Level 3 gets passport to Latin America through Global Crossing

With an appetite for Latin America’s burgeoning communications market, Level 3 Communications Inc. is devouring Global Crossing Ltd. On Monday, the companies announced a $3 billion deal that will make Global Crossing a subsidiary of Level 3 in a move to sate the ravenous demand for bandwidth. According to Level 3, the acquisition will expand its footprint in several markets around the world especially in Latin American countries such as Brazil, Chile, Mexico and Argentina where Global Crossing operates.

James Q. Crowe, CEO of Level 3 said in a conference call the deal will help his company meet the needs of local, national and international communications buyers.

Global Crossing’s CEO John J. Legere said his company previously sought partners to combine with before inking Monday’s deal. He said the acquisition will allow both companies to increase their capacity to carry communications traffic. “Our combined assets will allow us to move massive amounts of data around the world,” Legere said.

Bulking up resources is essential for the communications market according to industry watcher Robert Rosenberg, president of The Insight Research Corp. in Mountain Lakes, N.J. “This has always been an industry of scale,” he said. “It costs you billions to build an international network.”

Both Level 3 in Broomfield, Colo. and Global Crossing in Florham Park, N.J. provide communications services to enterprise and government customers. Rosenberg said Level 3’s backers have a history of aggressive expansion even in tremulous times. “These guys didn’t flinch during the bust in the early 2000s,” he said. “They made a bunch of acquisitions including Broadwing.”

Level 3’s president Jeff Storey said during the conference call his company and Global Crossing have little overlap in Latin America. In March, Level 3 expanded its services to Columbia, Ecuador, Peru and Venezuela through an agreement with fiber-optic network provider Internexa.

Rosenberg said more businesses are investing in Latin America to ride the economic growth there. “People have more disposable income,” he said. “People are willing to spend more on clothes.” However, he is cautious of the region’s history of growth and recession. Rosenberg believes as more Latin American countries do business with companies from the United States, that boom-bust cycle may be abated. “They are embracing the free market economy,” he said.

Some of Level 3’s plans for Global Crossing, potential layoffs in particular, remain vague. Crowe said Level 3 wants to expand the sales teams at both companies. Other departments may not be immune to job cuts. Possible headcount reductions for North America and Europe where the companies overlap were mentioned but not elaborated upon during the conference call . Level 3 has a staff of some 5,500 and Global Crossing has a more than 5,100 employees.

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About Joao-Pierre S. Ruth
New York tech correspondent for Xconomy, tech writer for Investor Uprising, and aspiring urban fantasy writer. I also make brownies and crème brulee.

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