Level 3 to Plug In TelCove for $1.2B


Level 3 Communications Inc. is expanding its fiber-optic network once again, announcing that it will acquire metro communications-service provider TelCove Inc. for about $1.2 billion.

Under terms of the agreement, Level 3 will pay $637 million in its own common-stock shares, $445 million in cash and assume $155.5 million in debt for Pennsylvania-based TelCove.

A privately held company, TelCove is a provider of metro and regional communications services, including transport, Internet access and voice services. It has more than 22,000 local and long-haul fiber-optic route miles reaching 70 Eastern U.S. markets, including connections to about 4,000 buildings.

Level 3 will also acquire more than 300 local-multipoint-distribution-system and 39-gigahertz radio-spectrum licenses covering 90% of the U.S. population.

"The acquisition of TelCove increases our ability to provide end-to-end bandwidth services to our customers," Level 3 CEO James Q. Crowe said. "In addition to the contribution to operating margins, this additional metropolitan and regional capability will enable us to extend the network reach we offer to our customers and enable TelCove's customers to benefit from our national network and broad suite of IP-based [Internet protocol] services.”

TelCove is the latest in a spurt of acquisitions for Broomfield, Colo.-based Level 3. Last month, it announced that it was acquiring Denver-based IGC Communications Inc., and last year, it closed on its acquisition of Progress Telecom LLC, a fiber-optic communications company serving the Southeast United States.

With these acquisitions, Level 3 will claim 5,000 aggregation points in the United States and about 5,200 points worldwide. In order to manage this new portfolio of metro assets, the company formed Level 3 Metro Services, a separate business unit to focus on local markets.