Telecommunications company CenturyLink is making a major move to expand its fiber optic cable network, announcing Monday it had agreed to acquire Level 3 Communications for about $25 billion.

The deal continues CenturyLink’s transformation from a small Louisiana phone company to a leading provider of internet services, increasing its fiber network by 80%. Level 3, which sells only to businesses, currently operates 200,000 route miles of fiber.

CenturyLink will pay Level 3 shareholders $26.50 and 1.4286 shares of CenturyLink stock for each share of Level 3 stock. At $66.50 per Level 3 share, that represents a premium of about 42% over the closing price of $46.92 on Oct. 26, before media reports about a possible deal surfaced.

“The digital economy relies on broadband connectivity, and together with Level 3 we will have one of the most robust fiber network and high-speed data services companies in the world,” CenturyLink CEO Glen Post said in a news release.

The Financial Times said the deal will give CenturyLink “global significance for the first time, propelling it above Verizon in the U.S. enterprise market and greatly expanding its internet services business as data use rapidly increases.”

CenturyLink has nearly 6 million residential internet customers in the U.S. but makes about 60% of its revenue selling network services to businesses. With Level 3, 76% of its revenue will come from business customers.

Level 3’s fiber network includes 64,000 route miles in 350 metropolitan areas and 33,000 subsea route miles connecting multiple continents. CenturyLink, which has a smaller market capitalization than Level 3, currently operates 250,000 route miles of fiber in the U.S. and a 300,000-route-mile international transport network.

”The financial benefits [of the deal] speak for themselves,” Level 3 CEO Jeff Storey said during a conference call with analysts, citing nearly $1 billion of expected cost savings from sharing data lines and cutting overlapping jobs. “I believe scale matters.”

CenturyLink became the number three U.S. telecom group in 2010 with the acquisition of Qwest. In trading Monday, its shares fell 12.5% to $26.58, while Level 3 rose 3.9% to $56.15.

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