|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.
In his session at Cloud Expo, Alan Winters, an entertainment executive/TV producer turned serial entrepreneur, will present a success story of an entrepreneur who has both suffered through and benefited from offshore development across multiple businesses: The smart choice, or how to select the right offshore development partner Warning signs, or how to minimize chances of making the wrong choice Collaboration, or how to establish the most effective work processes Budget control, or how to m...
Mar. 28, 2017 10:21 AM EDT
SYS-CON Events announced today that Juniper Networks (NYSE: JNPR), an industry leader in automated, scalable and secure networks, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Juniper Networks challenges the status quo with products, solutions and services that transform the economics of networking. The company co-innovates with customers and partners to deliver automated, scalable and secure network...
Mar. 28, 2017 10:15 AM EDT Reads: 1,500
SYS-CON Events announced today that Interoute, owner-operator of one of Europe's largest networks and a global cloud services platform, has been named “Bronze Sponsor” of SYS-CON's 20th Cloud Expo, which will take place on June 6-8, 2017 at the Javits Center in New York, New York. Interoute is the owner-operator of one of Europe's largest networks and a global cloud services platform which encompasses 12 data centers, 14 virtual data centers and 31 colocation centers, with connections to 195 add...
Mar. 28, 2017 10:00 AM EDT Reads: 1,480
SYS-CON Events announced today that SD Times | BZ Media has been named “Media Sponsor” of SYS-CON's 20th International Cloud Expo, which will take place on June 6–8, 2017, at the Javits Center in New York City, NY. BZ Media LLC is a high-tech media company that produces technical conferences and expositions, and publishes a magazine, newsletters and websites in the software development, SharePoint, mobile development and commercial UAV markets.
Mar. 28, 2017 09:45 AM EDT Reads: 4,382
SYS-CON Events announced today that Cloudistics, an on-premises cloud computing company, has been named “Bronze Sponsor” of SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Cloudistics delivers a complete public cloud experience with composable on-premises infrastructures to medium and large enterprises. Its software-defined technology natively converges network, storage, compute, virtualization, and management into a ...
Mar. 28, 2017 09:45 AM EDT Reads: 2,204
Historically, some banking activities such as trading have been relying heavily on analytics and cutting edge algorithmic tools. The coming of age of powerful data analytics solutions combined with the development of intelligent algorithms have created new opportunities for financial institutions. In his session at 20th Cloud Expo, Sebastien Meunier, Head of Digital for North America at Chappuis Halder & Co., will discuss how these tools can be leveraged to develop a lasting competitive advanta...
Mar. 28, 2017 09:30 AM EDT Reads: 2,826
Building custom add-ons does not need to be limited to the ideas you see on a marketplace. In his session at 20th Cloud Expo, Sukhbir Dhillon, CEO and founder of Addteq, will go over some adventures they faced in developing integrations using Atlassian SDK and other technologies/platforms and how it has enabled development teams to experiment with newer paradigms like Serverless and newer features of Atlassian SDKs. In this presentation, you will be taken on a journey of Add-On and Integration ...
Mar. 28, 2017 09:30 AM EDT Reads: 3,220
Now that the world has connected “things,” we need to build these devices as truly intelligent in order to create instantaneous and precise results. This means you have to do as much of the processing at the point of entry as you can: at the edge. The killer use cases for IoT are becoming manifest through AI engines on edge devices. An autonomous car has this dual edge/cloud analytics model, producing precise, real-time results. In his session at @ThingsExpo, John Crupi, Vice President and Eng...
Mar. 28, 2017 09:15 AM EDT Reads: 4,047
There are 66 million network cameras capturing terabytes of data. How did factories in Japan improve physical security at the facilities and improve employee productivity? Edge Computing reduces possible kilobytes of data collected per second to only a few kilobytes of data transmitted to the public cloud every day. Data is aggregated and analyzed close to sensors so only intelligent results need to be transmitted to the cloud. Non-essential data is recycled to optimize storage.
Mar. 28, 2017 08:15 AM EDT Reads: 3,162
"I think that everyone recognizes that for IoT to really realize its full potential and value that it is about creating ecosystems and marketplaces and that no single vendor is able to support what is required," explained Esmeralda Swartz, VP, Marketing Enterprise and Cloud at Ericsson, in this SYS-CON.tv interview at @ThingsExpo, held June 7-9, 2016, at the Javits Center in New York City, NY.
Mar. 28, 2017 08:00 AM EDT Reads: 4,422
Microservices are a very exciting architectural approach that many organizations are looking to as a way to accelerate innovation. Microservices promise to allow teams to move away from monolithic "ball of mud" systems, but the reality is that, in the vast majority of organizations, different projects and technologies will continue to be developed at different speeds. How to handle the dependencies between these disparate systems with different iteration cycles? Consider the "canoncial problem" ...
Mar. 28, 2017 06:00 AM EDT Reads: 8,929
As businesses adopt functionalities in cloud computing, it’s imperative that IT operations consistently ensure cloud systems work correctly – all of the time, and to their best capabilities. In his session at @BigDataExpo, Bernd Harzog, CEO and founder of OpsDataStore, will present an industry answer to the common question, “Are you running IT operations as efficiently and as cost effectively as you need to?” He will expound on the industry issues he frequently came up against as an analyst, and...
Mar. 28, 2017 06:00 AM EDT Reads: 4,316
Why do your mobile transformations need to happen today? Mobile is the strategy that enterprise transformation centers on to drive customer engagement. In his general session at @ThingsExpo, Roger Woods, Director, Mobile Product & Strategy – Adobe Marketing Cloud, covered key IoT and mobile trends that are forcing mobile transformation, key components of a solid mobile strategy and explored how brands are effectively driving mobile change throughout the enterprise.
Mar. 28, 2017 06:00 AM EDT Reads: 2,996
After more than five years of DevOps, definitions are evolving, boundaries are expanding, ‘unicorns’ are no longer rare, enterprises are on board, and pundits are moving on. Can we now look at an evolution of DevOps? Should we? Is the foundation of DevOps ‘done’, or is there still too much left to do? What is mature, and what is still missing? What does the next 5 years of DevOps look like? In this Power Panel at DevOps Summit, moderated by DevOps Summit Conference Chair Andi Mann, panelists l...
Mar. 28, 2017 05:00 AM EDT Reads: 9,900
In their Live Hack” presentation at 17th Cloud Expo, Stephen Coty and Paul Fletcher, Chief Security Evangelists at Alert Logic, provided the audience with a chance to see a live demonstration of the common tools cyber attackers use to attack cloud and traditional IT systems. This “Live Hack” used open source attack tools that are free and available for download by anybody. Attendees learned where to find and how to operate these tools for the purpose of testing their own IT infrastructure. The...
Mar. 28, 2017 04:45 AM EDT Reads: 7,497