The consolidation momentum in the telecom sector is increasing

International fibre network operator Level 3 Communications on Tuesday agreed to acquire rival carrier Global Crossing in a stock for stock transaction valued at approximately $3bn.

The combined company will operate a services platform anchored by fibre networks on three continents – the Americas, Europe and Asia – connected by its own undersea facilities. The combined network will serve a customer base with owned network in more than 50 countries and reach to more than 70 countries.

Commenting on the deal, Jim Crowe, chief executive officer of Level 3, said: “The complementary fit between the two companies’ networks, service portfolios and customers is compelling. By leveraging the respective strengths and extensive reach of both companies, we are creating a highly efficient and more extensive global platform that is well-positioned to meet the local and international needs of our customers.”

Jim Kinsella, chairman of European network operator and smaller regional rival, Interoute, said that the deal was a sign of the times. “The consolidation momentum in the telecom sector is increasing. There seem to be two primary reasons for the acceleration in deal activity. First, bandwidth usage is spiralling – from computer desktops to mobile phones – and the operators are working hard to keep up with the demand. Companies that provide that bandwidth are experiencing record growth in IP traffic and the bandwidth that supports it.

“Second, enterprises are relying more heavily than ever on infrastructure companies to provide the physical network upon which their cloud services can operate. The cloud is effectively allowing organisations to manage large parts of their IT more cheaply and far more effectively.”