CenturyLink to Buy Level 3 for $34B(bloomberg.com)
bloomberg.com
CenturyLink to Buy Level 3 for $34B
https://www.bloomberg.com/news/articles/2016-10-31/centurylink-agrees-to-buy-level-3-for-34-billion-in-cash-stock
107 comments
My experience is exactly the opposite. I have found Level3 to be slow and unhelpful.
This year we have seen a few outages due to this mismanagement of routing. When Easily avoidable mistakes are repeated, it raises a few questions.
Would you say you're paying more or similar for other transit, and are there any transit providers you have an unusually good experience with?
It's one of those industries where you have to negotiate with sales people (I hate doing this) to get any pricing information, and it's extremely difficult to gauge quality. That's why I added "take with a grain of salt" to my general perception comment.
Tip for ailing IP transit companies: put your damn pricing on your web site! AWS can do it, you can too. You often offer far better BW rates than the cloud providers do, but you do a horrible job showing it.
It's one of those industries where you have to negotiate with sales people (I hate doing this) to get any pricing information, and it's extremely difficult to gauge quality. That's why I added "take with a grain of salt" to my general perception comment.
Tip for ailing IP transit companies: put your damn pricing on your web site! AWS can do it, you can too. You often offer far better BW rates than the cloud providers do, but you do a horrible job showing it.
Has that Rockefeller vertical integration feel to it.
Yeah, with the acquisitions they've been making, you can use your home CenturyLink connection, which goes over the CenturyLink backbone cabling, over to CenturyLink's IaaS provider, which hosts an app deployed using CenturyLink's PaaS.
Yeah, with the acquisitions they've been making, you can use your home CenturyLink connection, which goes over the CenturyLink backbone cabling, over to CenturyLink's IaaS provider, which hosts an app deployed using CenturyLink's PaaS.
CTL is much stronger in the commercial space than they are in residential. Vertical integration is the name of the game in the commercial telecom space, and has been for 30+ years.
And really, think of CTL as a decades-long rollup of baby Bells in the north central / midwestern US and they make more sense -- just like AT&T is largely a rollup of the southern and western Bells and Verizon is largely a rollup of east coast Bells.
AT&T and Verizon were able to prevent Comcast from becoming a third national competitor (for now), but it looks like CenturyLink will just take their place. Look for them to get into cellular in more than an overbuilding capacity soon though. I will almost guarantee that Sprint ends up with Comcast and T-Mobile with CenturyLink -- though I also wouldn't be surprised if the opposite happens.
Our goal as people who use telecom services should be to get as much diversity in telecom as possible. Right now, it's a two-horse race: AT&T / Verizon and Comcast / Charter / Cox. If, in 10 years, we have a choice between AT&T, Verizon, Comcast and CenturyLink... that will be better.
Small, local competition for ISPs do not make sense over the long term. It may get you fast speeds over the last mile in the short-term, but doesn't get you a fast connection to everywhere else and the investment levels are going to be unable to keep up after the first generation. The oversubscription model benefits from national scale, and even a national last-mile telecom without a national fiber network will have problems matching the cost structure of their competitors (as we recently saw with TimeWarner Cable). The infrastructure doesn't scale operationally or financially otherwise.
And really, think of CTL as a decades-long rollup of baby Bells in the north central / midwestern US and they make more sense -- just like AT&T is largely a rollup of the southern and western Bells and Verizon is largely a rollup of east coast Bells.
AT&T and Verizon were able to prevent Comcast from becoming a third national competitor (for now), but it looks like CenturyLink will just take their place. Look for them to get into cellular in more than an overbuilding capacity soon though. I will almost guarantee that Sprint ends up with Comcast and T-Mobile with CenturyLink -- though I also wouldn't be surprised if the opposite happens.
Our goal as people who use telecom services should be to get as much diversity in telecom as possible. Right now, it's a two-horse race: AT&T / Verizon and Comcast / Charter / Cox. If, in 10 years, we have a choice between AT&T, Verizon, Comcast and CenturyLink... that will be better.
Small, local competition for ISPs do not make sense over the long term. It may get you fast speeds over the last mile in the short-term, but doesn't get you a fast connection to everywhere else and the investment levels are going to be unable to keep up after the first generation. The oversubscription model benefits from national scale, and even a national last-mile telecom without a national fiber network will have problems matching the cost structure of their competitors (as we recently saw with TimeWarner Cable). The infrastructure doesn't scale operationally or financially otherwise.
" If, in 10 years, we have a choice between AT&T, Verizon, Comcast and CenturyLink... that will be better."
CenturyLink is already one of the big players and they'll never enter markets that Comcast, ATT, or Verizon are already in. We're a small ISP and a Level 3 customer. I'm moderately concerned about what this acquisition will mean for companies like us in the long run. The hand that feeds us is now also a competitor.
CenturyLink is already one of the big players and they'll never enter markets that Comcast, ATT, or Verizon are already in. We're a small ISP and a Level 3 customer. I'm moderately concerned about what this acquisition will mean for companies like us in the long run. The hand that feeds us is now also a competitor.
> CenturyLink is already one of the big players and they'll never enter markets that Comcast, ATT, or Verizon are already in.
The market is drastically changing. Wireless has quickly become the center of the telecom industry; look for CTL to jump in there (which would put them in direct conflict with AT&T and Verizon). The FCC rules governing wireless are also a lot more favorable. CTL already overbuilds residential service on top of AT&T/Verizon/Comcast, albeit in select areas that are underserved.
There will still be market space for small ISPs in markets that are too small for the large players to serve (just like there are still small, regional wireless companies) but they'll be fighting over the scraps.
The market is drastically changing. Wireless has quickly become the center of the telecom industry; look for CTL to jump in there (which would put them in direct conflict with AT&T and Verizon). The FCC rules governing wireless are also a lot more favorable. CTL already overbuilds residential service on top of AT&T/Verizon/Comcast, albeit in select areas that are underserved.
There will still be market space for small ISPs in markets that are too small for the large players to serve (just like there are still small, regional wireless companies) but they'll be fighting over the scraps.
> CenturyLink is already one of the big players and they'll never enter markets that Comcast, ATT, or Verizon are already in.
They are entering Comcast's market in Seattle. A lot of places now have two options, where they only had one ~3 years ago.
They are entering Comcast's market in Seattle. A lot of places now have two options, where they only had one ~3 years ago.
They've been competing with Comcast in my area. I was lucky before I moved, I was about 30 yards from the DSLAM and was getting solid internet service from them for about $25 less per month than Comcast.
Then I moved to an area they're not servicing very well. My internet speeds went from 60mbs down and 7mbs up to a paltry 4mbs up and 1mbs down.
I had to switch to Comcast which wasn't so bad, but I got way better service from CL tbh. I've been told they're building out fiber in my area and their 1gb service will be available "soon".
Then I moved to an area they're not servicing very well. My internet speeds went from 60mbs down and 7mbs up to a paltry 4mbs up and 1mbs down.
I had to switch to Comcast which wasn't so bad, but I got way better service from CL tbh. I've been told they're building out fiber in my area and their 1gb service will be available "soon".
> They are entering Comcast's market in Seattle
They aren't really competitive in most of Seattle. 6-12 Mbit vs ~50 Mbit at the same pricepoint. I don't hate Comcast that much.
They aren't really competitive in most of Seattle. 6-12 Mbit vs ~50 Mbit at the same pricepoint. I don't hate Comcast that much.
>Small, local competition for ISPs do not make sense over the long term.
I would love a Glass-Steagall for the telecom industry – long haul and last mile not allowed by the same company. ISPs must peer at local exchanges. Add municipal ownership of the last mile fiber with ISPs leasing capacity to individual residences (allowing you to choose one of many) and the world seems ideal.
I'm lucky enough / chose my home such that I am served by a local ISP which is hooked up to a local exchange. It's great. The biggest bottleneck is usually WiFi, and after that peering. Having the last mile not be the weakest link is great.
I would love a Glass-Steagall for the telecom industry – long haul and last mile not allowed by the same company. ISPs must peer at local exchanges. Add municipal ownership of the last mile fiber with ISPs leasing capacity to individual residences (allowing you to choose one of many) and the world seems ideal.
I'm lucky enough / chose my home such that I am served by a local ISP which is hooked up to a local exchange. It's great. The biggest bottleneck is usually WiFi, and after that peering. Having the last mile not be the weakest link is great.
So now the "middle mile" ISP is completely undifferentiated and basically owns one router with some ports connected to the local exchange and some ports connected to the municipal last mile... Why bother? Why not just nationalize the whole thing?
The "middle mile" provides customer service, does advertising, installation, bundled services over IP (voice, TV, etc.), negotiates competitive rates and speeds; does things like colocating Netflix on their network to reduce peering costs. Their business is bridging the gap between customers and long-haul network operators.
It's basically enforced separation of the wholesale and retail markets. The roads that get you to brick and mortar stores are publicly owned, why not the last mile of fiber? Vertical integration is good for some markets, but markets where your customer is captive because you own the lines outside their house, vertical integration is terrible.
It's basically enforced separation of the wholesale and retail markets. The roads that get you to brick and mortar stores are publicly owned, why not the last mile of fiber? Vertical integration is good for some markets, but markets where your customer is captive because you own the lines outside their house, vertical integration is terrible.
>Why not just nationalize the whole thing?
Because the government only drives innovation when it's in competition with other governments (wars mostly). Give it a basic service to manage and it tends to do the shittiest acceptable job possible.
Interesting paper on the falling pricing of transit (2010) :
http://drpeering.net/white-papers/Internet-Transit-Pricing-H...
On the other hand, I understand transit is a commodity, but not sure I want to see what happens when a "too big to fail" company goes under, in countries that have heavily-privatized backbones.
On the other hand, I understand transit is a commodity, but not sure I want to see what happens when a "too big to fail" company goes under, in countries that have heavily-privatized backbones.
The paper is totally opposite (but make sense to me with increasing fiber deployed) what Cloudflare is saying[1] and the reason for removing PoPs from their free and pro plans
[1] https://blog.cloudflare.com/bandwidth-costs-around-the-world...
[1] https://blog.cloudflare.com/bandwidth-costs-around-the-world...
Fiber links are valuable long-term assets, and remaining competitors will generally be happy to buy them from a distressed company.
Happened here in Canada with Teleglobe. All their assets (mainly buried fiber links) were purchased for cheap by Tata Communication, which has been growing since.
Interesting, CL has such terrible customer service, perhaps Level 3 was treating customers too well and Century Link thinks they can help them with that :-)
It is interesting that CL seems to be operating out of the old MCI playbook. Here I thought the days of aggregating a bunch of ISPs into a mega communication company were behind us.
It is interesting that CL seems to be operating out of the old MCI playbook. Here I thought the days of aggregating a bunch of ISPs into a mega communication company were behind us.
>CL has such terrible customer service
I can vouch for this. We have a choice between CL and Comcast here for residential service and I've used both. CL has a pretty solid DSL service but $deity help you if you ever need to call in for some problem you're having with it. Expect to spend multiple-hours on the phone while you're put on hold for extended periods, have your call dropped, get routed to numbers that don't answer, and, if you're lucky, speak to a person who has no idea what you're talking about but might know someone who can help, "let me transfer you"... Rinse and repeat. The only good that I can say about CL is that their come-out-to-your-house techs seem to know more or less what they're doing and have solved DSL and analog line problems for me quickly and without additional pain.
I can vouch for this. We have a choice between CL and Comcast here for residential service and I've used both. CL has a pretty solid DSL service but $deity help you if you ever need to call in for some problem you're having with it. Expect to spend multiple-hours on the phone while you're put on hold for extended periods, have your call dropped, get routed to numbers that don't answer, and, if you're lucky, speak to a person who has no idea what you're talking about but might know someone who can help, "let me transfer you"... Rinse and repeat. The only good that I can say about CL is that their come-out-to-your-house techs seem to know more or less what they're doing and have solved DSL and analog line problems for me quickly and without additional pain.
Hey, they sent my account to collections twice after it was already closed for "non payment" even though it had a balance of zero. After the second conference call with the debt collector, the Century link accounts people and me to unwedge that mess I explained that if Century link did this a third time I would sue them in small claims court for the maximum amount allowed for harassment and punitive damages.
The article mentions this interesting detail:
"The deal also promises to help CenturyLink by giving it access to about $10 billion in tax credits that Level 3 is carrying on its books, Jennifer Fritzsche, an analyst with Wells Fargo Securities LLC, said last week."
Can anyone comment/speculate on why L3 has $10 billion in tax credits that is "carrying"?
"The deal also promises to help CenturyLink by giving it access to about $10 billion in tax credits that Level 3 is carrying on its books, Jennifer Fritzsche, an analyst with Wells Fargo Securities LLC, said last week."
Can anyone comment/speculate on why L3 has $10 billion in tax credits that is "carrying"?
So that's 35% of $10bn right there, paid for by the US government. You've got to love financial engineering sometimes.
$10 Billion worth of debt that is tax deductible as losses.
"Tax credits" :P
"Tax credits" :P
I was an employee for Level 3, coming from the Global Crossing acquisition, for around 17 years, choosing to leave early last year (and unlike most former Level 3/Global Crossing employees, this choice was not forced upon me).
Internally (and by, internally, I mean within my team, not within management or anyone who makes decisions of this nature), we'd always seen CenturyLink as an interesting prospect for merger. The two companies' footprints and businesses appeared to compliment each other. It was generally dismissed out of hand because of the consumer side of CentryLink. Level 3 (and even less so with Global Crossing), focused on carriers and Fortune 50-100 businesses as their core and shied away from the more expensive, less profitable consumer facing pieces.
A bit of history for those who weren't around in the 90s: When thinking CenturyLink, think Qwest (and commercials about the little motel in the desert with "Cable TV" replaced by media services delivering every television show and movie produced in the history of ever). They were one of the formerly local telecoms that expanded into long distance/fiber/internet after the 1996 telecom deregulation[0].
Level 3's business is Carrier and Enterprise with much of the Enterprise piece coming from the Global Crossing side of it because, at the time, we effectively couldn't compete with Level 3. We'd come in to bid a project at a price we could eek out a small profit on and would be undercut because they owned far more local which had the effect of lower cost of access and lower complexity for the company we were selling to. Our focus was Enterprise where the margins were higher, we could work with other carriers to provide the services (often Level 3) and step in with a better understanding (and willingness to "do practically anything" to win the contract -- our CEO, after all, was John Legere and the way he runs T-Mobile came from the way he ran Global Crossing: "Hug the Customer" was a mantra).
Level 3 (like all telecoms) is a run to the bottom as far as price is concerned. Cost of access is pretty much it in this business. The expense is so large it eclipses pretty much everything else. Being able to move more things onto your own network reduces that expense (and in-turn results in revenue from others paying you for access to those local components). This fits well with CenturyLink.
The rumblings of this deal internally were strong over the last few months (I don't work there any longer and I heard the rumors[1]). Since this had come up from time to time, I wasn't surprised to hear it again and it still came with the difficulty of figuring out how a deal like that would work. Internally, most employees assumed it'd be a Level 3 purchase of CenturyLink, but a look at the fundamentals of the two businesses made something like that wishful thinking on the part of employees who are really tired of all of the layoffs and really didn't want to see a large one that would come as a result of being purchased.
This will be an interesting transition for the employees of Level 3 proper. They're used to doing the buying and they're actually more used to being the company that comes in, strips the company they purchased (of staff) and imposing the "Level 3 way" on the purchased entity. It was clear that was their position during the Global Crossing merger and morale became greatly affected when some Global Crossing employees took leadership positions and imposed "The Global Crossing way" on Level 3. This resulted in a pretty dramatic culture clash that wasn't really resolved even by the time I left (which was shortly after the TW Telecom merger!). At least at that point they were still suffering getting the various pieces/parts of the company together and operating as a single, well oiled, machine. Adding this to the mix will further complicate those efforts. Level 3 was known for being good at making a purchase and bad at integrating that purchase. I think they did a better job with the Global Crossing and TW acquisitions, but "better" was in comparison to the "abysmal" job they did with the six that were there prior. They still have a history (and current?) reputation of shedding jobs about every 6 months (5-10% across the board) that despite having a better few years, didn't change after I left[3]. They have difficulties hiring top talent as a result, though I'm sure this problem exists across telecom unless you're one of the two big guys.
Apologies for the lengthy and poorly revised post. The speculation contained within is my own and has not been influenced by internal employees -- and may be wildly off since I haven't been an employee there for well over a year, but I thought I'd share in case it spurs further discussion that irons out some of the wrinkles. This will be an interesting change in the landscape of telecom, putting a really large competitor against some of the "bigs" who's reputation is best summed up by this SNL sketch: https://www.youtube.com/watch?v=CHgUN_95UAw
[0] Which is in and of itself a terrible description. It was less a "deregulation" than a "re-regulation" and like all government regulations of this kind, it defined a set of "winning and losing business strategies" in this sector that were different than the strategies that existed before. And a set of tricks/arbitrages that would create entirely new businesses designed to provide nearly free services by leveraging cost of access (in a quasi tariff style).
[1] Before I get anyone in trouble, the rumors I heard were not from people who would have been in any position to know about something like this and were little more than the speculation of previous years ... along the lines of "wouldn't it be great?". I was able to connect the dots, though, by discovering that certain of my former coworkers were unusually busy -- so busy that I couldn't get in touch with them due to their workload. Knowing what they were often involved in, and combining the increase in talk about CenturyLink led me to fully believe this deal was going to land at some point. As a result, I didn't do any stock transactions to avoid the appearance of having "insider information" that I didn't reliably or accurately have.
[2] A look at the fundamentals of both business indicated that as wishful thinking. It was clear to me if there was going to be a purchase, it was Level 3 who was getting bought.
[3] This was a small bit of my motivation for leaving. I'd been through 30-35 "Reductions in Force" and came out still employed and had continued to have the confidence of management up to the VP level, so I was not concerned about losing my job, but all of those "RIF"s take a toll on you. I'm still amazed, to this day, how efficiently our process for laying off employees had become. We had entire systems/applications built for the task and it was these sorts of things. That sort of thing bleeds into the culture of the company and it was a culture I had grown very tired from.
Internally (and by, internally, I mean within my team, not within management or anyone who makes decisions of this nature), we'd always seen CenturyLink as an interesting prospect for merger. The two companies' footprints and businesses appeared to compliment each other. It was generally dismissed out of hand because of the consumer side of CentryLink. Level 3 (and even less so with Global Crossing), focused on carriers and Fortune 50-100 businesses as their core and shied away from the more expensive, less profitable consumer facing pieces.
A bit of history for those who weren't around in the 90s: When thinking CenturyLink, think Qwest (and commercials about the little motel in the desert with "Cable TV" replaced by media services delivering every television show and movie produced in the history of ever). They were one of the formerly local telecoms that expanded into long distance/fiber/internet after the 1996 telecom deregulation[0].
Level 3's business is Carrier and Enterprise with much of the Enterprise piece coming from the Global Crossing side of it because, at the time, we effectively couldn't compete with Level 3. We'd come in to bid a project at a price we could eek out a small profit on and would be undercut because they owned far more local which had the effect of lower cost of access and lower complexity for the company we were selling to. Our focus was Enterprise where the margins were higher, we could work with other carriers to provide the services (often Level 3) and step in with a better understanding (and willingness to "do practically anything" to win the contract -- our CEO, after all, was John Legere and the way he runs T-Mobile came from the way he ran Global Crossing: "Hug the Customer" was a mantra).
Level 3 (like all telecoms) is a run to the bottom as far as price is concerned. Cost of access is pretty much it in this business. The expense is so large it eclipses pretty much everything else. Being able to move more things onto your own network reduces that expense (and in-turn results in revenue from others paying you for access to those local components). This fits well with CenturyLink.
The rumblings of this deal internally were strong over the last few months (I don't work there any longer and I heard the rumors[1]). Since this had come up from time to time, I wasn't surprised to hear it again and it still came with the difficulty of figuring out how a deal like that would work. Internally, most employees assumed it'd be a Level 3 purchase of CenturyLink, but a look at the fundamentals of the two businesses made something like that wishful thinking on the part of employees who are really tired of all of the layoffs and really didn't want to see a large one that would come as a result of being purchased.
This will be an interesting transition for the employees of Level 3 proper. They're used to doing the buying and they're actually more used to being the company that comes in, strips the company they purchased (of staff) and imposing the "Level 3 way" on the purchased entity. It was clear that was their position during the Global Crossing merger and morale became greatly affected when some Global Crossing employees took leadership positions and imposed "The Global Crossing way" on Level 3. This resulted in a pretty dramatic culture clash that wasn't really resolved even by the time I left (which was shortly after the TW Telecom merger!). At least at that point they were still suffering getting the various pieces/parts of the company together and operating as a single, well oiled, machine. Adding this to the mix will further complicate those efforts. Level 3 was known for being good at making a purchase and bad at integrating that purchase. I think they did a better job with the Global Crossing and TW acquisitions, but "better" was in comparison to the "abysmal" job they did with the six that were there prior. They still have a history (and current?) reputation of shedding jobs about every 6 months (5-10% across the board) that despite having a better few years, didn't change after I left[3]. They have difficulties hiring top talent as a result, though I'm sure this problem exists across telecom unless you're one of the two big guys.
Apologies for the lengthy and poorly revised post. The speculation contained within is my own and has not been influenced by internal employees -- and may be wildly off since I haven't been an employee there for well over a year, but I thought I'd share in case it spurs further discussion that irons out some of the wrinkles. This will be an interesting change in the landscape of telecom, putting a really large competitor against some of the "bigs" who's reputation is best summed up by this SNL sketch: https://www.youtube.com/watch?v=CHgUN_95UAw
[0] Which is in and of itself a terrible description. It was less a "deregulation" than a "re-regulation" and like all government regulations of this kind, it defined a set of "winning and losing business strategies" in this sector that were different than the strategies that existed before. And a set of tricks/arbitrages that would create entirely new businesses designed to provide nearly free services by leveraging cost of access (in a quasi tariff style).
[1] Before I get anyone in trouble, the rumors I heard were not from people who would have been in any position to know about something like this and were little more than the speculation of previous years ... along the lines of "wouldn't it be great?". I was able to connect the dots, though, by discovering that certain of my former coworkers were unusually busy -- so busy that I couldn't get in touch with them due to their workload. Knowing what they were often involved in, and combining the increase in talk about CenturyLink led me to fully believe this deal was going to land at some point. As a result, I didn't do any stock transactions to avoid the appearance of having "insider information" that I didn't reliably or accurately have.
[2] A look at the fundamentals of both business indicated that as wishful thinking. It was clear to me if there was going to be a purchase, it was Level 3 who was getting bought.
[3] This was a small bit of my motivation for leaving. I'd been through 30-35 "Reductions in Force" and came out still employed and had continued to have the confidence of management up to the VP level, so I was not concerned about losing my job, but all of those "RIF"s take a toll on you. I'm still amazed, to this day, how efficiently our process for laying off employees had become. We had entire systems/applications built for the task and it was these sorts of things. That sort of thing bleeds into the culture of the company and it was a culture I had grown very tired from.
The acquisition values Level 3 at $66.50 a share, the companies said in a statement Monday. That’s about 42 percent above where the Broomfield, Colorado-based company was trading last week, before reports surfaced of a potential acquisition by CenturyLink...
What explains this? I could understand a small jump in value, but what can be the basis for a $14B gain in a company's value when the only facts that have changed are that a buyer exists? Does the market "believe" that the company's future 42% brighter under the prospect of a buyout, and that belief is captured in the price now?
What explains this? I could understand a small jump in value, but what can be the basis for a $14B gain in a company's value when the only facts that have changed are that a buyer exists? Does the market "believe" that the company's future 42% brighter under the prospect of a buyout, and that belief is captured in the price now?
Two things:
1. CONTROL PREMIUM. Buyers pay more to control a company [1]. Control means you can directly effect changes through management. (The flip side is the minority discount.)
There is also the technical aspect of, when buying 100% of a company, needing to make an offer 70% or 90% or whatever (depending on the target's bylaws) of the company's stock will accept. The most willing sellers are reflected in the bid-ask. Less-willing sellers will need more to move. Since you make one bid to everyone, a premium emerges as the price the last least-willing seller you need will accept.
2. SYNERGIES. If you have a billing department and they have a billing department, you can probably do fine with just one billing department. The more similar the acquirer and target, the more of these cost savings and joint growth potentials (e.g. targeted ads over TV) emerge.
[1] https://en.m.wikipedia.org/wiki/Control_premium
1. CONTROL PREMIUM. Buyers pay more to control a company [1]. Control means you can directly effect changes through management. (The flip side is the minority discount.)
There is also the technical aspect of, when buying 100% of a company, needing to make an offer 70% or 90% or whatever (depending on the target's bylaws) of the company's stock will accept. The most willing sellers are reflected in the bid-ask. Less-willing sellers will need more to move. Since you make one bid to everyone, a premium emerges as the price the last least-willing seller you need will accept.
2. SYNERGIES. If you have a billing department and they have a billing department, you can probably do fine with just one billing department. The more similar the acquirer and target, the more of these cost savings and joint growth potentials (e.g. targeted ads over TV) emerge.
[1] https://en.m.wikipedia.org/wiki/Control_premium
Consider "where xyz was trading last week". This is the price at which deals got done - at which both the buyer and seller thought they were getting a "good enough" deal.
On that day, there are many people holding the stock who do not sell, because they believe the correct price should be higher. And there are many people who might buy, but do not because they think the price is too high.
For an acquisition you have to pay the price where most of the holders _will_ sell. This price is naturally higher than the price where some holders _did_ sell, on a given day.
On that day, there are many people holding the stock who do not sell, because they believe the correct price should be higher. And there are many people who might buy, but do not because they think the price is too high.
For an acquisition you have to pay the price where most of the holders _will_ sell. This price is naturally higher than the price where some holders _did_ sell, on a given day.
The most straightforward reason why the stock price jumps is because the acquirer generally makes a bid at a premium to the potential acquiree's stock value in order for the deal to make sense.
Market participants know this, especially professional traders, so when the news comes out the fastest players will hop on the stock to make a quick profit. Those who get in on it the fastest when the news breaks enjoy an increase of several percent (or sometimes significantly higher, such as in Linkedin's case!).
The long term reasons and implications are more complex, but from a short term game theoretic perspective if you can quickly act on the knowledge of an acquisition, you can make quite a bit of money. Most people don't have the savvy or infrastructure in place to do this, but if you're drinking coffee in the morning and you see this pop up on your Bloomberg terminal, you'll want to buy within seconds/minutes if you believe the stock is going to jump. You can go so far as to automate the process and place orders for the stock as soon as an algorithm recognizes an acquisition announcement.
There is also the phenomenon where you can reasonably assume that M&A announcements were leaked in hindsight by looking at the option trading history for the stock. Very often you see that in the week or days prior to an announcement, extraordinarily lucky "bets" are placed in the form of call options, indicating that someone knew and acted on the information. Matt Levine has a great Bloomsberg column article on this with several examples.
Market participants know this, especially professional traders, so when the news comes out the fastest players will hop on the stock to make a quick profit. Those who get in on it the fastest when the news breaks enjoy an increase of several percent (or sometimes significantly higher, such as in Linkedin's case!).
The long term reasons and implications are more complex, but from a short term game theoretic perspective if you can quickly act on the knowledge of an acquisition, you can make quite a bit of money. Most people don't have the savvy or infrastructure in place to do this, but if you're drinking coffee in the morning and you see this pop up on your Bloomberg terminal, you'll want to buy within seconds/minutes if you believe the stock is going to jump. You can go so far as to automate the process and place orders for the stock as soon as an algorithm recognizes an acquisition announcement.
There is also the phenomenon where you can reasonably assume that M&A announcements were leaked in hindsight by looking at the option trading history for the stock. Very often you see that in the week or days prior to an announcement, extraordinarily lucky "bets" are placed in the form of call options, indicating that someone knew and acted on the information. Matt Levine has a great Bloomsberg column article on this with several examples.
Keep in mind that the offer has to be good enough to get the majority of stock holders to sell.
The long term holders of the stock obviously believe the company will be worth more than its current trading value (otherwise they would have sold). So a buyer has to pick a value that convinces enough of these shareholders to cash out.
Imagine that you owned a condo in a building and each owner got to vote on whether to sell the whole building. If a buyer wanted to buy the whole building, they are going to have to make an offer with an amount per condo higher than any of the current listings to capture a majority of the condo owners' interest that weren't previously interested in selling.
The long term holders of the stock obviously believe the company will be worth more than its current trading value (otherwise they would have sold). So a buyer has to pick a value that convinces enough of these shareholders to cash out.
Imagine that you owned a condo in a building and each owner got to vote on whether to sell the whole building. If a buyer wanted to buy the whole building, they are going to have to make an offer with an amount per condo higher than any of the current listings to capture a majority of the condo owners' interest that weren't previously interested in selling.
The ARM acquisition had a similar premium of around 40%. If you picture buying all those shares one trade at a time though you can easily imaginr the price pressure pushing it 20 or 30 pct higher. The rest is synergy or whatever you want to call it.
The 42% increase was CenturyLink's offer over last week's stock price. The actual stock price is only at $54 (15% above last week).
Why would CenturyLink offer such a large premium? Beats me, I'm not an expert.
Why would CenturyLink offer such a large premium? Beats me, I'm not an expert.
My understanding, which should not be relied on, is that the market is composed of traders expecting other traders to bid it up in anticipation of CenturyLink bidding it up, so they're bidding it up.
Or that another suitor will step in and cause an intense bidding war ala Isilon/Data Domain/etc.
The difference in value should be the "synergies" that combining the companies will yield.
Especially this financial magic "The deal also promises to help CenturyLink by giving it access to about $10 billion in tax credits that Level 3 is carrying on its books"
I've often wondered this as well. Would love an eli5...
How can a company that is valued at $16.6 billion with $19 billion in debt buy a company that is valued at $19.4 billion with $11 billion in debt for $34 billion? From where is the money for such acquisitions coming?
I think you're confused about "value."
CTL isn't valued at $16B. That's only the market capitalization of its common shares outstanding.
On an unrelated note, CTL has $20B in goodwill on its balance sheet. Wow...
edit: [0] http://on.wsj.com/2f0DDdj
CTL isn't valued at $16B. That's only the market capitalization of its common shares outstanding.
LVLT market cap = $19.4B
LVLT assets = $24.1B (as of FYE15)
CTL market cap = $16.5B
CTL assets = $47.6B (as of FYE15)
On an unrelated note, CTL has $20B in goodwill on its balance sheet. Wow...
edit: [0] http://on.wsj.com/2f0DDdj
I never quite understood how goodwill is calculated. I mean, I can understand how ATVI (Activision) or HAS (Hasbro) can have big "goodwill". But it doesn't make sense for CTL. Do you have any explanation?
Assume that Qwest invests $1B in copper wire, telephone poles and central offices in 1970. The accountants write that off over the next X years because, for accounting and tax purposes its getting old and will need to be replaced. In the year 2000 all that copper and those poles have zero value on the books (called book value) but it's obvious that it still has some value.
Century Link comes along and looks at the value of all the copper in the ground and says that they will pay $1B for it even though on the books it has zero book value. That excess paid becomes good will on Century Link because they paid more for it than book value.
Century Link comes along and looks at the value of all the copper in the ground and says that they will pay $1B for it even though on the books it has zero book value. That excess paid becomes good will on Century Link because they paid more for it than book value.
"Goodwill" is simply an accounting term (remove any preconceptions of what "goodwill" actually is).
Goodwill is essentially what happens when you pay over book value for an asset.
It's quite common in telecom, because telecom infrastructure investments are generally depreciated over 10 years, but the capital assets still have some value even after they've been depreciated for tax purposes. If they were still listed as capital assets they could be depreciated, so they have to be booked as an asset somewhere.
Goodwill is essentially what happens when you pay over book value for an asset.
It's quite common in telecom, because telecom infrastructure investments are generally depreciated over 10 years, but the capital assets still have some value even after they've been depreciated for tax purposes. If they were still listed as capital assets they could be depreciated, so they have to be booked as an asset somewhere.
I think of goodwill as the premium you pay over the book value of an asset. It sounds like CTL will take on some goodwill in this deal. Likely, CTL views LVLT as having intangibles -- e.g. strategic regulatory relationships, exclusive fiber contracts, employee culture, etc.
It's simply the difference between the money you have paid when acquiring other companies and the value of the business you were acquiring from an accounting point of view (including tangible assets and also intangible assets that can be identified and valued).
I think others have done a good job explaining this, so all I'll add is: accounting is an entirely different exercise than valuation. Which seems strange... But the goal of accounting is tracking assets and accounts more so than understanding value.
It's BS assets that companies use to add phantom value to a balance sheet with things like "brand value" and "intellectual capital". There's no way to assess an actual value, so a lot of companies give outlandish valuations to themselves to make themselves appear more valuable than they are. Some people will disagree with that, but that's the reality.
There are of course a lot of companies that have extremely valuable brands and IP, but those tend to trade at pretty fair market valuations and don't have an unusually high percentage of goodwill relative to the rest of their assets.
In the case of CenturyLink, that would be a major red flag to me.
There are of course a lot of companies that have extremely valuable brands and IP, but those tend to trade at pretty fair market valuations and don't have an unusually high percentage of goodwill relative to the rest of their assets.
In the case of CenturyLink, that would be a major red flag to me.
Goodwill is just accounting. It is your what you pay - net assets whats on their balance sheets. No real BS about that.
Right, but just because an accounting team says "Well yeah the market values the company at $5B, but we think it's worth $15B because goodwill" does not make it so.
In some cases, there is additional value created by an acquisition that can justify that added value, but in many cases it's just a way to justify an irrational overvaluation on a balance sheet.
For example, the last time I looked CTL had lost about $2 billion in market cap after this deal was announced. That's the market saying "you overpaid for this company" or, as I prefer to say "your goodwill valuation is BS."
In some cases, there is additional value created by an acquisition that can justify that added value, but in many cases it's just a way to justify an irrational overvaluation on a balance sheet.
For example, the last time I looked CTL had lost about $2 billion in market cap after this deal was announced. That's the market saying "you overpaid for this company" or, as I prefer to say "your goodwill valuation is BS."
It doesn't work like that. You're not paying $15bn for some assets worth $5bn because you have decided that the "goodwill" is $10bn. It's the other way around: you have decided to pay $15bn and as a result you write down in your books tangible and intangible assets for $5bn and "goodwill" (the balance) for $10bn. Maybe you think it's better to write off the $10bn as wasted money right away, but that also creates some issues (for example, you would probably wipe off your profits for several years, so you wouldn't have to pay taxes).
Goodwill is the amount you paid beyond the tangible assets (cash, property, equipment, accounts paid, etc.) on the balance sheet. You can call it what you like, but basically it's something you spent cash on that you have to show on a balance sheet but has no tangible value. This is usually attributed as "synergies", "IP", "brand recognition" and other BS.
> Goodwill is the amount you paid beyond the tangible assets
Wrong. For example "Hewlett-Packard purchased Autonomy for $11 billion in 2011. The purchase price represented a greater than 65 percent premium over the price at which Autonomy was trading at the time of the announcement. Hewlett-Packard recorded $6.9 billion of goodwill and $4.3 billion of other intangible assets in connection with the acquisition."
Wrong. For example "Hewlett-Packard purchased Autonomy for $11 billion in 2011. The purchase price represented a greater than 65 percent premium over the price at which Autonomy was trading at the time of the announcement. Hewlett-Packard recorded $6.9 billion of goodwill and $4.3 billion of other intangible assets in connection with the acquisition."
Ha and how'd that work for them? According to the Wikipedia entry, "within a year HP had written off $8.8 billion of the value."
Thanks for helping me make my point.
Thanks for helping me make my point.
You're welcome. Just to be clear, I agree that paying too much when making acquisitions is not a good business model. But goodwill is not the reason for overpaying, or an excuse for overpaying. Goodwill is the consequence of overpaying.
Ignorant question: If I manage to buy all outstanding shares, do I not own the underlying assets? If so, why are the assets valued separately from the shares?
Shares are a form of equity. Owning the shares will give you a claim to the residual assets of the company after all the liabilities have been settled. So what you own is effectively the 'Net Assets' of the company. This is different from outright owning the actual underlying assets of the company.
To slightly complicate things, the total assets shown on the annual report of these companies are mostly on their cost basis. During an acquisition like this, they would be 'fair valued', which could result in significant write up or write off compared to the cost basis.
To slightly complicate things, the total assets shown on the annual report of these companies are mostly on their cost basis. During an acquisition like this, they would be 'fair valued', which could result in significant write up or write off compared to the cost basis.
Market capitalization is the value of all the public shares, and is determined by investor sentiment about the medium/long-term prospects of the company as much as any other factor. The underlying assets are wholly owned by the company and have an intrinsic value that is easier to measure through accounting, but that alone doesn't take in to account the liabilities or debts on the books.
>"CTL needs to raise cash and issue/buy-back shares."
Can you elaborate on this? Does CTL need to buy back shares so that they can use them to put towards the $15B in stock to put towards the LVLT transaction?
If this is so isn't this the equivalent of cash? Since they need to finance that purchase of stock? How would that not be $10B plus $15B?
If the source of that financing is creditors how do they get paid if not cash? Is this some kind of structured financing?
Can you elaborate on this? Does CTL need to buy back shares so that they can use them to put towards the $15B in stock to put towards the LVLT transaction?
If this is so isn't this the equivalent of cash? Since they need to finance that purchase of stock? How would that not be $10B plus $15B?
If the source of that financing is creditors how do they get paid if not cash? Is this some kind of structured financing?
Not sure exactly how they'll do it.
The $10B in cash is the $25/share * # of LVLT shares. CTL has to come up with that. It looks like they have $10B in lending ready to go from MS and BAML.
For the stock, CTL can do a lot of things but just need to come up with the shares at the agreed upon conversion factor. Likely, CTL will issue new shares. Current CTL shareholders will hope that the dilutive effects will be offset by the accretive gains from owning a smaller chunk of a bigger company. Alternatively, CTL could use cash on hand (or from asset sales), treasury stock, and more to purchase shares to then hand over. I don't know CTL's plans.
The $10B in cash is the $25/share * # of LVLT shares. CTL has to come up with that. It looks like they have $10B in lending ready to go from MS and BAML.
For the stock, CTL can do a lot of things but just need to come up with the shares at the agreed upon conversion factor. Likely, CTL will issue new shares. Current CTL shareholders will hope that the dilutive effects will be offset by the accretive gains from owning a smaller chunk of a bigger company. Alternatively, CTL could use cash on hand (or from asset sales), treasury stock, and more to purchase shares to then hand over. I don't know CTL's plans.
Basically the company gets bigger when they add Level 3 to it so they can issue additional shares without diluting their current outstanding shares.
Think of it more as converting your Level 3 stock into Century Link stock.
Think of it more as converting your Level 3 stock into Century Link stock.
They also just recently laid off 3000 employees due to a "loss of $600 million a year"...
http://finance.yahoo.com/news/centurylink-lay-off-3-000-1305...
Okie Dokie
http://finance.yahoo.com/news/centurylink-lay-off-3-000-1305...
Okie Dokie
That's precisely why this acquisition is happening now, they're not doing so well and that means they are (relatively) cheap.
That would true if L3 was acquiring Century Link, but Century is acquiring L3.
From the OPs article link:
"In a memo issued to employees Wednesday, CenturyLink CEO Glenn Post said that sinking legacy revenue has resulted in a loss of $600 million a year for the company."
From the OPs article link:
"In a memo issued to employees Wednesday, CenturyLink CEO Glenn Post said that sinking legacy revenue has resulted in a loss of $600 million a year for the company."
Ah, silly me! I thought there was something weird about L3 buying them but in a way it's even weirder to see it happen the other way around. Thanks for the correction.
Level 3 is doing phenomenal. I think you have this the other way around.
As another poster mentioned, in this case the asset values of the acquirer are bigger.
But smaller companies buy bigger companies even without that. In general they just need somebody to fund the acquisition either through debt (they borrow the money) or equity (they issue more stock). Generally it has to be done with debt. The reason it can work in telecom is that business tends to be very recurring revenue so people are willing to lend them money. (Their recurring revenue looks like a bond) An investor can see that two companies have similar businesses and economies of scale, and they want the more efficiently run one to be the acquirer, even if it's the smaller one.
But smaller companies buy bigger companies even without that. In general they just need somebody to fund the acquisition either through debt (they borrow the money) or equity (they issue more stock). Generally it has to be done with debt. The reason it can work in telecom is that business tends to be very recurring revenue so people are willing to lend them money. (Their recurring revenue looks like a bond) An investor can see that two companies have similar businesses and economies of scale, and they want the more efficiently run one to be the acquirer, even if it's the smaller one.
I am no expert but I will try.
First, there is no strict separation between acquisitions and mergers. It is often somewhere in between.
If CenturyLink is valued at $16.6 billion with $19 billion in debt, that means the company without debt would be worth $35.6 billion. Likewise Level 3 without debt would be worth 19.4 + 11 = $30.4 billion.
The article says that "the value of the deal includes assumed debt", so they are really just paying 34-11= $23 billion for the Level 3 stock (I think).
It also says they are getting $10.2 billion in new debt, meaning they are issuing ~$13 billion worth of new CenturyLink stock, and giving that to current Level 3 shareholders.
If I calculated things right, CenturyLink shareholders will own about 56% of shares in the combined company, with Level 3 shareholders getting 44% plus some cash. The combined company will be worth about $26 billion, and have about $40 billion of debt, so the banks will wield quite a lot of power.
First, there is no strict separation between acquisitions and mergers. It is often somewhere in between.
If CenturyLink is valued at $16.6 billion with $19 billion in debt, that means the company without debt would be worth $35.6 billion. Likewise Level 3 without debt would be worth 19.4 + 11 = $30.4 billion.
The article says that "the value of the deal includes assumed debt", so they are really just paying 34-11= $23 billion for the Level 3 stock (I think).
It also says they are getting $10.2 billion in new debt, meaning they are issuing ~$13 billion worth of new CenturyLink stock, and giving that to current Level 3 shareholders.
If I calculated things right, CenturyLink shareholders will own about 56% of shares in the combined company, with Level 3 shareholders getting 44% plus some cash. The combined company will be worth about $26 billion, and have about $40 billion of debt, so the banks will wield quite a lot of power.
I'm not a finance guy, but isn't that just econ 101?
Your company is valued at X, you take on Y in loan and invest some of that into, e.g., buying and laying fiber. Your company will now be valued at X+f*Y, where f is some adjustment factor. E.g. you may not get the same money back if you sold the fiber today. On the other hand, that fiber is projected to earn you some money over time.
I do agree those are huge figures, but it could make sense.
Your company is valued at X, you take on Y in loan and invest some of that into, e.g., buying and laying fiber. Your company will now be valued at X+f*Y, where f is some adjustment factor. E.g. you may not get the same money back if you sold the fiber today. On the other hand, that fiber is projected to earn you some money over time.
I do agree those are huge figures, but it could make sense.
The acquirer issues new shares and gives them to the acquiree's shareholders in exchange for their stake.
In this case, the acquirer also buys out the acquiree's debt. This part of the deal is funded by a loan from Bank of America and Morgan Stanley.
In this case, the acquirer also buys out the acquiree's debt. This part of the deal is funded by a loan from Bank of America and Morgan Stanley.
More debt?
The real secret to making money seems to be making more money (debt).
I am starting to think fractional reserve banking was a bad idea
If only it were that simple. Turns out that, rather than being constrained by the deposits/assets they have on hand (FRB doctrine), banks will create the loans they believe they can make, then go settle up with the central bank/regulators. See, for example, (unorthodox) economist Steve Keen [0][1] on this.
[0] http://www.forbes.com/sites/stevekeen/2015/02/28/what-is-mon...
[1] https://en.wikipedia.org/wiki/Steve_Keen
[0] http://www.forbes.com/sites/stevekeen/2015/02/28/what-is-mon...
[1] https://en.wikipedia.org/wiki/Steve_Keen
Yeah, that was my greatest take away from what I've read from him. Talk about the tail wagging the dog.
The restrictions in this light almost do more harm than good since it exonerates the banks (or rather the system) and every time we have a crisis (after people have been making the big bucks for years) we treat it as mysterious and unrelated to the profits made in the 'good' times.
The restrictions in this light almost do more harm than good since it exonerates the banks (or rather the system) and every time we have a crisis (after people have been making the big bucks for years) we treat it as mysterious and unrelated to the profits made in the 'good' times.
One of the primary responses to the 2008 crisis has been to change the regulations around capital requirements for banks and other financial institutions.
https://en.wikipedia.org/wiki/Basel_III
Note that even though the introduction calls it a voluntary framework, the US and EU have implemented much of it in their regulatory systems.
https://en.wikipedia.org/wiki/Basel_III
Note that even though the introduction calls it a voluntary framework, the US and EU have implemented much of it in their regulatory systems.
While I agree, you don't need formal fractional reserve banking to create the same sorts of crises, see for example the various US financial panics prior to the creation of the Fed in 1913 (e.g. go to the bottom of https://en.wikipedia.org/wiki/Panic_of_1910%E2%80%9311 and hit Show on "Banking panics in the United States").
It's not just fractional reserve that's the issue. Even metalists et. al. miss the fundamental issue that debt is simply a means of control. You put someone into debt to make them slaves. Debt is also the product of war. It's been toned down in the modern western world with mergers and acquisitions, but deep down it's all the same.
Read: Debt The First 5,000 Years. It's a life changing book that helps all this stuff make a lot more sense.
Read: Debt The First 5,000 Years. It's a life changing book that helps all this stuff make a lot more sense.
[deleted]
how else would they acquire Frontier, Windstream, Bresnan, Matrix, UBTA-UBET? with cash?
Telecom is a commodity market, so a race to the bottom is inevitable, unless there is a monopoly (or quasi monopoly) involved.
IP transit seems to be a declining business as content moves towards customers. See "The death of transit?":
https://blog.apnic.net/2016/10/28/the-death-of-transit/
https://blog.apnic.net/2016/10/28/the-death-of-transit/
Not really, because mobile data roaming is growing, and in most cases it doesn't use local breakout. VoIP is growing in the volume (but almost not growing in $). That data has to be moved over backbones. Messengers are growing - again backbone traffic. In fact Tier-1 traffic grows. Revenues - not so much, price per megabit is in constant fall.
Major communications mergers like this and AT&T/Time Warner read like a chapter from Tim Wu's "The Master Switch". The path forward for these new communication conglomerates is either profound failure a la AOL/Time Warner, or a change in the Net Neutrality legislation that has traditionally precluded their success.
I'm not sure if I got the same thing out of Master Switch. Clearly the hero of that book was Theodore Vail and AT&T as the enlightened monopoly.
Prisms for wave division multiplex keep on getting more color channels while speed of light stays the same. What is the physical limit of prisms?
The prisms aren't the limiting factor. The limiting factor is the fact that the optical signal for any given channel will "widen" in bandwidth when you modulate it. Some modulation schemes are better than others and you can do some tricks like using orthogonal polarizations.
At the end of the day, if you modulate a signal at higher and higher rates, it takes more and more bandwidth. That's your real limiting factor.
At the end of the day, if you modulate a signal at higher and higher rates, it takes more and more bandwidth. That's your real limiting factor.
Sort of. We are able to shape these spectra now to improve the spectral efficiency (when using colorless muxing). The next generation of coherent modems will have a 25G granularity and SW will tune the modem to maximize capacity for a given reach. Higher order modulation requires more SNR so this is the real limitation.
For relatively short reaches the modulation order will increase. This improves the spectral efficiency. For longer reaches lower order modulation will be needed but the baud rate can increase. We can can however use other wavelength bands like L band to double the capacity. You are already seeing this in new submarine cables.
For relatively short reaches the modulation order will increase. This improves the spectral efficiency. For longer reaches lower order modulation will be needed but the baud rate can increase. We can can however use other wavelength bands like L band to double the capacity. You are already seeing this in new submarine cables.
There is plenty of BW available in the fiber. A nit, we don't use prisms to combine and separate the colors. We are getting more data in the fiber by increasing the modulation complexity and by making advances in forward error correction. We are seeing FECs now that have 12.3dB gain and are approaching the Shannon Limit.
In addition to the tax benefits someone mentioned, Level 3 has massive voip and traditional voice assets. They are a huge wholesaler to other voip companies.
34B is the kind of money I can only dream of. Hell, I don't think I can even afford to dream about it.
I always wonder how companies like this get founded. So i checked their own history page which includes this statement which reads so dry, i have to blow the sand out of my eyes by the bucket:
"Our business started as part of a subsidiary of a construction company that created one of the first competitive local exchange carriers, MFS Communications."
If you follow that trail of companies, you feel like you've hit "deep corporate america" where nothing has a founder and everything is a subsidiary of some larger corporate division of something.
"Our business started as part of a subsidiary of a construction company that created one of the first competitive local exchange carriers, MFS Communications."
If you follow that trail of companies, you feel like you've hit "deep corporate america" where nothing has a founder and everything is a subsidiary of some larger corporate division of something.
> If you follow that trail of companies, you feel like you've hit "deep corporate america" where nothing has a founder and everything is a subsidiary of some larger corporate division of something.
A corporation is literally just a group of people acting together. Much as the tech world likes to maintain the image of the visionary individual put forth by the ideology of creativity, that's of actually how the world usually works.
Most innovation happens when groups of people leverage their existing collective abilities together well.
A corporation is literally just a group of people acting together. Much as the tech world likes to maintain the image of the visionary individual put forth by the ideology of creativity, that's of actually how the world usually works.
Most innovation happens when groups of people leverage their existing collective abilities together well.
A corporation is a collection of assets owned by stockholders.
Someone has been reading Bhandari and Weiss' "Corporate Bankruptcy'. This view ignores a very important aspect of who/what carries the liability of say violations made by the corporation.
Friend of mine who worked at Qwest in the early days and worked with Level3:
"Interestingly enough, Level3 started out by building out the Qwest network as a contractor building out the fiber. Level3 in exchange for some of the work L3 was given long-term IRUs on the fiber and heavily discounted conduit leases.
Level3 to this day still leases a lot of fiber from CenturyLink (ala Qwest)..."
CenturyLink buying Level3 means that they are basically leasing to themselves :P
"Interestingly enough, Level3 started out by building out the Qwest network as a contractor building out the fiber. Level3 in exchange for some of the work L3 was given long-term IRUs on the fiber and heavily discounted conduit leases.
Level3 to this day still leases a lot of fiber from CenturyLink (ala Qwest)..."
CenturyLink buying Level3 means that they are basically leasing to themselves :P
CenturyLink has been quietly making great acquisition moves for the past few years. My opinion is this helps move them to be a bigger player in the market. Now they can further compete with companies like Verizon for more business market share.
EDIT: Disregard this comment
Leaving my mistake for context.
---
L3 is also a defense contractor. I wonder what happens when a company is purchased for one line of business, but is under contract on other, very different, lines of business.
Leaving my mistake for context.
---
L3 is also a defense contractor. I wonder what happens when a company is purchased for one line of business, but is under contract on other, very different, lines of business.
No, you're thinking of L3 Communications. Totally different companies. Level 3 is a backbone provider, L3 specializes in military communications technology.
While a case of mistaken identity, this is an interesting question to consider.
two completely different companies.
Take this with a grain of salt, but from what I've gathered doing IP transit related work, Level3 has something of a reputation of being higher quality transit than many of their competitors. They tend to cost more and people seem to be paying it.