatory (federal and state) reviews and complexity within each company, but it should be completed by the end of 2017. As a byproduct, the combined entity will become one of the largest employers in Colorado.

Appendix

Further reading

"Acquisition of Level 3 by CenturyLink creates North American wholesale giant," TE0012-000586 (November 2016)

Author

Mike Sapien, Principal Analyst, Large Enterprise Services

mike.sapien@ovum.com

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