Light Reading
tw telecom has been a rumored takeover target for years and Level 3 a rumored suitor. But is there more to this deal than just getting bigger?

Level With Me: When Rumors Get Real

Carol Wilson
6/16/2014
50%
50%

Sometimes you hear a rumor so often that you stop listening to it. Such was the case for me with the Level 3/tw telecom deal that finally happened today.

tw telecom inc. (Nasdaq: TWTC) has been a targeted acquisition in the rumor mill for so long that it was hard to take the latest round of rumors seriously. (See Level 3 to Acquire tw telecom for $5.7B.)

Obviously, however, rumors persist for a reason. Consolidation is a pervasive trend in telecom, and this is the latest example of why bigger is usually better for competing.

This deal is good for Level 3 Communications Inc. (Nasdaq: LVLT)'s new focus on enterprise services, because tw telecom is the premier Ethernet services provider in the country, according to rankings from people such as Vertical Systems Group and industry reputation. Level 3 has tremendous fiber backbone resources and content delivery deals, while tw telecom has the local fiber reach and strong business market play -- much stronger than what Level 3 has had in the past.

Twice in the past year I've had executives from tw telecom competitors volunteer the fact that they purposely avoid going head-to-head with that particular service provider -- if tw telecom has direct connections to an office building and is actively selling services there, these two competitors look elsewhere to invest their own fiber dollars. The reason was the level of service that tw telecom was delivering and the recognition that it would be hard to beat.

The question for Level 3 will be how this integration is handled and if the combined company can perpetuate the level of service for which tw telecom has become known in the Ethernet world, or whether the integration process itself becomes an issue.

In the past, Level 3 has stumbled somewhat in managing the integration of large acquisitions -- this could well be a case of seeing what was learned from those previous problems.

As I wrote about earlier this year, tw telecom took a different tack when it absorbed a large fiber optic network operator Xpedius, back in the mid-aughts. CEO Larissa Herda and her team decided to bite the bullet and invest heavily in creating a single integrated backend from a hodgepodge of systems. Will Level 3 maintain this kind of integration and commitment. Does it need to? (See Doing the Dirty Work Pays Off.)

So while this may well be an obvious coming together of two players to create one, much larger, more competitive entity, there are still some questions hanging out there to be resolve.

— Carol Wilson, Editor-at-Large, Light Reading

(6)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
Kreskin
50%
50%
Kreskin,
User Rank: Moderator
6/17/2014 | 5:56:13 AM
Re: Not Made in Heaven
One thing I put little currency in are Wall Street Analysts.

 

They brought us the Internet crash.  The telecom crash of insatiable demand - build it and they will come.

 

And of cousre, the "Too big to Fail" Financial collapse.

 

Finf me a Wall Street Analyst that has actual operating experience and was successful -- then they may have credibility.  Otherwise, they just run numbers.
Carol Wilson
50%
50%
Carol Wilson,
User Rank: Blogger
6/16/2014 | 8:40:40 PM
Re: Not Made in Heaven
I actually might have agreed with that assessment more if it weren't for some analysts chiming in - apparently Level 3 has been cleaning up its act, of late, and this may not be as much of a culture clash as it once was. 

I do think it will be interesting to see if the new entity can rise to tw telecom's standard. One indication will be how many of the key tw telecom leadership team are retained.
Kreskin
50%
50%
Kreskin,
User Rank: Moderator
6/16/2014 | 8:02:38 PM
Not Made in Heaven
 

Talk about two totally different cultures -- there is going to be some serious clashes.

Level 3 is a low price player and TWTC is a value player with great discipline, systems and processes.

It's like a High School (Level 3) acquiring an Ivy League University (TWTC).
danielcawrey
50%
50%
danielcawrey,
User Rank: Light Sabre
6/16/2014 | 5:47:43 PM
Re: Once in play; always in play
I think that these types if integrations are indeed difficult. But it is not like the two parties probably do not realize this. A merger like this must be a risk vs. reward proposition. And in order to spend all of this time and money to make it happen there must be some sort of plan to make all the moving parts work together. 

At least, one would think so. 
Ariella
50%
50%
Ariella,
User Rank: Light Sabre
6/16/2014 | 12:27:32 PM
Re: Once in play; always in play
This reminded me of a rumor that turned out true in my neighborhood several years ago. The rumor was that two private schools were going to combine. People said it seemed so unlikely that it probably was true. Though the principal of one denied it, the merger did take place. However, it proved a difficult marriage, and the two entities divorced just a few years later. 
bosco_pcs
50%
50%
bosco_pcs,
User Rank: Light Beer
6/16/2014 | 12:06:07 PM
Once in play; always in play
Carol:

 

Once something (credible) is in play, it tends to stick around. The only one I can remember that ever got away is GE-Honeywell marriage so long ago and that is because of their sheer size. Look at Sprint and T-Mobile and you can tell the stickiness especially in the size matters area. Of course, the recent growth desperate environment really exacerbates the M&A frenzy. Be thankful it is so much harder for this space to do domicile inversion like the medical space!

 

Just some random musings
More Blogs from Rewired
Incumbents don't want cities and towns to build their own gigabit networks, but what's their alternative plan?
It's up to network operators to make sure "open" retains some meaning and doesn't go the way of "natural" foods.
The beauty of the early Internet was that it was distance-insensitive but as video takes over and the cloud grows, is that changing?
The move of NFV management and orchestration to an open source model seems inevitable, but how it happens is as transparent as the World Cup refs' game time calculations.
Flash Poll
LRTV Custom TV
A New Security Paradigm in SDN/NFV

7|28|14   |   02:54   |   (0) comments


Paul Shaneck, Global Director Network Solutions for Symantec, discusses the evolving virtualized network, explaining how Symantec is leading the security discussion as it relates to SDN and NFV, and helping to ensure the network is protected and compliant.
LRTV Documentaries
Sprint's Network Evolution

7|24|14   |   14:59   |   (0) comments


Sprint's Jay Bluhm gives a keynote speech at the Big Telecom Event (BTE) about Sprint's network and services evolution strategy, including Spark.
LRTV Documentaries
BTE Keynote: The Software-Defined Operator

7|24|14   |   18:43   |   (1) comment


Deutsche Telekom's Axel Clauberg explains the concept of the software-defined operator to the Big Telecom Event (BTE) crowd.
Light Reedy
Numbers Are In: LR's 2014 Salary Survey

7|24|14   |   1:25   |   (7) comments


Our fourth annual Salary Survey paints a picture of who's hiring, firing, earning, and yearning for a change in the telecom industry.
LRTV Custom TV
Driving the Network Transformation

7|23|14   |   4:29   |   (0) comments


Intel's Sandra Rivera discusses network transformation and how Intel technologies, programs, and standards body efforts have helped the industry migration to SDN and NFV.
LRTV Custom TV
Distributed NFV-Based Business Services by RAD

7|18|14   |   5:38   |   (0) comments


With the ETSI-approved Distributed NFV PoC running in the background, RAD's CEO, Dror Bin, talks about why D-NFV makes compelling sense for service providers, and about the dollars and cents RAD is putting behind D-NFV.
LRTV Custom TV
MRV Accelerating Packet Optical Convergence

7|15|14   |   6:06   |   (0) comments


Giving you network insight to make your network smarter.
LRTV Custom TV
NFV-Enabled Ethernet for Generating New Revenues

7|15|14   |   5:49   |   (0) comments


Cyan's Planet Orchestrate allows service providers and their end-customers to activate software-based capabilities such as firewalls and encryption on top of existing Ethernet services in just minutes.
LRTV Custom TV
Symkloud NVF-Ready Video Transcoding, Big Data

7|9|14   |   3:41   |   (0) comments


Kontron and ISV partner Vantrix demonstrate high-performance video transcoding and data analytic solutions on same 2U standard platform that is ready for SDN and NFV deployments made by mobile, cable and cloud operators.
LRTV Huawei Video Resource Center
The Evolving Role of Hybrid Video for Competitive Success

7|4|14   |   4:09   |   (0) comments


At Huawei's Global Analysts Summit in Shenzhen, China, Steven C. Hawley from TV Strategies speaks to us about the evolving role of hybrid video for competitive success.
LRTV Huawei Video Resource Center
How CSPs Leverage Big Data in the Digital Economy

7|4|14   |   4:48   |   (2) comments


Justin van der Lande from Analysys Mason shares with us his views on how telecom operators can leverage customer asset monetization with big data. His discusses the current status of big data applications and the challenges and opportunities for telecom operators in the digital economy era.
LRTV Huawei Video Resource Center
Accelerator for Digital Business Future Oriented BSS

7|4|14   |   3:08   |   (0) comments


Mobile and internet are becoming intertwined; IT and CT are integrating; and leading CSPs have begun to transform to information service and entertainment providers. How should the BSS system evolve to enable this transformation? Karl Whitelock, an analyst at Frost & Sullivan, shares his views.
Upcoming Live Events!!
September 16, 2014, Santa Clara, CA
September 16, 2014, Santa Clara, CA
October 29, 2014, New York City
November 6, 2014, Santa Clara
November 11, 2014, Atlanta, GA
December 9-10, 2014, Reykjavik, Iceland
June 9-10, 2015, Chicago, IL
Infographics
Packet Design asks network professionals how they handle the cloud, SDN, and network management.
Today's Cartoon
Vacation Special Caption Competition Click Here
Latest Comment
Hot Topics
The Municipal Menace?
Jason Meyers, Senior Editor, Utility Communications/IoT, 7/22/2014
Cisco Puts a Fog Over IoT
Sarah Reedy, Senior Editor, 7/23/2014
Apple Earnings: Strong iPhone Sales, iPad Sales Slump, $7.8B Profit
Mitch Wagner, West Coast Bureau Chief, Light Reading, 7/22/2014
Salary Survey Report 2014
Sarah Reedy, Senior Editor, 7/23/2014
Like Us on Facebook
Twitter Feed