Level 3 Communications has signed a deal to acquire ICG Communications in a cash and stock deal valued at $163 million.

Under the deal, Level 3 will pick up ICG for $127 million in unregistered shares of Level 3 common stock and $36 million in cash.

Level 3 said the deal will expand its transport profile. ICG provides transport, IP and voice services to wireline and wireless carriers, ISPs and enterprise customers. ICG’s network spans more than 2,000 metro and regional fiber miles in Colorado and Ohio, and supports roughly 500 points of presence. Overall, ICG serves more than 1,600 customers.

“This transaction gives Level 3 the opportunity to further expand our footprint into areas where we see demand for our services, and to realize cost savings,” said Level 3 President & COO Kevin O’Hara, in a statement.

Level 3 expects the deal to improve annualized cash flow by $30 to $40 million once it has successfully integrated ICG.

The deal, expected to close by mid-2006, does not include ICG’s investments in New Global Telecom or Mpower Holding Corp.