Telecom ETFs: More Mergers and Acquisitions

 |  Includes: IXP, IYZ, TTH, VOX
by: Tom Lydon

A big acquisition in the telecommunications sector is raising hopes for additional deals that could provide a catalyst for ETFs tracking the industry.

Level 3 Communications (NasdaqGS: LVLT) plans on acquiring Global Crossing (NasdaqGS: GLBC) for around $1.9 billion to upgrade the company’s enterprise service offerings, such as managed services and VPN offerings, according to Network World. Under the deal, Level 3 will purchase Global Crossing at $23.04 a share, or around a 56% premium upon announcement. As part of the deal, Level 3 will have to assume $1.1 billion in debt.

The bulked-up carrier will have combined revenue of around $6.26 billion.

The deal is seen as a safe move since both companies have been suffering from pricing pressures in their core business of Internet services, reports Roger Cheng for The Wall Street Journal. Level 3 Chief Executive Jim Crowe commented that “the new company will clearly have a solid balance sheet,” and Global Crossing CEO John Legere remarked, “It’s the right combination at the right time.” It is calculated that the total merger cost savings could be around $2.5 billion.

The acquisition of Global Crossing will also help Level 3 efficiently compete against rival Akamai Technologies Inc. (NasdaqGS: AKAM) for online video streaming services and movie downloads, writes Sayantani Ghosh for Reuters.

For more information on the telecom sector, visit our telecommunications category.

  • iShares Dow Jones US Telecom (NYSEArca: IYZ)
  • Vanguard Telecommunications (NYSEARca: VOX)
  • Telecom HOLDRs (NYSEArca: TTH)
  • iShares S&P Global Telecommunications Index Fund (NYSEArca: IXP)

Max Chen contributed to this article.