CenturyLink, Level 3 enter 'advanced' talks to merge, says report

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CenturyLink and Level 3 are in “advanced” talks to merge, creating a larger global carrier that would become an even greater threat to AT&T and Verizon in the wireline market.

RELATED: CenturyLink bleeds 65K broadband customers in Q2, but says triple play focus will drive growt

Citing people close to the talks, The Wall Street Journal reported that a deal could be announced in the next few weeks. However, nothing is certain, and the two providers could walk away without finalizing any deal.

WSJ could not get either service provider to reveal a specific price a deal could bring. At the time the WSJ report of the talks emerged, Level 3 had a value of $16.8 billion, while CenturyLink was worth $15.2 billion.

RELATED: Level 3 maintains lead over Verizon amid roiling competitive Ethernet segment

The market responded favorably to a report of a possible deal as CenturyLink and Level 3’s shares rose 14 and 6.1 percent, respectively, in mid-Thursday trading.  

CenturyLink and Level 3 are very skilled in making large acquisitions as a way to enhance their service portfolios.

As it looked to shed its small town voice-centric image, CenturyLink has made a number of transformative acquisitions, including Qwest Communications for $11 billion in 2011 and cloud provider Savvis for $2 billion. Earlier, CenturyLink bolstered its local service presence by purchasing Embarq, the former local telephone division of Sprint, for $6 billion in 2009.

Level 3 has been no less aggressive, purchasing tw telecom for about $6 billion in 2014. Earlier in 2011, the service provider also enhanced its VPN and global reach capabilities by acquiring Global Crossing around $2 billion.

The potential merger of these two providers would make the combined company an even bigger player in the domestic and global Ethernet sector.

Level 3, through its aggressive network build and acquisition strategy, has been able to overtake Verizon as the second largest Ethernet provider in the United States, according to Vertical Systems Group’s Leaderboard ranking.

Likewise, Level 3 is on a similar growth track on the international front, gaining market share by expanding its fiber footprint in Latin America and Europe. The service provider also surpassed Verizon as the fifth largest Ethernet service provider as it expands service availability in Europe and South America.

If a deal actually were to happen, CenturyLink would immediately enhance its domestic and global network services reach, giving it an even bigger advantage over cable MSOs like Charter, which has advanced its Ethernet and business service ranking by acquiring Time Warner Cable and Bright House Communications.