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.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.