Level 3 Says That CenturyLink Merger Will Improve Their SMB Hold

Level 3 Communications is now a big name in the enterprise space. They will become a part of the CenturyLink network next year, and will have opportunities to effectively deal with the cable operators in small to medium-sized businesses (SMBs). Sunil Patel, who is the CFO of Level 3 Communications, said to investors at the Bank of America Merrill Lynch 2016 Leveraged Finance Conference that they could increase their reach to small and medium businesses soon after the merger.

“If you look at Level 3, our business historically has been stronger with larger enterprises and we don’t have as much scale with the lower end of enterprises,” Patel said. “I think CenturyLink’s business is pretty much across the enterprise sector so they have much more scale and critical mass in the smaller end of enterprises and also in the medium-sized enterprises.”

Level 3 reported in their third quarter results that users who spend between 2,000 and 20,000 dollars a month decreased to 0.6% sequentially, and the largest decline was with the smallest customers. These customers represented 5% of the North American enterprise base of the company and they spend less than 2,000 dollar a month – the group of small customers declined 18% sequentially. Level 3 said that what affected their small business customer base was the moving of 8,000 of these customers to the inside sales.

An important part of the merger with CenturyLink would be its capability to offer services to businesses with the larger fiber network footprint. When the merger is completed, CenturyLink will get an additional 200,000 route miles of fiber. This include 64,000 route miles spread across 350 metropolitan areas and 33,000 subsea route miles that connects different continents. The on-net fiber footprint is also notable, and the acquisition of Level 3 by CenturyLink will improve their reach by about 75%, including 10,000 buildings in Latin America and EMEA.

An increase in the on-net fiber buildings means that CenturyLink will be able to serve more SMBs that are present in these buildings or satellites offices of their bigger business users. “In many cases our ability to serve those customers in more places with more products and services is a big, big plus,” Patel said. “Given the complementary nature of the customers and then you add to that the benefit of a much larger network footprint with a more comprehensive products and services portfolio we should be able to increase our market share with the enterprise market in general.”