Level 3 CFO: Acquisition by CenturyLink Will Grow SMB Customer Base

**Editor’s Note: Please click here for a recap of the biggest channel-impacting mergers in September-October 2016.**

Level 3 Communications will be able to reach more SMB customers with a broader set of network and service capabilities when it becomes part of CenturyLink in the third quarter of 2017.

That’s what Sunit Patel, Level 3’s CFO, told investors during this week’s Bank of America Merrill Lynch 2016 Leveraged Finance Conference. CenturyLink is set to acquire Level 3 in a cash and stock transaction valued at about $34 billion, including debt.

“Historically, Level 3’s … enterprise business has been stronger with larger enterprises; we didn’t have or do not have as much scale with the lower end of enterprises,” Patel said. “I think CenturyLink’s business is pretty much across the enterprise sector, so they have much more scale and critical mass in the smaller enterprises and also in the medium-size enterprises, so we see a good fit there.”

The combined company’s ability to serve businesses in the United States and internationally will be “unmatched,” Patel said. Seventy-six percent of the combined company’s revenue will be business revenue, while the consumer business will be 24 percent, he said.

“It’s a transformational combination and changes the industry landscape with a lot of buildings on net, but more importantly a very large, addressable market for enterprises in the vicinity of our network,” he said. “So it gives us a very substantial, addressable market that’s in the neighborhood of our network that we can get to quite profitably.”{ad}

For its third quarter, Level 3 reported revenue from SMB customers who spend between $2,000 and $20,000 per month decreased a little less than 1 percent from the second quarter. It saw the largest declines with the smallest customers, who represented 5 percent of the company’s North America enterprise base and spend less than $2,000 per month. That group decreased 18 percent.

“From a size perspective, this combination makes us the second-largest provider to enterprises in the United States (behind AT&T), which I think helps a lot for us to be able to do more for our customers … and that scale is important, not just from a synergy perspective, but also in terms of what we can do for our customers from a range of products and services, and the geographies that we can serve them in,” Patel said.