Consolidation in the US telecoms market has taken another step with Excel Communications Inc acquiring fellow long-distance provider Telco Communications. The deal valued at $1.2 billion will create the fifth largest long distance company in the US with a combined turnover of some $2 billion, and 6.3 million customers. Until recently Excel, based in Dallas Texas, based its business around selling space on other companies networks alongside its own services, but earlier this year the company announced it would build its own network. With Telco, Excel does exactly that gaining an existing low cost network infra- structure. That, it says, can accommodate the combined company’s 11 billion long distance minutes of usage. According to Excel the deal will enable it to make cost savings of more than $100m in the year after the deal closes. Telco operates a dial-around long-distance telephone service, where Telco’s 2.5 million customers are provided with a 5-digit code enabling them to bypass standard long distance carriers and use Telco’s own network. Excel also says it wants to enter the local telephone market, and plans to provide a bundled package of local, long distant and wireless services. Under the agreement, which has the backing of both companies boards, Telco shareholders will receive 0.7595 shares of common stock for the combined company, and $15 in cash for each share of Telco common stock. Excel shareholders will own approximately 80% of the combined company once the transaction is complete which is expected to be by the end of the year. To pay for the deal, which will be accounted for as a purchase, Excel has agreed a $1bn line of credit from an affiliate of Lehman Brothers, and will use up to $600m of the amount to fund the cash portion of the merger.