Level 3 to buy ICG

Level 3 Communications today continued its acquisition spree, announcing that it will acquire ICG Communications for $163 million in cash, including $127 million in Level 3 stock and $36 million in cash.

ICG, a competitive services provider with a 20-year history, operates regional and metropolitan fiber optic networks in Colorado and Ohio, providing bandwidth to other service providers, large businesses and government agencies, as well as data and voice services to small to mid-sized businesses. ICG operates a network with more than 2,000 metro and regional fiber miles in Colorado and Ohio and includes approximately 500 points of presence.

The acquisition is Level 3’s third in less than 12 months, following its purchase of WilTel, which operates a national network, and regional network operator Progress Telecom.

"ICG is a well-run business with a strong and growing base of customers," said Kevin O'Hara, president and chief operating officer of Level 3, in a prepared statement. "This transaction gives Level 3 the opportunity to further expand our footprint into areas where we see demand for our services, and to realize cost savings."

"ICG standalone is expected to generate approximately $75 to $80 million of annualized revenue and approximately $10 to $15 million of annualized positive cash flow after approximately $10 million in capital expenditures," said Sunit S. Patel, chief financial officer of Level 3 Communications, in a prepared statement. "We expect annualized cash flow to improve to approximately $30 to $40 million once we have completed integration, which is expected to begin later this year."

The acquisition will not include ICG's investment in New Global Telecom, a VoIP services provider, or Mpower, an integrated voice and data over DSL provider in California, Las Vegas and Chicago. Level 3 did not indicate what will happen to those investments.