CenturyLink to Buy Level 3 for $34B
I was an employee for Level 3, coming from the Global Crossing acquisition, for around 17 years, choosing to leave early last year (and unlike most former Level 3&#x2F;Global Crossing employees, this choice was not forced upon me).<p>Internally (and by, internally, I mean within my team, not within management or anyone who makes decisions of this nature), we&#x27;d always seen CenturyLink as an interesting prospect for merger.  The two companies&#x27; footprints and businesses appeared to compliment each other.  It was generally dismissed out of hand because of the consumer side of CentryLink.  Level 3 (and even less so with Global Crossing), focused on carriers and Fortune 50-100 businesses as their core and shied away from the more expensive, less profitable consumer facing pieces.<p>A bit of history for those who weren&#x27;t around in the 90s: When thinking CenturyLink, think Qwest (and commercials about the little motel in the desert with &quot;Cable TV&quot; replaced by media services delivering every television show and movie produced in the history of ever).  They were one of the formerly local telecoms that expanded into long distance&#x2F;fiber&#x2F;internet after the 1996 telecom deregulation[0].<p>Level 3&#x27;s business is Carrier and Enterprise with much of the Enterprise piece coming from the Global Crossing side of it because, at the time, we effectively couldn&#x27;t compete with Level 3.  We&#x27;d come in to bid a project at a price we could eek out a small profit on and would be undercut because they owned far more local which had the effect of lower cost of access and lower complexity for the company we were selling to.  Our focus was Enterprise where the margins were higher, we could work with other carriers to provide the services (often Level 3) and step in with a better understanding (and willingness to &quot;do practically anything&quot; to win the contract -- our CEO, after all, was John Legere and the way he runs T-Mobile came from the way he ran Global Crossing: &quot;Hug the Customer&quot; was a mantra).<p>Level 3 (like all telecoms) is a run to the bottom as far as price is concerned.  Cost of access is pretty much <i>it</i> in this business.  The expense is so large it eclipses pretty much everything else.  Being able to move more things onto your own network reduces that expense (and in-turn results in revenue from others paying <i>you</i> for access to those local components).  This fits well with CenturyLink.<p>The rumblings of this deal internally were strong over the last few months (I don&#x27;t work there any longer and <i>I</i> heard the rumors[1]).  Since this had come up from time to time, I wasn&#x27;t surprised to hear it again and it still came with the difficulty of figuring out how a deal like that would work.  Internally, most employees assumed it&#x27;d be a Level 3 purchase of CenturyLink, but a look at the fundamentals of the two businesses made something like that wishful thinking on the part of employees who are really tired of all of the layoffs and really didn&#x27;t want to see a large one that would come as a result of being purchased.<p>This will be an interesting transition for the employees of Level 3 proper.  They&#x27;re used to doing the buying and they&#x27;re actually <i>more</i> used to being the company that comes in, strips the company they purchased (of staff) and imposing the &quot;Level 3 way&quot; on the purchased entity.  It was clear that was their position during the Global Crossing merger and morale became greatly affected when some Global Crossing employees took leadership positions and imposed &quot;The Global Crossing way&quot; on Level 3.  This resulted in a pretty dramatic culture clash that wasn&#x27;t really resolved even by the time I left (which was shortly after the TW Telecom merger!).  At least at that point they were <i>still</i> suffering getting the various pieces&#x2F;parts of the company together and operating as a single, well oiled, machine.  Adding this to the mix will further complicate those efforts.  Level 3 was known for being good at making a purchase and bad at integrating that purchase.  I think they did a better job with the Global Crossing and TW acquisitions, but &quot;better&quot; was in comparison to the &quot;abysmal&quot; job they did with the six that were there prior.  They still have a history (and current?) reputation of shedding jobs about every 6 months (5-10% across the board) that despite having a better few years, didn&#x27;t change after I left[3].  They have difficulties hiring top talent as a result, though I&#x27;m sure this problem exists across telecom unless you&#x27;re one of the two big guys.<p>Apologies for the lengthy and poorly revised post.  The speculation contained within is my own and has not been influenced by internal employees -- and may be wildly off since I haven&#x27;t been an employee there for well over a year, but I thought I&#x27;d share in case it spurs further discussion that irons out some of the wrinkles.  This will be an interesting change in the landscape of telecom, putting a really large competitor against some of the &quot;bigs&quot; who&#x27;s reputation is best summed up by this SNL sketch: <a href="https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=CHgUN_95UAw" rel="nofollow">https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=CHgUN_95UAw</a><p>[0] Which is in and of itself a terrible description. It was less a &quot;deregulation&quot; than a &quot;re-regulation&quot; and like all government regulations of this kind, it defined a set of &quot;winning and losing business strategies&quot; in this sector that were different than the strategies that existed before.  And a set of tricks&#x2F;arbitrages that would create entirely new businesses designed to provide nearly free services by leveraging cost of access (in a quasi tariff style).<p>[1] Before I get anyone in trouble, the rumors I heard were not from people who would have been in any position to know about something like this and were little more than the speculation of previous years ... along the lines of &quot;wouldn&#x27;t it be great?&quot;.  I was able to connect the dots, though, by discovering that certain of my former coworkers were unusually busy -- so busy that I couldn&#x27;t get in touch with them due to their workload.  Knowing what they were often involved in, and combining the increase in talk about CenturyLink led me to fully believe this deal was going to land at some point.  As a result, I didn&#x27;t do any stock transactions to avoid the appearance of having &quot;insider information&quot; that I didn&#x27;t reliably or accurately have.<p>[2] A look at the fundamentals of both business indicated that as wishful thinking. It was clear to me if there was going to be a purchase, it was Level 3 who was getting bought.<p>[3] This was a small bit of my motivation for leaving.  I&#x27;d been through 30-35 &quot;Reductions in Force&quot; and came out still employed and had continued to have the confidence of management up to the VP level, so I was not concerned about losing my job, but all of those &quot;RIF&quot;s take a toll on you.  I&#x27;m still amazed, to this day, how efficiently our process for laying off employees had become.  We had entire systems&#x2F;applications built for the task and it was these sorts of things.  That sort of thing bleeds into the culture of the company and it was a culture I had grown very tired from.