CenturyLink's Frank Gimondo in power room of the company's new Toronto area data centre in 2014. ITWC staff photo
CenturyLink's Frank Gimondo in power room of the company's new Toronto area data centre in 2014. ITWC staff photo

The impeding merger of U.S.-based service providers CenturyLink and Level 3 Communications announced this week is expected to have only a small impact here.

The US$34 billion cash and stock deal, announced Monday, will become the second largest American communications provider serving enterprise customers. CenturyLink and Level 3 have business customers here who want connectivity to the U.S.

However, far more interesting to enterprises here is that CenturyLink, with US$18 billion in revenue from around the world,  has already said publicly it wants to get out of the data centre business. It has three data centres here (among 58 around the world), and Level 3 has one.

Demand for hosting and cloud services has never been higher, so it will be interesting to see who picks up those facilities. IDC Canada analyst Mark Schrutt said there are “tons” of buyers for data centres.

UPDATE: On Nov. 4  CenturyLink announced it had sold  its 57 data centers around the world and it co-location business to funds advised by BC Partners, in a consortium including Medina Capital Advisors and Longview Asset Management, for US$2.5 billion and a minority stake in the consortium’s newly-formed global secure infrastructure company. CenturyLink will continue to offer co-location services through the consortium.

So far neither company is saying anything about the merged company’s future plans here. Asked for a statement CenturyLink said that it’s very early in the process with many details to be determined. “Until the transaction closes, CenturyLink and Level 3 will operate as separate companies and it remains business as usual.”

The deal comes amid two huge consolidations in the U.S with their telecom competitors: AT&T intending to swallow Time-Warner, and Verizon Communications buying Yahoo.

Citing Vertical Systems Group numbers, Bloomberg News said  that in the first half of the year Level 3 was the second-biggest U.S. provider of Ethernet services to companies, behind AT&T. CenturyLink was fifth on the list.

In a statement CenturyLink said the combined company will have the ability to offer its larger enterprise customer base the benefits of Level 3’s global footprint across more than 60 countries. CenturyLink’s fibre network would increase by 200,000 route miles of fiber, which includes 64,000 route miles in 350 metropolitan areas and 33,000 subsea route miles connecting multiple continents.

IDC Canada’s Schrutt said the CenturyLink deal is really about combining its network with Level 3’s.

However, Bloomberg also noted both companies have a lot of losses from building out their networks and can use some of those as tax shields.

Neither company is a stranger to acquisitions. In 2011 CenturyLink bought competitor Savvis  for US$2.5 billion, while in 2014 Level 3 bought TW Telecom.

In a 2015 interview with IT World Canada editorial director Brian Jackson, CenturyLink CTO Aamir Hussain said more cloud capacity was being added to all its data centres. Virtualization of its services –everything from MPLS to firewalls — was continuing.

In 2014 CenturyLink opened its fourth Canadian data centre, just outside Toronto, with the potential of  100,000 square feet of raised floor space. Already it was looking ahead to possibly opening a fifth facility.

 



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