|By Business Wire||
|June 17, 2014 04:58 PM EDT||
ATLANTIC-ACM today released the following analysis of the Level 3 – tw telecom deal. Members of the press are free to quote with attribution.
Level 3 – tw telecom Deal to Create New “Major Player” in Business Telecom
By Charlie Reed, Director of Quantitative Analytics, ATLANTIC-ACM
Level 3 announced the planned acquisition of tw telecom for approximately $5.68B in a cash and stock transaction.
If consummated, the deal will have the following impacts on the market:
- The deal will help both companies compete. tw telecom will add valuable local assets to Level 3’s robust long-haul network, increasing its lit building count by 21,000 on-net units (for a total of 35,000). tw telecom’s dense metro footprint has allowed it to play well with mid-sized local and regional businesses, including entities in the large medical, local government and education segments. (These three verticals account for 29 percent of employees in the U.S. and represent a large opportunity to capture share from the ILECs.) The deal also will help Level 3 compete for contracts from large enterprises as its increased on-net reach delivers new advantages in costs, provisioning and service levels. Those types of advantages, and decades of focus, have allowed AT&T and Verizon to capture significant shares of contracts with large enterprises. (Level 3 has had recent success in capturing large contracts already, and this deal will enable it to compete more deeply for these deals.) On the other side of the transaction, tw telecom will similarly benefit from Level 3’s global footprint, opening up opportunities with customers that have international requirements. Finally, the deal will help Level 3 in the wholesale space, delivering strong metro density that will help the new company capture greater share of the wireless backhaul market.
- Will integration challenges interfere with the momentum of these players? tw telecom has one of the most consistent networks, visions and strategies in the industry, which has enabled revenue growth every quarter for the past nine years in a flat market for business telecom services. Level 3 has experienced significant growth as well—especially over the past several quarters, logging growth in the North American enterprise financial line item of 3%, 5% and 4% percent quarterly in 3Q13, 4Q13 and 1Q14, respectively. ATLANTIC-ACM estimates the combined Level 3 and tw telecom have grown U.S. business telecom service revenue (excluding data center, cloud equipment and professional services) by 8% from 2012 to 2013 while the overall market remained flat. Integration will create challenges for the new company to maintain this trend. To this point, tw telecom’s growth has been greatly assisted by its excellent business customer service. In ATLANTIC-ACM’s 2013 Business Connectivity Report Card, tw telecom was the highest scoring carrier among companies generating $1B+ in revenue for Sales Reps, Billing, Customer Service, Voice Value and Data Value. Level 3 also scores well with customers, receiving Brand and Network awards in 2013. (Note: 2014 results will be announced next week – stay tuned for updates.) The operational organizations and cultures that enable this level of customer focus will be difficult to maintain through integration and probable layoffs. This said, Level 3 was successful overall with its integration of Global Crossing and has at its disposal the expertise of CEO Jeff Storey, whose deep background in operations will serve it well as the new company tackles these challenges.
- A new major player. Despite the high profile of this merger, and the new company leapfrogging Windstream to take position as the Number Four player in business services, the combined firms will have a small share (5.2% in 2013) of the overall business services market. (Note that the Comcast/TWC deal, if approved, will have a larger share than Level3/twtc.) AT&T, Verizon and CenturyLink possess a combined share of 59.8%. However, when drilling specifically into more advance services, including Ethernet, VoIP, IP VPN and Dedicated Internet Access (DIA), the combined companies’ share in 2013 would have been 8.9% -- the third largest behind AT&T and Verizon. On the wholesale side, the combined company’s share in 2013 would have been 7.2% -- again placing fourth behind AT&T, Verizon and CenturyLink.
The Bottom Line:
Since these companies do not overlap in network and focus on slightly different customer sets, the merger is not likely to decrease competition. If fact, Level 3 has historically priced very competitively and may bring that perspective to tw telecom markets, driving increased competition. In addition, the combined company will likely make stronger plays in bids for large contracts, placing competitive pressure on AT&T, Verizon and CenturyLink.
At the same time, the acquisition will deliver a significant last-mile access footprint to an operator that historically has lacked a scaled metro footprint, driving OPEX synergies via on-net circuits while also enabling Level 3 to deeply penetrate U.S. metro markets in pursuit of greater business services expansion. In today’s market, the telecom business is a game of scale, and this deal delivers Level 3 the required metro network scale to broadly support U.S. business customer needs, which translates to opportunities to capture greater share of business telecom services revenue.
ATLANTIC-ACM is a leading provider of strategic research and consulting services to the communications and information industries. In addition to producing the industry's principal customer satisfaction, benchmarking, and market sizing and opportunity studies, ATLANTIC-ACM assists clients in evaluating business development opportunities for successful investment, market entry and long-term planning. For more than two decades, ATLANTIC-ACM has helped leading companies identify opportunities, capture and retain market share, and navigate changing markets, economies and technologies. For more information, visit ATLANTIC-ACM's website at http://www.atlantic-acm.com.
Using new techniques of information modeling, indexing, and processing, new cloud-based systems can support cloud-based workloads previously not possible for high-throughput insurance, banking, and case-based applications. In his session at 18th Cloud Expo, John Newton, CTO, Founder and Chairman of Alfresco, described how to scale cloud-based content management repositories to store, manage, and retrieve billions of documents and related information with fast and linear scalability. He addres...
Jan. 19, 2017 04:00 AM EST Reads: 5,350
Hardware virtualization and cloud computing allowed us to increase resource utilization and increase our flexibility to respond to business demand. Docker Containers are the next quantum leap - Are they?! Databases always represented an additional set of challenges unique to running workloads requiring a maximum of I/O, network, CPU resources combined with data locality.
Jan. 19, 2017 03:30 AM EST Reads: 373
Due of the rise of Hadoop, many enterprises are now deploying their first small clusters of 10 to 20 servers. At this small scale, the complexity of operating the cluster looks and feels like general data center servers. It is not until the clusters scale, as they inevitably do, when the pain caused by the exponential complexity becomes apparent. We've seen this problem occur time and time again. In his session at Big Data Expo, Greg Bruno, Vice President of Engineering and co-founder of StackIQ...
Jan. 19, 2017 01:15 AM EST Reads: 7,796
The cloud market growth today is largely in public clouds. While there is a lot of spend in IT departments in virtualization, these aren’t yet translating into a true “cloud” experience within the enterprise. What is stopping the growth of the “private cloud” market? In his general session at 18th Cloud Expo, Nara Rajagopalan, CEO of Accelerite, explored the challenges in deploying, managing, and getting adoption for a private cloud within an enterprise. What are the key differences between wh...
Jan. 19, 2017 01:15 AM EST Reads: 6,096
Security, data privacy, reliability, and regulatory compliance are critical factors when evaluating whether to move business applications from in-house, client-hosted environments to a cloud platform. Quality assurance plays a vital role in ensuring that the appropriate level of risk assessment, verification, and validation takes place to ensure business continuity during the migration to a new cloud platform.
Jan. 19, 2017 01:00 AM EST Reads: 1,279
"Tintri was started in 2008 with the express purpose of building a storage appliance that is ideal for virtualized environments. We support a lot of different hypervisor platforms from VMware to OpenStack to Hyper-V," explained Dan Florea, Director of Product Management at Tintri, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
Jan. 19, 2017 12:45 AM EST Reads: 4,691
Containers have changed the mind of IT in DevOps. They enable developers to work with dev, test, stage and production environments identically. Containers provide the right abstraction for microservices and many cloud platforms have integrated them into deployment pipelines. DevOps and containers together help companies achieve their business goals faster and more effectively. In his session at DevOps Summit, Ruslan Synytsky, CEO and Co-founder of Jelastic, reviewed the current landscape of Dev...
Jan. 19, 2017 12:00 AM EST Reads: 4,177
One of the hottest areas in cloud right now is DRaaS and related offerings. In his session at 16th Cloud Expo, Dale Levesque, Disaster Recovery Product Manager with Windstream's Cloud and Data Center Marketing team, will discuss the benefits of the cloud model, which far outweigh the traditional approach, and how enterprises need to ensure that their needs are properly being met.
Jan. 18, 2017 11:15 PM EST Reads: 4,473
The security needs of IoT environments require a strong, proven approach to maintain security, trust and privacy in their ecosystem. Assurance and protection of device identity, secure data encryption and authentication are the key security challenges organizations are trying to address when integrating IoT devices. This holds true for IoT applications in a wide range of industries, for example, healthcare, consumer devices, and manufacturing. In his session at @ThingsExpo, Lancen LaChance, vic...
Jan. 18, 2017 09:45 PM EST Reads: 6,519
Big Data, cloud, analytics, contextual information, wearable tech, sensors, mobility, and WebRTC: together, these advances have created a perfect storm of technologies that are disrupting and transforming classic communications models and ecosystems. In his session at @ThingsExpo, Erik Perotti, Senior Manager of New Ventures on Plantronics’ Innovation team, provided an overview of this technological shift, including associated business and consumer communications impacts, and opportunities it m...
Jan. 18, 2017 09:30 PM EST Reads: 5,747
WebRTC has had a real tough three or four years, and so have those working with it. Only a few short years ago, the development world were excited about WebRTC and proclaiming how awesome it was. You might have played with the technology a couple of years ago, only to find the extra infrastructure requirements were painful to implement and poorly documented. This probably left a bitter taste in your mouth, especially when things went wrong.
Jan. 18, 2017 09:30 PM EST Reads: 7,636
In their general session at 16th Cloud Expo, Michael Piccininni, Global Account Manager - Cloud SP at EMC Corporation, and Mike Dietze, Regional Director at Windstream Hosted Solutions, reviewed next generation cloud services, including the Windstream-EMC Tier Storage solutions, and discussed how to increase efficiencies, improve service delivery and enhance corporate cloud solution development. Michael Piccininni is Global Account Manager – Cloud SP at EMC Corporation. He has been engaged in t...
Jan. 18, 2017 08:15 PM EST Reads: 4,882
You have great SaaS business app ideas. You want to turn your idea quickly into a functional and engaging proof of concept. You need to be able to modify it to meet customers' needs, and you need to deliver a complete and secure SaaS application. How could you achieve all the above and yet avoid unforeseen IT requirements that add unnecessary cost and complexity? You also want your app to be responsive in any device at any time. In his session at 19th Cloud Expo, Mark Allen, General Manager of...
Jan. 18, 2017 07:30 PM EST Reads: 3,151
WebRTC is bringing significant change to the communications landscape that will bridge the worlds of web and telephony, making the Internet the new standard for communications. Cloud9 took the road less traveled and used WebRTC to create a downloadable enterprise-grade communications platform that is changing the communication dynamic in the financial sector. In his session at @ThingsExpo, Leo Papadopoulos, CTO of Cloud9, discussed the importance of WebRTC and how it enables companies to focus o...
Jan. 18, 2017 06:15 PM EST Reads: 4,202
Big Data engines are powering a lot of service businesses right now. Data is collected from users from wearable technologies, web behaviors, purchase behavior as well as several arbitrary data points we’d never think of. The demand for faster and bigger engines to crunch and serve up the data to services is growing exponentially. You see a LOT of correlation between “Cloud” and “Big Data” but on Big Data and “Hybrid,” where hybrid hosting is the sanest approach to the Big Data Infrastructure pro...
Jan. 18, 2017 05:30 PM EST Reads: 4,891