Sources: Level 3 poised to buy ICG
Jeff Smith, Rocky Mountain News
Published April 15, 2006 at midnight
Broomfield's Level 3 Communications tentatively has agreed to buy Douglas County-based ICG Communications, two sources close to the situation said Friday.
The deal could be announced as early as Monday or Tuesday.
Sources confirmed a deal between the two communications network operators has been in the works after ICG said in an e-mail Friday it would be making a "very significant announcement" involving a large Colorado publicly traded company on Monday morning.
ICG didn't disclose the name of the company in the e-mail, and ICG Chief Executive Dan Caruso declined comment when reached Friday afternoon except to say an announcement might be delayed until Tuesday. He also sounded less definite about a deal.
ICG, once a high-flying national communications provider that went bankrupt in 2000, was bought by two venture capital firms in 2004 and now operates business communications networks in just Colorado and the Ohio Valley. The 250-employee company generates about $80 million in annual revenue and recently said it has become profitable.
Level 3 is a multibillion-dollar company that operates a nationwide fiber-optic network and provides wholesale communications services.
Donna Jaegers, a telecommunications analyst with Janco Partners in Greenwood Village, said ICG could be attractive to Level 3 because of its local fiber networks. In a similar deal, Level 3 recently bought a Florida- based telecommunications carrier to expand its network in the Southeast.
"Obviously, Level 3 is trying to get more local fiber so it can be a better wholesaler to different carriers," Jaegers said. In other words, such a deal enables Level 3 to provide both long-distance and local communications services.
With the wireless industry growing so rapidly, Jaegers noted that one of the biggest areas of demand is in transporting communications traffic between cell towers and long-distance fiber-optic backbones.
"And to do that you need local fiber," she said.
Jaegers said she hadn't heard about the Level 3-ICG deal but noted such deals can collapse if one party jumps the gun on an announcement. Those are "sensitive" issues, she said.
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