Level 3 eyes potential acquisition opportunities outside the U.S.

With its acquisition of tw telecom now complete, Level 3's focus in 2015 will be on integrating those assets into its fold, but that does not mean that it's ruling out pursuing new deals.

During the first-quarter earnings call, Jeff Storey, CEO of Level 3 Communications, suggested it would still pursue opportunistic acquisitions, saying it was pleased with the outcome of the tw telecom purchase.

"M&A is part of our strategy," Storey said. "We look at gaps in our capabilities. We look at gaps in our network. We look at opportunities to add customers and view M&A as the mechanism to do all of those things. And so we'll continue to focus on M&A. It's opportunistic by the very nature of it."

However, given the task of integration it has embarked on, the service provider said that if it makes any purchases in the near-term, they will likely be in the international corridor.  

"Outside the U.S. is probably more in our targets than maybe inside the U.S. given that we've just done the tw telecom acquisition," Storey said.

Storey's comments come at a time of continued consolidation in the competitive fiber network segment. A number of Level 3's competitors, including Zayo and Lightower, have been hot on the acquisition path.

Just this week two sizeable deals were made in the competitive fiber network space: Lightower Fiber Networks announced a deal to purchase Fibertech on Monday and Crown Castle is enhancing its small cell backhaul play by purchasing Quanta Fiber (called Sunesys). Earlier, Zayo purchased regional provider Latisys and a number of regional fiber providers, including IdeaTek and FiberLink. While not nearly as big as the Level 3/tw telecom deal, these purchases show that having broad fiber connectivity enables service providers to respond to a diversity of wholesale and retail service opportunities for wireless operators, content companies and enterprise customers.

Level 3's acquisition of tw telecom was also a game changer for the company in the United States. By acquiring the fellow competitive carrier, Level 3 immediately deepened its fiber network and Ethernet service presence in the U.S. market by gaining access to nearly 21,000 on-net fiber buildings. Having this expanded fiber network combined with its global reach means that Level 3 can be more valuable to multinational customers that require services from a service provider that has a deep domestic and international presence.

But even with all of this consolidation taking place around Level 3, Storey emphasized that the company will not enter into any deal that would disrupt its integration of tw telecom.

"We will not do anything from an M&A perspective that causes us to damage our integration of tw telecom," Storey said. "That is the highest priority for us in the business. And I think you're right in saying that the North America team, management team is focused well on that. And so if we were to do something outside of North America, I think it creates less of a distraction but we will not do anything from an M&A perspective that harms our ability to integrate tw telecom effectively."

For more:
- see the Seeking Alpha earnings transcript

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