'Cable Surprise' Possible in CenturyLink/Level 3, Says Raymond James

Charter paying a similar price for Level 3 could be accretive to both providers and gets them a better platform to sell into medium and larger enterprises,” Raymond James analysts wrote investors. CenturyLink/Level 3 would provide big cost savings, said the analysts, estimating about $850 million of annual operating expenditure synergies and $125 million in capital expenditure savings. Level 3 has about $10 billion of net operating loss carryforwards that make the deal “much more attractive,” and the companies expect cash tax saving to be at least $650 million annually for the first four years after the transaction, they said. But Raymond James predicted softer business for the combined company in the early going. “As we have said with prior business services combinations, it is very likely the combined company growth rate will experience softness post-closing vs. on a standalone basis given the nature of combining two sales forces and changes,” the analysts said. Also, the transaction likely means less business for vendors like Infinera that today sell to both companies, they said in a separate note Monday.