Level 3 Agrees to Purchase Global Crossing
http://www.bloomberg.com/news/print/2011-04-11/level-3-agrees-to-acquire-glo... The deal will combine two unprofitable companies with total revenue of $6.26 billion as of last year, and cut annualized capital spending by about $40 million, according to the statement. It will also help reduce the pressure on prices, which have declined by as much as 30 percent a year in the industry, said Donna Jaegers, an analyst at DA Davidson & Co. “This is what telecom has needed for a long time,” said Denver-based Jaegers, who recommends buying both stocks. “You have way too many players.”
----- Original Message -----
From: "William Allen Simpson" <william.allen.simpson@gmail.com>
http://www.bloomberg.com/news/print/2011-04-11/level-3-agrees-to-acquire-glo...
The deal will combine two unprofitable companies with total revenue of $6.26 billion as of last year, and cut annualized capital spending by about $40 million, according to the statement. It will also help reduce the pressure on prices, which have declined by as much as 30 percent a year in the industry, said Donna Jaegers, an analyst at DA Davidson & Co.
Let me see if I have that straight. We're *admitting* in public that the result will be to make prices go up for customers? Wow... Justice is going to have a field day with that. Cheers, -- jra
On Mon, Apr 11, 2011 at 10:22 AM, Jay Ashworth <jra@baylink.com> wrote:
----- Original Message -----
From: "William Allen Simpson" <william.allen.simpson@gmail.com>
http://www.bloomberg.com/news/print/2011-04-11/level-3-agrees-to-acquire-glo...
The deal will combine two unprofitable companies with total revenue of $6.26 billion as of last year, and cut annualized capital spending by about $40 million, according to the statement. It will also help reduce the pressure on prices, which have declined by as much as 30 percent a year in the industry, said Donna Jaegers, an analyst at DA Davidson & Co.
Let me see if I have that straight.
We're *admitting* in public that the result will be to make prices go up for customers? Wow... Justice is going to have a field day with that.
Cheers, -- jra
Well, maybe they're just admitting it will slow the rate at which prices go down :)
On Mon, 11 Apr 2011 10:27:44 EDT, Jay Ashworth said:
----- Original Message -----
From: "Dorn Hetzel" <dorn@hetzel.org>
Well, maybe they're just admitting it will slow the rate at which prices go down :)
Cause L3 and GBLX are Too Big To Fail, right?
Yes, but the *real* question is - will they be able to depeer Cogent? ;)
I find it amusing that the article says - "The deal will combine two unprofitable companies...". So I guess the thinking is that two negatives make a positive? -Mike -----Original Message----- From: Dorn Hetzel [mailto:dorn@hetzel.org] Sent: Monday, April 11, 2011 10:26 AM To: Jay Ashworth Cc: NANOG Subject: Re: Level 3 Agrees to Purchase Global Crossing On Mon, Apr 11, 2011 at 10:22 AM, Jay Ashworth <jra@baylink.com> wrote:
----- Original Message -----
From: "William Allen Simpson" <william.allen.simpson@gmail.com>
http://www.bloomberg.com/news/print/2011-04-11/level-3-agrees-to-acquire-glo...
The deal will combine two unprofitable companies with total revenue of $6.26 billion as of last year, and cut annualized capital spending by about $40 million, according to the statement. It will also help reduce the pressure on prices, which have declined by as much as 30 percent a year in the industry, said Donna Jaegers, an analyst at DA Davidson & Co.
Let me see if I have that straight.
We're *admitting* in public that the result will be to make prices go up for customers? Wow... Justice is going to have a field day with that.
Cheers, -- jra
Well, maybe they're just admitting it will slow the rate at which prices go down :)
I find it amusing that the article says - "The deal will combine two unprofitable companies...".
So I guess the thinking is that two negatives make a positive?
-Mike Since they will be saving a whole $40mm annually, profitability is
On 4/11/11 10:41 AM, Mike Walter wrote: pretty much guaranteed - right? ;-) Wasn't there a telco CEO who would blow that much in strip clubs? Savvis springs to mind, but I don't remember. David
On Mon, 11 Apr 2011, David Coulson wrote:
Wasn't there a telco CEO who would blow that much in strip clubs? Savvis springs to mind, but I don't remember.
I seem to recall several dot-com-era CxOs spending very lavishly on themselves, or getting their employers to give them large 'loans' that were never paid back. Ken Lay, Jeff Skilling, Bernie Ebbers, Gary Winnick, Joe Nacchio, etc... The story of former Tyco CEO Dennis Kozlowski spending $2 million on his wife's 40th birthday party springs to mind... Tyco paid for half of it, under the guise of the party being a shareholder meeting... jms
On 4/11/11 12:24 PM, Justin M. Streiner wrote:
I seem to recall several dot-com-era CxOs spending very lavishly on themselves, or getting their employers to give them large 'loans' that were never paid back. Ken Lay, Jeff Skilling, Bernie Ebbers, Gary Winnick, Joe Nacchio, etc...
This is what I was thinking of - Awesome photo too. http://www.msnbc.msn.com/id/9750948/ns/business-small_business/
The story of former Tyco CEO Dennis Kozlowski spending $2 million on his wife's 40th birthday party springs to mind... Tyco paid for half of it, under the guise of the party being a shareholder meeting... Wish I could have been a fly on the wall during the meeting when someone suggested that idea.
David
combining the companies will allow them to maximize efficeinecies by the elimination of overlapping functions, hopefully paving the way to profitability. Job cuts here we come ........ Mike On Mon, Apr 11, 2011 at 10:41 AM, Mike Walter <mwalter@3z.net> wrote:
I find it amusing that the article says - "The deal will combine two unprofitable companies...".
So I guess the thinking is that two negatives make a positive?
-Mike
-----Original Message----- From: Dorn Hetzel [mailto:dorn@hetzel.org] Sent: Monday, April 11, 2011 10:26 AM To: Jay Ashworth Cc: NANOG Subject: Re: Level 3 Agrees to Purchase Global Crossing
On Mon, Apr 11, 2011 at 10:22 AM, Jay Ashworth <jra@baylink.com> wrote:
----- Original Message -----
From: "William Allen Simpson" <william.allen.simpson@gmail.com>
http://www.bloomberg.com/news/print/2011-04-11/level-3-agrees-to-acquire-glo...
The deal will combine two unprofitable companies with total revenue of $6.26 billion as of last year, and cut annualized capital spending by about $40 million, according to the statement. It will also help reduce the pressure on prices, which have declined by as much as 30 percent a year in the industry, said Donna Jaegers, an analyst at DA Davidson & Co.
Let me see if I have that straight.
We're *admitting* in public that the result will be to make prices go up for customers? Wow... Justice is going to have a field day with that.
Cheers, -- jra
Well, maybe they're just admitting it will slow the rate at which prices go down :)
On Mon, Apr 11, 2011 at 02:41:18PM +0000, Mike Walter wrote:
I find it amusing that the article says - "The deal will combine two unprofitable companies...".
So I guess the thinking is that two negatives make a positive?
They may lose on every subscriber, but now they'll make it up in volume. -- Mike Andrews, W5EGO mikea@mikea.ath.cx Tired old sysadmin
Let me see if I have that straight.
We're *admitting* in public that the result will be to make prices go up for customers? Wow... Justice is going to have a field day with that.
Cheers, -- jra
I don't think it means so much that prices will go up, just that it will slow the decline. But having said that, it appears that we are in for a spate of inflation generally and the prices of everything are going to rise fairly quickly, starting about now. That would be across the economy as a whole and not anything specific to the telecommunications sector.
On Mon, Apr 11, 2011 at 08:55:05AM -0700, George Bonser wrote:
Let me see if I have that straight.
We're *admitting* in public that the result will be to make prices go up for customers? Wow... Justice is going to have a field day with that.
Cheers, -- jra
I don't think it means so much that prices will go up, just that it will slow the decline.
Oh, trust me. I fully believe it will make prices go up. Anytime you take a major competitor out of the ball game, the negotiations shift towards center mass. That's just the way things go. The only saving grace may be that it opens the door for one of the little guys to get a bit bigger and start drawing cash away from the behemoths out there. -Wayne --- Wayne Bouchard web@typo.org Network Dude http://www.typo.org/~web/
"Way too many players ..." means that the telecom marketplace is good for the consumer, with competition keeping prices low. Many network users feel that prices are still way too high, particularly for high speed circuits and dark fiber, areas in which Level 3 and Global Crossing have specialized. -----Original Message----- From: William Allen Simpson [mailto:william.allen.simpson@gmail.com] Sent: Monday, April 11, 2011 7:14 AM To: NANOG list Subject: Level 3 Agrees to Purchase Global Crossing http://www.bloomberg.com/news/print/2011-04-11/level-3-agrees-to-acquire-glo... The deal will combine two unprofitable companies with total revenue of $6.26 billion as of last year, and cut annualized capital spending by about $40 million, according to the statement. It will also help reduce the pressure on prices, which have declined by as much as 30 percent a year in the industry, said Donna Jaegers, an analyst at DA Davidson & Co. "This is what telecom has needed for a long time," said Denver-based Jaegers, who recommends buying both stocks. "You have way too many players." This communication, together with any attachments or embedded links, is for the sole use of the intended recipient(s) and may contain information that is confidential or legally protected. If you are not the intended recipient, you are hereby notified that any review, disclosure, copying, dissemination, distribution or use of this communication is strictly prohibited. If you have received this communication in error, please notify the sender immediately by return e-mail message and delete the original and all copies of the communication, along with any attachments or embedded links, from your system.
On Mon, Apr 11, 2011 at 03:49:43PM -0700, Holmes,David A wrote:
"Way too many players ..." means that the telecom marketplace is good for the consumer, with competition keeping prices low. Many network users feel that prices are still way too high, particularly for high speed circuits and dark fiber, areas in which Level 3 and Global Crossing have specialized.
Cute theory, but unfortunately this has no basis in reality. Users can "feel" any way they'd like, but the truth is that the current market prices for wholesale IP transit, in which Level 3 and Global Crossing specialize, are far below cost and are impossible for any carrier to sustain long term. I'm not saying that either L3 or GX runs a completely optimal network (infact I'd say that GX may well be a case study in failure to do so :P), but a simple analysis of the costs of routers, colo, power, crossconnects, optical gear, etc, makes it abundantly clear that the current "rush to the bottom" pricing cannot possibly be supported even under optimal conditions and ignoring other overhead. The situation isn't significantly different for high-speed longhaul capacity, the revenue these these circuits generate at current market prices is barely offsetting their capex on the optical gear at this point. Anyone who told you that there is a cash cow in this particular market is woefully mistaken, any serious money to be had is coming from enterprise customers who can only be reached via unique metro assets. I have no doubt that there will be some modest reduction in competition following the acquisition, but I honestly don't think it is anything to get too worried about. Unlike L3's previous acquisitions (such as Wiltel, Telcove, Looking Glass, etc), it isn't really possible for them to "disappear" the assets from the market following the purchase. GX's longhaul fiber footprint is mostly still owned and operated by Qwest, they were never a big player in IRU dark sales to begin with, and they don't have much in the way of metro fiber assets to speak of. The two companies also not really in any danger of being able to stop the current tide of market transit prices, since this are being driven by many other companies. And L3 has already learned what happens to their market share when they try to alter market pricing by themselves, which is what led to their current Comcast debacle in the first place. The best case scenario that I see here is L3 being able to provide some technical leadership to significantly reduce GX's overhead, and hopefully fix some of their other problem areas too. But personally I'm not convinced that L3 is the technical or market force they used to be, and thus I question whether they'll be able to get it right themselves. Remember, it taks a LOT of work for a big telco to put all the pieces in place correctly, and any mistakes on their part will open the door for smaller carriers to show off the advantages of being nimble. If there is any significant reduction in competition that comes to either carrier, it will do exactly that. Infact, I encourage them to try, it will probably be good for my business. :) -- Richard A Steenbergen <ras@e-gerbil.net> http://www.e-gerbil.net/ras GPG Key ID: 0xF8B12CBC (7535 7F59 8204 ED1F CC1C 53AF 4C41 5ECA F8B1 2CBC)
If I were a large tier-2 with SFI to one, but not both, of Level3 and GBLX, I would see this acquisition as an opportunity to squeeze peering out of the other network, or eventual combination of both, in trade for not stirring the pot with regulators. Perhaps AS3356 will carry AS6939 IPv6 routes soon, etc. -- Jeff S Wheeler <jsw@inconcepts.biz> Sr Network Operator / Innovative Network Concepts
On 4/11/2011 10:13 AM, William Allen Simpson wrote:
http://www.bloomberg.com/news/print/2011-04-11/level-3-agrees-to-acquire-glo...
The deal will combine two unprofitable companies with total revenue of $6.26 billion as of last year, and cut annualized capital spending by about $40 million, according to the statement. It will also help reduce the pressure on prices, which have declined by as much as 30 percent a year in the industry, said Donna Jaegers, an analyst at DA Davidson & Co.
“This is what telecom has needed for a long time,” said Denver-based Jaegers, who recommends buying both stocks. “You have way too many players.”
If L3 merges GBLX in as well as they did Broadwing...the little guy stands to do pretty well.
participants (15)
-
David Coulson -
Dorn Hetzel -
George Bonser -
harbor235 -
Holmes,David A -
Jay Ashworth -
Jeff Wheeler -
Justin M. Streiner -
Mike Walter -
mikea -
ML -
Richard A Steenbergen -
Valdis.Kletnieks＠vt.edu -
Wayne E. Bouchard -
William Allen Simpson