LEVEL 3 ANNOUNCES ACCELERATION AND EXPANSION OF BUSINESS PLAN
Company Conducts Analyst & Investor Conference
NEW YORK CITY, January 24, 2000 – Level 3 Communications, Inc. (Nasdaq: LVLT) today announced acceleration and significant expansion of its previously announced business plan. The company will discuss these matters at an analyst and investor conference in New York City today.
Acceleration and Expansion of Business Plan U.S. and European Network Construction Ahead of Schedule – Level 3 expects to complete both its U.S. and European intercity networks on or ahead of schedule. The company has advanced its U.S. intercity network construction completion date by approximately one quarter. The U.S. network is now expected to be substantially complete in the fourth quarter of 2000. The European network remains ahead of schedule. Approximately 3,400 miles of the multi-conduit U.S. intercity network were completed during the fourth quarter of 1999, bringing the total to over 9,300 miles, well ahead of Level 3's previously announced target for the year.
Approximately 97% of the U.S. intercity network is now under construction. The company has installed approximately 3,000 miles of fiber optic cable in the first conduit of the completed sections of the network.
Level 3's multi-conduit network is designed to allow new generations of fiber cables to be installed much more rapidly and at lower incremental costs than traditional network designs. The 4,750 mile European intercity network build is also ahead of schedule.
Construction of the first two of three rings is currently underway. Over 1,200 miles were completed in the fourth quarter of 1999, bringing the total miles completed to over 2,100 miles. As previously announced, the company is sharing construction costs for the European network with COLT Telecom Group plc. Ring 1 connects London, Amsterdam, Frankfurt, Paris and Brussels; Ring 2 connects Frankfurt, Hamburg, Berlin and Munich.
Communications Services Being Offered in 31 U.S. and European Cities - The company's selection of cities involved in network construction is primarily based on an assessment of Web-centric traffic concentrations. At the end of the fourth quarter of 1999, the company had operational Gateways in 27 U.S. cities and four European cities - Amsterdam, Frankfurt, London and Paris.
Level 3 Gateways are advanced technical facilities, which provide colocation space for customers' equipment and facilities, link Level 3's network to other communications networks, and house the company's own network equipment. Additionally, at the end of the fourth quarter of 1999, markets with local fiber networks totaled 25 versus a planned 23 markets. Of the total, 22 are in the U.S. and three are in Europe. First U.S. Intercity Network Segment Lit - A fiber network is considered to be 'lit' when electronics are installed, thereby enabling the network to carry customer traffic.
In December 1999, Level 3 announced that it was carrying customer traffic between Dallas and Houston on the first completed and lit segment of its U.S. intercity network. Asian Developments - In 1999, Level 3 opened its Asia Pacific headquarters in Hong Kong and began development of its 70,000 sq. ft. Gateway there. In addition, Level 3 is currently constructing a 60,000 sq. ft. Gateway facility in Tokyo. Both Gateways are expected to be operational in the fourth quarter of 2000. The company also announced its plans to build a high speed, broadband undersea cable system connecting Hong Kong to Tokyo, Japan.
The cable is the first stage in the construction of an undersea network in the region. The system will initially run at 320 gigabits per second - more than eight times the combined existing undersea capacity to and from Hong Kong -- and significantly higher than other announced systems. The system can be expanded to 2.56 terabits as demand increases. The network is scheduled for completion in the second quarter of 2001. The first stage of construction from Tokyo to Hong Kong is substantially pre-funded by Phase 4 funding of Level 3's five-phase business plan. The remaining stages of the Northern Asia cable loop may require additional funding, depending on the cable's ultimate structure, pre-construction sales and ownership.
The company plans to share construction and operating expenses with one or more industry partners. Discussions with such partners are currently underway.
Business Plan Expanded to Meet Demand for Colocation Services – Level 3 has experienced a higher than expected demand for its colocation services from Web-centric customers who also purchase significant amounts of bandwidth. In its 27 initial Gateway facilities in the U.S. and Europe, colocation space was sold out in an average of 10 months after completion of construction.
To meet expected demand, Level 3 has secured additional facilities in New York, London and Silicon Valley totaling 900,000 sq. ft. In total, Level 3 has secured over 3.4 million square feet of Gateway space. Of this total, at the end of 1999, construction of approximately 1.3 million sq. ft. was completed, with approximately 1.1 million sq. ft. sold out. To capitalize on the colocation opportunity, Level 3 is reprioritizing and expanding the scope of its business plan. Phase 5 has been modified and now includes a significant increase in the amount of colocation space. Additionally, Phase 5 will include the development of additional local fiber facilities. Level 3 expects Phase 5 plans to require approximately $2.5 billion in funding. In addition, a Phase 6 has been added to the business plan. Phase 6 includes certain initiatives previously planned as part of Phase 5, including the build-out of additional markets in Europe and Asia and the third ring of the European intercity network. Phase 6 is anticipated to require approximately $2.5 billion in funding.
Level 3 expects that future funding requirements beyond Phase 6 will relate to specific initiatives and success-based capital (capital required to purchase and install facilities and equipment necessary to provide service to customers in backlog).
Financial Projections – Level 3 announced that it expects telecom revenue to reach approximately $750 million in 2000 and $1.7 billion in 2001. Telecom gross margin for the same periods are expected to be approximately 25% and 50% of revenues, respectively. Total sales, general and administrative expenses (SG&A) are projected to be approximately 80% of total company revenues in 2000 and approximately 65% in 2001. As a result of the acceleration of the business plan, capital expenditures are expected to reach approximately $3.5 billion in 2000 and approximately $2.5 billion in 2001. The metrics above applies to the financial results of Phases 1 through 5.
Analyst and Investors Conference Level 3 Partners Participate - In addition to presentations by Level 3 executives, the conference will include a Partners Exhibit Area where more than 20 of Level 3's customers and strategic technology partners will be featured. Demonstrations and information in the exhibit area will focus on customers' Web-centric services that Level 3 enables through its communications and bandwidth services, and the advanced technologies deployed by Level 3 in its network.
Exhibiting companies are expected to include: 3Com Corporation; Akamai Technologies; Allied Riser Communications; Cisco Systems; Convergys Corporation; Corning Incorporated; Data Return Corporation; Desktop News Corporation; eManage.com; Enron Communications; Focal Communications Corporation; IntelliSpace; Juno Online Services; Live365.com; Lucent Technologies; Nortel Networks; Onebox.com; RCN Corporation; StorageTek; WebUseNet; XUMA Technologies; and Yahoo!.
(* Softswitches are advanced software based switching systems, which enable Level 3 to provide services combining the best features of the Internet and traditional telephone networks.)
About Level 3 Communications
Level 3 Communications, Inc. (NASDAQ: LVLT), an international communications company, operates one of the largest Internet backbones in the world, connecting 180 markets in 18 countries. The company serves a broad range of wholesale, enterprise and content customers with a comprehensive suite of services including: Internet Protocol (IP) services, broadband transport and infrastructure services, colocation services, voice and voice over IP services, content delivery and media distribution services. These services provide the building blocks to enable Level 3’s customers to meet their growing demands for advanced communications solutions. The company’s Web address is www.Level3.com.
"Level 3 Communications,” "Level 3," the red 3D brackets and the Level 3 Communications logo are registered service marks of Level 3 Communications, LLC in the United States and/or other countries. Level 3 services are provided by wholly owned subsidiaries of Level 3 Communications, Inc. Any other service, product or company names recited herein may be trademarks or service marks of their respective owners.
Forward-Looking Statement
Some of the statements that we make in this press release are forward looking in nature. These statements are based on management’s current expectations or beliefs. These forward looking statements are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside our control, which could cause actual events to differ materially from those expressed or implied by the statements. The most important factors that could prevent us from achieving our stated goals include, but are not limited to our ability to: successfully integrate acquisitions; increase the volume of traffic on our network; defend our intellectual property and proprietary rights; develop new products and services that meet customer demands and generate acceptable margins; successfully complete commercial testing of new technology and information systems to support new products and services; attract and retain qualified management and other personnel; and meet all of the terms and conditions of our debt obligations. Additional information concerning these and other important factors can be found within Level 3’s filings with the Securities and Exchange Commission. Statements in this press release should be evaluated in light of these important factors. Level 3 is under no obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.
