A big acquisition in the telecommunications sector is raising hopes for additional deals that could provide a catalyst for exchange traded funds (ETFs) tracking the industry.
Level 3 Communications (NasdaqGS: LVLT) plans on acquiring Global Crossing (NasdaqGS: GLBC) for around $1.9 billion to upgrade the company’s enterprise service offerings, such as managed services and VPN offerings, according to Network World. Under the deal, Level 3 will purchase Global Crossing at $23.04 a share, or around a 56% premium upon announcement. As part of the deal, Level 3 will have to assume $1.1 billion in debt. [AT&T Buying T-Mobile; Telecom ETFs Deserve a Look.]
The bulked-up carrier will have combined revenue of around $6.26 billion.
The deal is seen as a safe move since both companies have been suffering from pricing pressures in their core business of Internet services, reports Roger Cheng for The Wall Street Journal. Level 3 Chief Executive Jim Crowe commented that “the new company will clearly have a solid balance sheet,” and Global Crossing CEO John Legere remarked, “It’s the right combination at the right time.” It is calculated that the total merger cost savings could be around $2.5 billion.
The acquisition of Global Crossing will also help Level 3 efficiently compete against rival Akamai Technologies Inc. (NasdaqGS: AKAM) for online video streaming services and movie downloads, writes Sayantani Ghosh for Reuters. [International Telecom ETFs: Doing Business In The Emerging Markets.]
For more information on the telecom sector, visit our telecommunications category.
- iShares Dow Jones US Telecom (NYSEArca: IYZ)
- Vanguard Telecommunications (NYSEARca: VOX)
- Telecom HOLDRs (NYSEArca: TTH)
- iShares S&P Global Telecommunications Index Fund (NYSEArca: IXP)
Max Chen contributed to this article.