Level 3 To Lay off US Workers Now That the Acquisition Is Complete

XO Communications’ allegation that the merger would create a “global colossus” that would dominate the Internet backbone market, resulting in higher prices and decreased service quality proved to be untrue and did not change the FCC’s ruling – the transaction was approved.

Earlier this week it was announced that Level 3 Communications, a provider for a variety of customers, including government agencies, other communications providers, and large enterprises completed its acquisition of Global Crossing, a provider for 40% of Fortune 500 companies, as well as 700 carriers, mobile operators and Internet service providers worldwide. The deal advanced Level 3’s position as an international telecom carrier with undersea network facilities and fiber infrastructure on three continents and in more than 45 countries.

Prior to closing, Level 3 had said the transaction would generate approximately $2.5 billion in savings and enrich its financial position. However, while the merger proved to be good news for shareholders, customers, and the company as a whole, that was not necessarily the case for employees. Collectively, Level 3 and Global Crossing employ over 10,000 staff members.

Citing a Level 3 top executive, Reuters reported that as part of its effort to incorporate Global Crossing, the provider is anticipating laying off as many as a few hundred employees. According to Level 3’s chief executive officer, James Crowe, the majority of the cuts will be coming from those currently working in the United States adding that “in large parts of the world it is very minimal.”

Subsequent to the merger’s completion, credit rating agencies Moody’s Investors Service and Fitch Ratings have promoted Level 3’s rating position. Moody’s Investor Service states that while the provider has a sizeable debt load and moderately poor margins, there is a probability that it will “become modestly cash flow positive on a sustained basis within two years.”

Fitch Ratings said that the transaction improves Level 3’s “competitive position,” and explained that once the acquisition was complete, it deleveraged the provider’s balance sheet, and noted potential for Level 3 to continue improving its credit score and produce steady free cash flow levels. Fitch Ratings added that on top of escalating Level 3’s scale, the merger increases the depth and breadth of its services, allowing it to spread out into new markets and widens the range of customers the provider serves, “including large multi-national enterprise customers.”