Level 3's Storey: M&A is an option, not a necessity

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Level 3 Communications (NYSE: LVLT) has a reputation for being one of the aggressive consolidators of the wireline service provider market, but CEO Jeff Storey told investors that the company has the right mix of assets and products to compete.

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Speaking at the Deutsche Bank Media, Internet & Telecom Conference, Storey said that it is not ruling out further acquisition opportunities, but unlike other providers it is not a requirement.

"We'll continue to ... be opportunistic about it," Storey said. "The benefit of our position is we don't have to do M&A. We're in a position where we have the resources, have the network and the products and services that the market is after so M&A is an option, but it's not a necessity."

While not having any near-term acquisition plans, Level 3 has continually looked for ways to grow organically.

One market where it is expanding its network presence is in Northern California.

Level 3 recently announced that it expanded its local network presence in Northern California by placing additional fiber in existing electrical conduit, which it says will speed up delivery of new circuits while providing diverse access paths into area buildings.

However, the service provider is not afraid to augment its internal growth initiatives with targeted acquisitions of regional service providers.

One example of this was its acquisition of San Francisco-based IP Networks (IPN), which gave it 750 route miles of fiber connecting 140 enterprise buildings and 33 data centers.

"We have done organic expansions a number of times and some slight M&A expansions," Storey said. "For example, last year we bought a company called IP Networks, which had a rich fiber network in San Francisco with the ability to rapidly add new capacity."

Storey added the company does that "from an organic perspective by building to markets we don't have or deeper within markets or to data centers where our customers want us to be."

Like its competitors, Level 3 is operating in a rapidly consolidating industry that's making some competitors, particularly cable, become a bigger threat. Comcast's (Nasdaq: CMCSA) proposed acquisition of cable rival Time Warner Cable (NYSE: TWC) will make it an even stronger retail and wholesale competitor.

Storey said that the best way to stay competitive and grow comes down to focusing on fundamental issues like customer service.

"We're definitely focused on how we can ensure we're competitive with anybody at any given point and we will look at M&A," Storey said. "The majority of our growth comes from our execution and if we provide the best customer experience, if we have the simplest systems, if we have the cleanest products and we meet our customer's needs, I am not afraid of anybody."

For more:
- hear the webcast (reg. req.)

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