The deal significantly expands CenturyLink's fibre network assets and international presence. CenturyLink's on-net buildings are expected to increase by nearly 75 percent to approximately 75,000, including 10,000 buildings in EMEA and Latin America. The operators expect their complementary US and international networks will provide cost savings, as capital investment is focused on increasing capacity and connecting more customers to the fibre network. Along with eliminating duplicate functions and systems, cash savings from the merger are projected to reach USD 975 million on an annual basis.
The combined company also expects improved adjusted EBITDA margins and revenue growth from the merger, as they exploit cross-selling and network expansion opportunities. To date both have suffered from flat to negative revenue growth, as they work to grow in IP data services in order to offset the pressure on the voice market and legacy services. In addition, the merged group will benefit from Level 3's nearly USD 10 billion of accumulated operating losses for tax reduction, resulting in increased cash flow and capacity to pay dividends. CenturyLink pledged to maintain its annual dividend of USD 2.16 per share.
CenturyLink CEO Glen Post will continue as CEO of the merged group, and Level 3's CFO Sunit Patel will be finance chief. While CenturyLink remains active in the consumer fixed market in several states in the US, the new company will have over three-quarters of its revenues, or USD 19 billion, in the business services market after the merger.
Level 3 shareholders will have four members on the board, including at least one for ST Telemedia, which has pledged to vote its 18 percent in Level 3 for the transaction. The group's headquarters will remain in Louisiana, with a significant presence at Level 3's offices in Colorado.
CenturyLink and Level 3 aim to close the deal by Q3 2017, pending regulatory and shareholder approval. CenturyLink has obtained commitments for over USD 10 billion in bank debt to help finance the deal and will also use its own and Level's cash on hand. Level 3 had cash of USD 1.6 billion at the end of September and debt totalling USD 11.0 billion. Its leverage over the previous 12 months was 3.3x adjusted EBITDA. The combined company expects pro forma net leverage at less than 3.7x at close, including the projected synergies.
