Rumor Patrol: Will Google Buy Level 3 Next?

Rumors are cirulating that backbone provider Level 3 could be the next acquisition target for Google. Analysts are split on the idea.

Google's deal to buy YouTube for $1.65 billion has sparked rumors of other acquisitions in the online video sector. Much of the speculation has focused on buyouts of some of the other video hosting start-ups. But one of the most intriguing theories comes from Ant & Sons, which cites "rumors circulating Wall Street" that Level 3 might be Google's next acquisition.

"Some investors believe that Level 3, which was hired by YouTube last month to provide high speed access and data center connection services, could be a perfect technology fit for Google to meet its other connectivity needs through Level 3's fiber optic network," writes blogger Thomas from Ant & Sons, which provides investment commentary and research.


Other analysts were skeptical. Donna Jaegers, an analyst with Denver-based Janco Partners Inc., dismissed the rumor. "I severely doubt that," she told the Denver Business Journal. "Level 3 has a lot more capacity than what Google needs." Jaegers also said Level 3's debt load is too high to make it a logical acquisition for Google. Level 3 currently has a market capitalization of $6.1 billion, and about $7.5 billion in long-term debt. That's a big bite, even for Google.

An interesting wrinkle in this speculation is the Net Neutrality debate, in which Google is almost always the first name mentioned by telco providers who would like to charge additional access fees to Internet companies. It's known that Google has acquired a lot of dark fiber. But what if it actually owned one of the major Internet backbone providers?

Level 3's network spans covering 48,000 miles in 110 North American markets, and another 3,600 miles connecting 20 European markets. It also operates 6.7 million square feet of data center, gateway and transmission facilities in North America and Europe, and a 1.28 terabyte per second (Tbps) transatlantic cable system.

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