Merger, Acquisition Change Telecom

merger, acquisitionMerger, Acquisition Change Telecom in 2016

Merge,  acquisition changes dominated the telecom industry in 2016.   Several leading carriers launched merger, acquisition projects.  While some companies merged to create more competitive companies, others acquired competitors to stay afloat.  Most noteworthy, strategic M&A goals were launched to compete with disruptive threats and innovative challenges in telecom technology.

Most noteworthy, many large, incumbent carriers focused on merger and acquisition transactions to add missing strategic services.  They also merge to expand coverage or further define increased value for their customers. Merger, acquisition strategies are a great way to maintain relevant in the marketplace against competitors like Google, Comcast and Verizon wireless.

While some of the merger, acquisition deals still require regulatory approval, here is a summary of this year’s noteworthy merger, acquisition activities in telecom.

Verizon acquires XO Communications

On November 17, 2016, the U.S. Federal Communications Commission approved Verizon Communications Inc.’s $1.8 billion acquisition of Carl Icahn’s XO Communications fiber-optic business.

Verizon stated that they will use Herndon, Va. based XO Communications’ fiber-based IP and Ethernet network assets to better serve its enterprise and wholesale customers.   XO’s fiber business will bolster Verizon’s cell network.

Verizon will also be leasing XO’s available wireless spectrum.

Windstream, EarthLink Merger

Windstream and EarthLink announced merger plans to create a joint company on November 8, 2016.

So Windstream announced that it would purchase fellow U.S. telecommunications company EarthLink an all-stock deal valued at about $1.1 billion.  This includes EarthLink’s debt.

EarthLink shareholders will receive 0.818 Windstream shares for each share they own.
Windstream shareholders will own about 51 percent of the combined company when the deal closes, while EarthLink shareholders will own about 49 percent, the companies said.

Most noteworthy, the new entity will join forces to create a large, national footprint that may well compete with telecom giants Verizon and AT&T.  Windstream and EarthLink expect the deal to close during the first half of 2017.

CenturyLink Acquisition of Level 3

On October 31, 2016, CenturyLink and Level 3 Communications, Inc. announced that their Boards of Directors unanimously approved a definitive merger, acquisition agreement between the two telecom giants. CenturyLink will acquire Level 3 in a cash and stock transaction valued at approximately $34 billion, including the assumption of debt.

Level 3 shareholders will receive $26.50 per share in cash and a fixed exchange ratio of 1.4286 shares of CenturyLink stock for each Level 3 share they own.  This implies a purchase price of $66.50 per Level 3 share (based on a CenturyLink $28.00 per share reference price) and a premium of approximately 42 percent based on Level 3’s unaffected closing share price of $46.92 on October 26, 2016.  October 26, 2016 was the last trading day prior to market speculation about a potential transaction. Upon the closing of the transaction,

CenturyLink shareholders will own approximately 51 percent and Level 3 shareholders will own approximately 49 percent of the combined company.

The combined company will have 500,000 route miles of fiber.  It will form the second largest domestic communications provider serving business customers behind AT&T.
CenturyLink, based in Monroe, La announced that the new company can earn 76 percent of its revenue from business customers.

Charter-Time Warner Cable Merger,  Acquisition Approved by FCC and the Department of Justice

Charter Communications received approval of their merger, acquisition of Time Warner Cable in a $78 billion transaction by the U.S. Department of Justice and the FCC in April 2016. Charter and Time Warner Cable merger,  acquisition,  therefore has formed one of the largest service providers in the country.

Approval of the deal came with some conditions, however. The regulatory bodies said that Charter can’t limit access to streaming video providers by putting contractual restrictions on them, which could limit content distribution. Consequently, Charter is prohibited from using data caps or charging consumers more for using more data.
Especially relevant, the Department of Justice also approved Stamford, Conn.-based Charter’s related $10.4 billion acquisition of Bright House Networks.

Comcast Announces Wireless Service

On Sep 20, 2016 Comcast announced it is looking to enter new territory by offering its own wireless service by mid-2017.

This news materialized during a speech by Comcast’s CEO Brian Roberts at a Goldman Sachs Conference. Roberts said the new service would use Verizon’s existing wireless infrastructure combined with Comcast’s own 15 million Wi-Fi hotspots.  The Wall Street Journal announced the news in September.
Cable giant Comcast in September confirmed that it was launching a wireless service following months of industry rumblings about a new mobility business unit within the company.

The new wireless service will use leased airwaves from competing carrier Verizon Wireless, as well as Comcast’s own network of 15 million Wi-Fi hot spots. The service will help Comcast compete with fellow carriers that already have a mobility practice, will add a new revenue stream for the provider, Comcast said.

Most of all, Comcast further said that the wireless service will be officially launched by mid-2017.

Verizon Makes Bid for Yahoo Acquisition; Yahoo Confirms Large-Scale Breach

Verizon confirmed a future acquisition of Yahoo’s operational assets, including its media, search, and communications assets, for $4.83 billion.  Yahoo formally confirmed to its Basking Ridge, N.J.-based buyer.

In addition, in September, Yahoo disclosed that more than 500 million of its user accounts were hacked in 2014.  At the time, Verizon said it would evaluate the deal as more information became known.

Verizon publically defended the deal as of October, but in November, Yahoo told its investors that Verizon could still potentially back out of the acquisition as a result of the breach.

On December 1, 2016 Barrons.com reported that Verizon management sees the deal going through.  Most of all, the price, however, could be renegotiated or delayed but the deal remains important to Verizon’s digital media

 

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