Level 3 reportedly exploring 'strategic options,' Comcast fingered as possible suitor

According to a new report, Level 3 Communications is exploring strategic alternatives, and Comcast (NASDAQ: CMCSA) may be interested in purchasing the company. A Level 3 spokesperson said the company doesn't comment on "rumors or speculation," and a Comcast representative didn't immediately respond to questions on the topic.

Benzinga Pro reported this morning that Level 3 is in the process of exploring strategic alternatives, phrasing that often implies that company management is considering major M&A transactions such as selling the company or merging with another company. Specifically, the publication noted Level 3 is considering options ranging from an outright sale of the company to a large stock buyback.

Level 3's stock was up roughly 3 percent in trading this morning, to around $56.27 per share, possibly in reaction to the report.

Benzinga Pro noted that, according to an unnamed source, Comcast is a potential suitor for Level 3. The publication pointed to Colby Synesael, an analyst with Cowen & Co, who noted last year that "our long-held/long-term view [is] that Level 3 is likely to be acquired by Comcast as we believe ultimately Comcast (and perhaps Charter) will look to compete against AT&T/Verizon across all facets of their business."

"We view this news very positively," wrote Wells Fargo analyst Jennifer Fritzsche in response to the today's Benzinga Pro report. "With fiber being the critical part of almost every stock we follow, LVLT has the most of this asset and has greater scale and reach than any player. While we have often thought LVLT would be more of a buyer than a seller, we would anticipate great interest from multiple different verticals in a potential sale (not just telcos). Today's news should also have a positive read-through to our other top pick (in addition to LVLT) - ZAYO which is the second largest pure-play fiber operator in the U.S."

Indeed, Level 3 has global network coverage in more than 55 countries and more than 500 markets with more than 100,000 fiber miles in North America, Europe, Latin America and Asia, including 30,000 metro route miles and 35,000 subsea route miles. Thus, the company's fiber network holdings could make it an attractive acquisition target for companies looking to bolster their fiber holdings in order to control more of the world's telecommunications traffic. Already Verizon said it will acquire XO Communications partly to obtain the company's fiber holdings, and Crown Castle purchased Quanta Services' Sunesys for a similar purpose.

Comcast too, for its part, has dabbled in fiber network buildouts alongside its DOCSIS 3.1 network efforts.

For more:
- see this Benzinga article

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