Rumor: CenturyLink, Level 3 eye merger

A true merger of equals might be in the works as several news outlets are reporting that CenturyLink and Level 3 Communications are in talks to merge.

Before the Wall Street Journal broke the news, the market capitalization of the two companies were close, with Level 3 being valued at $16.8 billion and CenturyLink at $15.2 billion.

The companies have not commented on the speculation.

Both companies hold positions on the current Networx contract and are expected to be prime bidders for the follow Enterprise Infrastructure Solutions contract.

A deal between CenturyLink and Level 3 could still be weeks away, according to the Wall Street Journal.

Both companies have been acquirers in the telecom market place as they’ve tried to expand beyond their base. CenturyLink has made multi-billion dollar deals over the last seven years to acquire Embarq, Savvis Inc. and most notably Qwest Communications. Qwest is what brought CenturyLink the bulk of its federal business.

Level 3 has one of the largest internet backbones in the world, according to the Journal. In 2014, it bought TW Telecom, and in 2011 it acquired Global Crossing. But Level 3’s involvement in the government market predates those acquisitions.

It’s worth noting that the government market isn’t the primary driver of this merger, though the combination will have an impact.

For the last decade, the overall telecom market has been brutal as business models have been disrupted by the shift to mobile, the need for fiber networks and ever increasing demands for bandwidth to feed cloud computing and other infrastructure needs.

The combination of CenturyLink and Level 3 will bring scale, and that’s a critical element for being competitive in that market, both commercially and in the public sector.