June 21, 2008
Level 3, Fiber Sector Stabilize: Level 3 Communications Inc.
By D.R. Stewart, Tulsa World, Okla.
Jun. 21--Level 3 Communications Inc. is a survivor.
Speaking by phone from Colorado this week, Level 3 Vice Chairman Charles C. Miller III said the long-anticipated consolidation in the telecommunications industry has finally arrived and produced a healthier market.
In 2001, when Williams Cos. Inc. spun off Level 3 competitor Williams Communications Group Inc. as an independent wholesale telecommunications company, the industry was swimming in excess capacity.
A year after its initial public offering, Williams Communications filed for Chapter 11 bankruptcy protection, strapped with $7 billion in debt, declining bandwidth prices and a glut of fiber-optic capacity.
The excess fiber capacity shrunk over the next six years as scores of telecom networks went dark.
"Things appear to be better," Miller said. "Of the next-generation carriers who built fiber networks over the last 10 years or so, we certainly would be considered the prime one. In the wholesale space, we're serving AT&T, Verizon, Sprint, cable companies, large telephone companies, foreign carriers, wireless carriers,
media companies such as Comcast, Time Warner Cable, Cox Communications. In the content world, we're serving Yahoo!, DirecTV, Microsoft and Singapore Telecom."
Based in Broomfield, Colo., Level 3 has acquired more than half a dozen telecommunications companies in the last three years, including Tulsa-based WilTel Communications Group LLC, which emerged from the Williams Communications bankruptcy, for $680.5 million.
At the time of the WilTel acquisition in December 2005, WilTel employed 1,200 in Tulsa at the glass-walled 750,000-square-footOne Technology Center at 100 S. Cincinnati Ave.
Today, Level 3 employs 600 people and occupies 145,000 square feet, or about 19 percent, of One Technology Center. The remainder is leased office space and City of Tulsa departments.
Earlier this month, Level 3 sold its Vyvx LLC advertising distribution business for $129 million to DG FastChannel Inc. of Dallas. Included in the deal was the sale of Vyvx's network operations center at One Technology Center. Also, about 25 Tulsa-based employees of the Vyvx advertising distribution business will transfer to the Dallas firm.
Although Level 3 retained ownership of Vyvx and its core broadcast business, industry observers and employees wondered whether the company's time in Tulsa was coming to an end.
Miller said Vyvx and Level 3 are here to stay.
"Tulsa is our next biggest location next to Broomfield," Miller said. "Tulsa is headquarters for all our field services. The core of the Vyvx business is still in Tulsa. We are not going away. If anything, we are planning to grow our business in Tulsa. We like the high-tech work force and cost of doing business in Tulsa.
"And, we're still hiring there."
In Tulsa, Level 3 is hiring network engineers, network operations staff and project managers, Level 3 executives said.
Miller said Level 3 values its Vyvx business, which transports standard and high-definition video for broadcast companies over its fiber-optic network and satellite facilities.
"We retained that business," Miller said. "Vyvx has become a verb in the news business, as in "Vyvx that to me."
"What we sold was a much lower-tech way to distribute ads. Given the inertia and complexity of back offices and TV stations, it's done on VCR tape. The ad business will change someday, but it's not tomorrow, and we're not the ones to work it through those changes.
"We want to handle the networking and let DG FastChannel handle the old physical distribution part."
Headquarters: Broomfield, Colo.
Offices: Tulsa, Atlanta and Coudersport, Pa.
Operates: 23,000-mile broadband fiber-optic network.
Employees: 6,300 worldwide; 600 in Tulsa.
2007 financial results: $1.1 billion in revenue; net loss of $91 million, or 6 cents per share.
Thirty months of acquisitions and divestiture at Level 3
December 2005: Level 3 acquires Tulsa-based WilTel Communications Group LLC for $680.5 million.
April 2006: Level 3 buys Colorado-based telecommunications company ICG Communications Inc. for $163 million.
May 2006: Level 3 purchases TelCove Inc., a Pennsylvania telecom company, for $1.23 billion.
June 2006: Level 3 pays $165 million for Looking Glass Networks Inc., an Oak Brook, Ill., provider of metropolitan data transport services.
October 2006: Level 3 acquires Broadwing Corp., the Austin, Texas, provider of optical network communications services, for $1.4 billion.
December 2006: Level 3 purchases for $135 million the content delivery network services business of ThousandOa ks, Calif.-based Savvis Inc.
July 2007: Level 3 buys video management and streaming services business of Servecast Ltd., Dublin, Ireland, for $45 million.
June 2008: Level 3 sells its Vyvx LLC advertising distribution business for $129 million to DG FastChannel Inc. of Dallas.
D.R. Stewart 581-8451 [email protected]
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