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  1. #1

    CenturyLink Buys Savvis for $2.5B

    http://www.techcrunchit.com/2011/04/...r-2-5-billion/

    Under the terms of the transaction, Savvis stockholders will receive $30 per share in cash and $10 in shares of CenturyLink common stock. The consideration represents an 11 percent premium over Savvis’ closing stock price as of the close of trading on April 26, 2011.
    Although the article makes a big deal about the hosting aspect of CenturyLink's business, it looks like CenturyLink is primarily a provider of DSL and Phone service. Buying up a Tier 1 carrier looks like a solid move in such a situation, as it presumable would help CenturyLink's routing and reduce their transit costs.

    As quoted:

    CenturyLink expects to realize approximately $70 million in full run-rate annual operating cost and capital expenditure synergies. The transaction is expected to be accretive to CenturyLink’s free cash flow per share in the first full year following the close.
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  2. #2
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    Wow high value! I didn't expect a price that large for savvis, lets hope CenturyLink have a good plan from here onward.

  3. #3
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    Sounds like the 2 may have good synergies, so as long as everything pans out, it will be good for CenturyLink (not sure how good for Savvis customers, in case anything changes in service quality).

  4. #4
    Quote Originally Posted by intelliServe View Post
    Wow high value! I didn't expect a price that large for savvis, lets hope CenturyLink have a good plan from here onward.
    I actually was thinking the opposite. Buyouts tend to go for quite a bit larger premium to the public share price. Clearly this shows that savvis's management thinks that their share price is already fully valuing the company, and they should take any premium they can get.
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  6. #6
    Quote Originally Posted by LoginTech View Post
    I want to know where centurylink is getting all this capital... 12.2B for Qwest and now 2.5B for SAVVIS?

    Sheesh!
    Good point. Qwest is / was a tier 1 as well right? This would be pretty interesting with a huge last mile network picking up two tier 1 networks, on top of news l3 and glbx merging.
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  7. #7
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    Quote Originally Posted by LoginTech View Post
    I want to know where centurylink is getting all this capital... 12.2B for Qwest and now 2.5B for SAVVIS?

    Sheesh!

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    My mom has Centurylink DSL and they are bad, really really bad! This is shocking and has fail all over it.
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  9. #9
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    Quote Originally Posted by ninkynonk View Post
    My mom has Centurylink DSL and they are bad, really really bad! This is shocking and has fail all over it.
    They must think different to pay $2.5b
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    Quote Originally Posted by funkywizard View Post
    http://www.techcrunchit.com/2011/04/...r-2-5-billion/



    Although the article makes a big deal about the hosting aspect of CenturyLink's business, it looks like CenturyLink is primarily a provider of DSL and Phone service. Buying up a Tier 1 carrier looks like a solid move in such a situation, as it presumable would help CenturyLink's routing and reduce their transit costs.

    As quoted:
    Uh actually Centrylink bought qwest not to long ago. Tier1 carriers isn't anything new to them they just wanted a managed service company. More so buying savvis for the contracts they have with the gov since savvis was on contract for the cloud stuff.

  11. #11
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    Ha! CL is too broke to replace a modem and spend a few thousand to improve service in my mum's area.... yet they have billions to buy out other telcos...... and thier "techs" are clueless one of them did not know what NAT meant!
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  12. #12
    These are big fishes

  13. #13
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    They are an iLec, several old RBOC's, a monopoly, thus a cash cow...now a real deal global player....smart moves, very smart moves....Savvis also has a stronghold in the financial sector...Let's see how they play in the low latency game...
    Last edited by circus&back; 04-29-2011 at 11:11 AM.

  14. #14
    Quote Originally Posted by ninkynonk View Post
    My mom has Centurylink DSL and they are bad, really really bad! This is shocking and has fail all over it.
    I would agree with this sentiment. The only customers of mine who've had issues with the quality of our b/w have been centurylink dsl customers. Hopefully these acquisitions improve their network, because as of now, it's flakey as hell.
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    Quote Originally Posted by funkywizard View Post
    I would agree with this sentiment. The only customers of mine who've had issues with the quality of our b/w have been centurylink dsl customers. Hopefully these acquisitions improve their network, because as of now, it's flakey as hell.
    They serve a vast area of small markets outside of traditional city limits in my experience. My mom has issues with them weekly, sites just randomly quit working for 30 min, then they come back. Techs are clueless, their email filters filter by content and do nasty levels of blocking.

  16. #16
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    yep. my mum has the same issues. hell FB is even slow as hell for her and google maps is molasses.
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  17. #17
    Quote Originally Posted by (Stephen) View Post
    They serve a vast area of small markets outside of traditional city limits in my experience. My mom has issues with them weekly, sites just randomly quit working for 30 min, then they come back. Techs are clueless, their email filters filter by content and do nasty levels of blocking.
    When I was having issues, doing a traceroute from them it seems to have packet loss start at the connection between centurylink and XO... and I think I know what people on here think of XO
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  18. #18
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    Quote Originally Posted by funkywizard View Post
    Good point. Qwest is / was a tier 1 as well right? This would be pretty interesting with a huge last mile network picking up two tier 1 networks, on top of news l3 and glbx merging.
    Is it me or dose this feel like a joke? Next Someone is going to tell me Comcast(please god no ) is now a tier one....

    I do wonder how do your merge two tier 1 networks though? I mean Level 3 and GLBX are supposed to be some of the best networks around. I wonder how that would work out. I'm also wondering hows that going to effect a networks redundancy if you have Level 3 and GLBX would you need to find a new provider to add back your redundancy?

    The same goes for quest and SAVVIS now that their owned by the same people.

    Also am I'm the only one worried that this will further kill competition among the bigger networks?
    Last edited by ShaunH; 04-29-2011 at 02:23 PM.

  19. #19
    Quote Originally Posted by ShaunH View Post
    Is it me or dose this feel like a joke? Next Someone is going to tell me Comcast(please god no ) is now a tier one....

    I do wonder how do your merge two tier 1 networks though? I mean Level 3 and GLBX are supposed to be some of the best networks around. I wonder how that would work out. I'm also wondering hows that going to effect a networks redundancy if you have Level 3 and GLBX would you need to find a new provider to add back your redundancy?

    The same goes for quest and SAVVIS now that their owned by the same people.

    Also am I'm the only one worried that this will further kill competition among the bigger networks?
    You merge two tier 1's like you would any other network: Leave them running as-is for a little while, then identifying areas where the networks are redundant or where costs can be reduced or performance improved by having one network use the other network's assets and interconnections instead of it's own, and slowly merge the two networks into one network. Presumably some traffic that would go via third party links will now be carried over the network's own infrastructure, presumably some routes which have a lot of excess capacity can be merged, and the equipment used in other areas, presumably some routes can be added to improve performance, and presumably additional traffic can be sold in areas where it previously was not possible due to capacity constraints.

    As to redundancy, yes, once the company has sufficiently merged the two networks, you'll want to add another carrier to get back your redundancy. Some areas of the network will be redundant for a while, but over time they'll merge more of the networks together, meaning that a fault in one network is more likely to affect both carriers.

    QWEST and SAVVIS were not particularly well known as cheap carriers, so I wouldn't think it would raise prices so much having them merge, although L3/GLBX has more of a chance of doing so, at least in the short term.

    For what it's worth, wikipedia lists the following Tier 1's:

    Qwest
    Verizon Business
    Sprint
    Telia
    NTT
    Tinet
    Deutsche Telekom AG
    Level 3
    Global Crossing
    Savvis
    Tata
    AT&T

    These two mergers take down the list to:

    Qwest / Savvis / CenturyLink
    Verizon
    Sprint
    Telia
    Ntt
    Tinet
    Deutsche Telekom AG
    Level 3 / Global Crossing
    Tata
    AT&T

    I would say that's still a reasonably competitive marketplace, what with tinet, telia, ntt, and tata being known for reasonably priced transit. With maybe 10 players in total there instead of 12, I would say it's probably going to benefit the market more than hurt it.
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  20. #20
    http://dealbook.nytimes.com/2011/04/...oud-computing/
    quote "It’s a play on the boom in so-called cloud computing"

    It appears to be Century's entrance into "the cloud" and I like how this editor actually used
    "so-called" before "cloud".

    The could should universally get renamed to "so-called cloud"

  21. #21
    I wouldn't be surprised if "cloud" is just an excuse to pass this off as a big deal to investors / the press. It's pretty obvious savvis is a colocation / hosting / transit play, "cloud" has little to do with it unless you just arbitrarily define "cloud" as "anything to do with the internet".
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  22. #22
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    CenturyLink doesn't even seem to have a functional abuse department / contact point. I can't imagine how they are going to manage to run and integrate two tier 1 networks.
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  23. #23
    Quote Originally Posted by Jay Suds View Post
    CenturyLink doesn't even seem to have a functional abuse department / contact point. I can't imagine how they are going to manage to run and integrate two tier 1 networks.
    Technically if they just don't change anything with the businesses they bought, they could run just as they did before, though I doubt that's the plan they have. For what it's worth, the article mentions that the Savvis team are going to be in charge of the combined hosting business. I guess that's not surprising, as I wasn't aware of CenturyLink having much of a hosting unit before their recent acquisitions.

    The integrated hosting business will be based in St. Louis and led primarily by key members of the Savvis leadership team, including CEO James Ousley, who will head the unit. Following the closing of the transaction, CenturyLink will employ approximately 50,000 people.
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  24. #24
    Qwest does have "cyber centers" that are data center's you can buy colocation in across the country. It is one of the few original ILEC and "baby bells". It can operate a data center anywhere it wishes. An example of that being the Burbank Cyber Center where no one else operates. I don't believe Qwest needs to look towards savvis for actual infrastructure as it is one of the baby bell that would be a total joke. It does appear to be a cloud play. Savvis's website is cloud-ed out to hell and back.

    I believe the Verizon purchase of Terremark for "the cloud" had a major impact on Century they became more influenced to make a move on this.

  25. #25
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    Quote Originally Posted by funkywizard View Post
    You merge two tier 1's like you would any other network: Leave them running as-is for a little while, then identifying areas where the networks are redundant or where costs can be reduced or performance improved by having one network use the other network's assets and interconnections instead of it's own, and slowly merge the two networks into one network. Presumably some traffic that would go via third party links will now be carried over the network's own infrastructure, presumably some routes which have a lot of excess capacity can be merged, and the equipment used in other areas, presumably some routes can be added to improve performance, and presumably additional traffic can be sold in areas where it previously was not possible due to capacity constraints.

    As to redundancy, yes, once the company has sufficiently merged the two networks, you'll want to add another carrier to get back your redundancy. Some areas of the network will be redundant for a while, but over time they'll merge more of the networks together, meaning that a fault in one network is more likely to affect both carriers.

    QWEST and SAVVIS were not particularly well known as cheap carriers, so I wouldn't think it would raise prices so much having them merge, although L3/GLBX has more of a chance of doing so, at least in the short term.

    For what it's worth, wikipedia lists the following Tier 1's:

    Qwest
    Verizon Business
    Sprint
    Telia
    NTT
    Tinet
    Deutsche Telekom AG
    Level 3
    Global Crossing
    Savvis
    Tata
    AT&T

    These two mergers take down the list to:

    Qwest / Savvis / CenturyLink
    Verizon
    Sprint
    Telia
    Ntt
    Tinet
    Deutsche Telekom AG
    Level 3 / Global Crossing
    Tata
    AT&T

    I would say that's still a reasonably competitive marketplace, what with tinet, telia, ntt, and tata being known for reasonably priced transit. With maybe 10 players in total there instead of 12, I would say it's probably going to benefit the market more than hurt it.
    Great post, that was very helpful. I always forget about the Non US tier 1's

    I also forgot the tier 2 market is getting stronger by the day (HE, Cognet, ect)

    Once interesting improvement might be a better foot print in Asia for Level 3. If I remember correctly their presence is not as strong there as GLBX's in that area of the world.

  26. #26
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    Quote Originally Posted by ninkynonk View Post
    My mom has Centurylink DSL and they are bad, really really bad! This is shocking and has fail all over it.
    The last mile is a completely different ball game. With DSL you're likely looking at overburdened legacy ATM infrastructure, or aging copper facilities.

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    and they are noted for having bad customer service, that would carry on to a small business hosting customer or any of thier other ones. It would "rub off" on SAVVIS or Qwest, perhaps and stuff could go downhill from there (insert typical merger ailments here)(this is a major worry). Kinda like the effects EIG buyout had on all those hosting companies they've ruined!
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    That I would be worried about. I work with Qwest almost on a daily basis, there is some trepidation as to the direction things could go in.

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