CenturyLink Merger With Level 3 Gives Partners More To Sell In The Enterprise

CenturyLink is scooping up Level 3 Communications for its global and robust fiber footprint. The new company will offer a compelling combination of cloud and data services for business customers over a far-reaching, high-speed network and partners are enthusiastic about the deal.

For Monroe, La.-based CenturyLink, the merger will help the carrier focus more on business sales and reduce the influence of consumer spending and trends on its revenue base. The two companies said that the soon-to-be combined entity would earn 76 percent of its revenue from business customers.

Both companies agreed on Monday morning to a cash and stock deal in which CenturyLink will buy Broomfield, Colo.-based Level 3 for $34 billion. The transaction is expected to close in by Q3 2017.

[Related: It's Official: CenturyLink To Acquire Level 3 For $34 Billion]

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In the meantime, CenturyLink and Level 3 will operate as separate companies, and it remains business as usual, John Delozier, vice president of CenturyLink's Channel Alliance, told CRN in an email.

CenturyLink and Level 3 said that the deal would let the new CenturyLink make more investments in its broadband infrastructure and enhance broadband speed for small businesses, as well as consumers. The combined company, which will have about 500,000 route miles of fiber, will form the second largest domestic communications provider serving business customers, behind Dallas-based telecom giant AT&T.

Lumenate, a Dallas-based IT consulting firm and CenturyLink partner has a direct relationship with the carrier. Lumenate also partners with Level 3 through a master agent.

John Hudson, director of service provider solutions for Lumenate, expects to see margins increase as the two companies are merged.

"In the long run, it’s the right move for CenturyLink, and it's a positive for us," he said.

Intelisys, Petaluma, Calif., sees the CenturyLink-Level 3 merger as a big opportunity for its agent partner community because the two companies already represent the two largest suppliers in the master agent's portfolio, according to Rick Dellar, co-founder of Intelisys.

Both companies have also shown a strong commitment to the channel, Dellar said.

"We look forward to leveraging the combined company in the marketplace," he said. "When this merger closes, we’ll reach channel-wide record-breaking monthly billing numbers with the combined company, and unrivaled financial scale."

CenturyLink has been touting its cloud and networking services as a way to differentiate itself in a crowded telecommunications market. But by scooping up Level 3, CenturyLink will not only be able to better serve businesses, but it will also be able to compete more directly with players such as AT&T and Verizon with traditional wireline services, Lumenate's Hudson said.

"It's kind of confusing because we've been hearing from CenturyLink about its efforts focused on cloud, data and professional services, but yet, here they are merging with a carrier," he said.

Hudson is curious as to how the merger will impact CenturyLink's channel strategy.

"The biggest thing for me is, what is the channel program going to look like when these companies come together?" he said.

CenturyLink's Delozier said that deal is still very new, and many details will need to be ironed out around how the two channel organizations will be fused.

"Both CenturyLink and Level 3 have a strong track record of successfully integrating companies, and we will leverage this experience to ensure a smooth transition to a combined company," Delozier said. "Once the transaction is complete, our combined company will be able to provide even more opportunities to strengthen our relationships with industry-leading technology providers as the second largest domestic communications provider serving global enterprise customers."

From a scale perspective, the merger makes sense, according to Adam Edwards, co-founder and CEO of Sandy, Utah-based master agent Telarus. Combining the two providers, however, will present a "significant operational challenge" in the short run, he added.

But unlike AT&T's monster acquisition of media giant Time Warner that it announced this month, CenturyLink's takeover of Level 3 won't present the same regulatory concerns, partners say.

"It's likely that CenturyLink will be able to make this merger as soon as possible so they can remain competitive with AT&T and Verizon. CenturyLink doesn't have a wireless play, so they need something else," according to one CenturyLink partner that asked not to be named.