Level 3 Communications (NYSE:LVLT, news, filings) has decided to take on the French enterprise market, expanding the scope of its European operations at a time when the macroeconomic environment is constraining many of the incumbent operators. The global network operator says expanding its investment in the country, adding sales and support personnel, enhancing its product portfolio, and expanding its network reach. That last one means more PoPs in the Paris metro area plus additional core network capabilities in Lille, Lyon, and Toulouse.
This parallels Level 3’s previous move into the German enterprise market, which was announced in October of lastyear. Since the Global Crossing deal, Level 3 has been talking up its ability to start going after the European enterprise market. Their presence has until lately has been largely a wholesale one, but the asset base is deep enough now and the market sufficiently mature that it is economical to invest in the enterprise space.
The UK, where Global Crossing had a start going already, was first, while Germany had been Level 3’s main stronghold on the continent itself. Their move into France will probably be followed with one in the Benelux region, which holds their remaining substantial bastion of metro fiber. I’ll be curious to see if they then start working more to build metro assets further afield.
Level 3’s expansionary footing in Europe comes at a time when many think a wave of M&A may be ready to sweep across the region. Most in the media are looking at the mobile space, but I think we may see some fiber change hands as well. Some already had of course, with euNetworks, Colt, Interoute and Level 3 itself making moves of different sorts last year.
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This is a fool’s errand. Level 3 has about as much chance of taking on the German and French enterprise market as Colt has taking on the US enterprise market.
Level 3 doesn’t have nearly enough footprint or physical presence to seriously compete in this market (or the German one).
Both the French and German markets have rich and fertile OLO (CLEC) landscapes. Level 3’s skeletal presence won’t give any sizable French or German enterprise the confidence it needs to turn over mission critical telecommunications services. (And do they really have back office to support the SME market in those countries — uh, not even close.)
Level 3 investors need the company to better sweat the assets it operates in the markets where it can actually win, for example, US, UK, BZL and Arg, before venturing off to win A-end customers in continental Europe and Asia. Continental Europe and Asia should be B-end connection countries for Level 3.
Over the last 5 years Level 3 (more specifically Global Crossing) has struggled to win large UK enterprise business and they have the third largest network there. Why should anyone believe they can succeed in France and Germany where their network coverage is tiny in comparison?
As an investor, I’d be more concerned by the sleight of hand announcement than anything else.
Hey Level 3, here’s a novel idea: how bout winning some market share (beyond margin-less internet transit) in the markets where you actually have a large presence before you set your sights on markets you can’t possibly win. This is a complete waste of shareholders’ money.
“this is a complete waste of shareholders money”.
So what else is new with this company? Keep throwing s#@t against the wall maybe one of these decades it will stick for them.