In another strategic acquisition that narrows the wholesale field, Level 3 Communications Inc. said today it is buying Progress Telecom LLC, a wholesale network services company based in St. Petersburg, Fla., although it has agreed not to touch certain parts of the companys wireless assets.
Progress Telecom is jointly owned by Progress Energy Inc. and Odyssey Telecorp Inc. Level 3 will pay $137 million in cash and stock for Progress Telecom. The companies expect the deal to close early in the second quarter, pending standard state and federal regulatory approvals.
Level 3 in December closed on its acquisition of WilTel Communications Group LLC. That purchase gave the underlying provider access to 50 new markets and 3,000 new route miles.
Similarly, buying Progress Telecom adds 9,000 miles, 29 metro networks, connections to international cable landings in southern Florida, and 31 mobile switching centers in the southeast, to Level 3s coverage.
Todays announced agreement stipulates that Level 3 will not acquire certain assets that are part of Progress Telecoms wireless tower attachment business, or Progress Telecoms interests in affiliates that provide distributed antennae systems and tower backhaul services to wireless providers.
Level 3 said it plans to have commercial services agreements in place to provide transport services and operations support to these former Progress Telecom affiliates. The company added it will work with those affiliates to develop complementary service offerings for wireless carriers.
Progress Telecom serves approximately 200 customers, many of whom are international and wireless carrier customers. Level 3 was one of those customers.
This transaction represents a unique opportunity to expand Level 3’s footprint in the southeastern region of the United States, where we have seen strong demand for our services,” said Kevin O’Hara, president and COO of Level 3. “More importantly, we serve a number of the same large, key customers, particularly certain wireless and international customers. We believe that the completion of this transaction will enable us to expand our relationship with these customers and offer them a broader set of services in more markets outside the southeast.
Progress Telecom and Progress Energy executives said they welcomed the buyout.
“We believe our customers will benefit greatly from expanded access to Level 3’s international network and its broad suite of transport, IP and VoIP service offerings, said Ronald J. Mudry, president and CEO of Progress Telecom.
Don Davis, executive vice president of Diversified Operations at Progress Energy, said his company will continue to use Progress Telecom for transport and network management services. Progress Energy is Progress Telecom’s largest customer.
Level 3s OHara said the company will realize significant cost synergies by integrating certain operational and corporate activities once it acquires Progress Telecom. Level 3 expects to begin uniting its networks with Progress Telecoms in 2007, once it has finished consolidation with WilTels networks.
Level 3 Communications Inc. www.level3.com
Odyssey Telecorp Inc. www.odysseytel.com
Progress Energy Inc. www.progress-energy.com
Progress Telecom LLC www.progresstelecom.com
WilTel Communications Group LLC www.wiltel.com