BROOMFIELD, Colo.—Level 3 Communications Inc.’s buying spree continues as the wholesale fiber optic network operator said it was spending $163 million to pick up Englewood, Colo.-based ICG Communications Inc.
Under terms of the agreement, Level 3 will spend $36 million in cash along with $127 million in stock. For its investment, Level 3 gains ICG’s more than 2,000 miles of fiber-optic connections in Colorado and Ohio, as well as 500 points of presence used by 1,600 Internet Service Providers, wireless operators and other businesses, helping Level 3 expand its transport, Internet Protocol and voice services.
“This transaction gives Level 3 the opportunity to further expand our footprint into areas where we see demand for our services, and to realize cost savings,” stated Kevin O’Hara, president and chief operating officer of Level 3.
Level 3 Chief Financial Officer Sunit Patel said he expects ICG’s $15 million cash flow to jump to $30 or $40 million once the company is integrated into Level 3.
The acquisition does not include ICG’s investments in Voice over IP provider Global Telecom or Mpower Holding Corp., an integrated voice and DSL provider in parts of California, Chicago and Las Vegas.
ICG, which at its peak had about 2,500 employees, has gone from serving about 10 percent of the Internet traffic nationally during the late 1990s to bankruptcy. In 2002, the company came out of bankruptcy with help from venture capitalists, and now has 250 employees.
In March, Level 3 finalized its acquisition of St. Petersburg, Fla.-based Progress Telecom for $68.5 million in cash and more than 19.6 million shares of stock. For its investment, Level 3 gained 200 customers in the southeast.
In 2005, Level 3 spent $680 million to buy Tulsa, Okla.-based WilTel Communications Group, a nationwide fiber network provider offering voice, data and Internet access. WilTel fought its way out of bankruptcy and was bought by investors in 2003.
Level 3’s stock was trading up 9 cents at $4.95 per share in morning trading on the Nasdaq and the company said it plans to announce its first-quarter earnings Apr. 26.
