Level 3 expands in the east with TelCove buy
The deal will expand Level 3's network reach in the Eastern United States. TelCove, a facilities-based provider of Internet, voice and general transport services, operates a network that extends more than 22,000 local and long-haul route miles and serves 70 markets in the eastern U.S. TelCove, with annual revenues of $390 million, has roughly 4,000 buildings "on-net."
Wireless access is also a key component of the deal. In addition to the hardened network, Level 3 said it will also pick up 300 LMDS and 39 GHz licenses that cover 90 percent of the U.S. population.
Level 3 noted that the $1.23 billion deal consists of $637 million in Level 3 common stock, $445 million in cash, and $155.5 million in assumed debt. The companies expect to close the deal in Q3 2006.
Following integration, which is expected to cost $75 million, TelCove's networks will connect Level 3's national backbone directly to traffic aggregation points, which include other carriers' points-of-presence, central offices, wireless switch centers, cable headends, and data centers.
The deal follows Level 3's $163 million agreement to purchase ICG Communications. Once closed, that agreement will give Level 3 access to a network that spans more than 2,000 metro and regional fiber miles in Colorado and Ohio, and serves north of 1,600 customers. Level 3 has already closed a deal to acquire St. Petersburg, Fla.-based Progress Telecom.
When all of its recent deals are sealed, Level 3 said its traffic aggregation points will reach 5,000 in the U.S., and about 5,200 globally. The company said it will place a finder focus on its metro assets via a newly- formed, separate business called Level 3 Metro Services.
"The addition of TelCove's metro markets will enable us to increase our focus on on-net, high-margin business. In addition, this acquisition should meaningfully reduce expenses paid to third parties for local access," said Level 3 President & COO Kevin O'Hara, in a statement.