Level 3 has bought WilTel for $700 million.

Level 3 will give WilTel's parent Leucadia 115 million shares of common stock and $370 million cash for the company.

WilTel's infrastructure will give Level 3 about 3,000 more route miles and allow it to reach 50 new markets. Level 3 plans to merge the two networks and migrate nearly all of WilTel's IP, optical and voice transport traffic to the combined network.

The deal includes a contract between WilTel and SBC, its largest customer for $675 million worth of services through to 2009. Level 3 will also acquire WilTel subsidiary, Vyvx. It won't however acquire WilTel's headquarters building or assume its outstanding $358 million debt.

The purchase will bring together two medium-sized backbone companies in an industry that is boiling down to a few big players and a number of small, specialized service providers, said independent telecommunications analyst Jeff Kagan.

Kagan expects to see more mergers as new network technologies and competition reshape the industry. On Monday, the FCC approved the mergers of SBC and AT&T, and Verizon and MCI.