Sunday, October 30, 2005

Level 3 To Acquire WilTel for $680 Million

Level 3 Communications agreed to acquire WilTel Communications in a cash and stock deal valued at $680 million. Both companies own major fiber routes across the United States. The companies expect to close the deal in Q1 2006, pending state and federal regulatory approvals.

WilTel, which is based in Tulsa, Oklahoma, is currently owned by Leucadia National Corporation. WilTel's fiber network extends coast-to-coast and has direct access in more than 700 locations.

The Level 3 network spans 23,000 route miles in the U.S. and Europe.

The deal also includes Vyvx, a WilTel subsidiary that specializes in gathering and distributing broadcast quality live and non-live video for the media and entertainment industry. The company delivers nearly 250,000 fiber and satellite video feeds, and more than 5 million ads and promotional media content around the world each year.

The companies cited a number of expected synergies, including the improved efficiency of migrating all IP, optical and voice transport traffic to a common network. The merged network will reach 50 new markets and include 3000 new route miles compared with Level 3's pre-acquisition facilities.

The acquisition includes all of WilTel's communications business, including a multi-year contract with SBC. The acquisition does not include WilTel's headquarters building or the assumption of any of WilTel's outstanding debt or mortgage obligations.

Level 3 will pay 115 million shares of Level 3 common stock and $370 million in cash subject to certain adjustments.

"There is a unique and compelling fit between WilTel and Level 3," said James Q. Crowe, chief executive officer of Level 3. "We believe this transaction brings together the two premier providers of communications backbone services and that our customers will benefit significantly from that shared institutional excellence. We also believe the combined technical and service capabilities will help support and advance our customers' transition to IP technology and Voice over IP," said Crowe.

  • In January 2005, SBC announced its pending merger with AT&T and its intention to migrate the services provided by WilTel to the merged SBC and AT&T network. In anticipation of the successful completion of the SBC and AT&T merger, the contract between WilTel and SBC was amended. The amended SBC agreement runs through 2009 and provides for a purchase commitment of $600 million from January 2005 through the end of 2007, and $75 million from January 2008 through the end of 2009. Only purchases of on-net services count toward satisfaction of this purchase commitment. Originating and terminating access charges paid to local phone companies are passed through to SBC in accordance with a formula that approximates cost. Additionally, the SBC agreement provides for the payment of $50 million from SBC if certain performance criteria are met.

  • In February 2005, WilTel Communications confirmed that it is providing Vonage with a bundled voice and data transport solution. Vonage's service area encompasses more than 2,000 active rate centers in more than 150 global markets.

  • In October 2002, Williams Communications emerged from Chapter 11 proceedings and changed its name to WilTel Communications.

  • In 1985, the Williams Companies made the revolutionary decision to place fiber in decommissioned petroleum pipelines from Kansas City to Des Moines and Omaha to Chicago. The company subsequently formed the Williams Telecommunications as a wholesale capacity provider.


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