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Level 3 Announces New Network Services Agreement with XO Communications

Companies Execute New Agreement for XO Communications to Buy Broadband Transport Services from Level 3 and Amend Dark Fiber Contracts

Level 3 Communications, Inc. (NASDAQ:LVLT) today announced it has signed a new agreement to provide network services to XO Communications, Inc. (NASDAQ:XOXO). Level 3 will provide its (3)Link Global Wavelength service to XO Communications ("XO") throughout North America. As part of the agreement, the companies are amending their previously announced dark fiber agreements.

Today's agreement reached between XO and Level 3 modified two separate transactions that were announced during the past three years. The original transactions included:

  • A July 1998 agreement for XO to purchase 24 fibers and an empty conduit in a 16,000-mile North American intercity fiber network from Level 3for $700 million. To date, more than 60 percent of this commitment has been purchased and paid for. Additionally, XO was also to have received tag-along rights for additional fibers as deployed in the future in certain conduits of Level 3's North American network.
  • A November 2000 agreement for XO to purchase nine European metro fiber networks and a pan-European intercity fiber network from Level 3for $148 million, as well as transatlantic capacity for an additional $15 million.

The newly signed agreement between the two companies resulted in the following changes to the original transactions:

  • XO and Level 3 have agreed to cancel agreements relating to the purchase of the European metro and intercity fiber networks from Level 3and to apply the $128 million in payments that have already been made to Level 3 for the European networks to reduce the remaining amounts payable by XO under its $700 million North American intercity network commitment.
  • XO will become a broadband transport customer of Level 3. Initially, XO will purchase approximately $30 million worth of wavelength services on Level 3's intercity network.
  • XO will give up certain contractual provisions included in its 1998 agreement with Level 3, including the tag-along rights for additional fibers as deployed in the future in certain conduits of Level 3's North American network.
  • XO will purchase Trans-Atlantic capacity per the original European agreement.
  • XO will transfer certain transmission equipment it has purchased to Level 3, the value of which will be applied toward the purchase price of Level 3 broadband transport services.

A joint Level 3-XO implementation team has been established to rapidly activate the wavelengths and migrate traffic from XO's existing leased network capacity onto the new wavelength capacity obtained from Level 3.

"This new agreement demonstrates the strengths of both companies and enables a long-term, mutually beneficial relationship," said Jim Crowe, Level 3's chief executive officer. "It also reflects broader trends that are reshaping the communications industry. We think that, because of the cost efficiency of the Level 3 network, companies increasingly will look to us to provide broadband transport services."

"We are pleased to have reached a mutually beneficial agreement with Level 3 that will extend our relationship and yield financial advantages for both of our companies," said XO Chairman and CEO Dan Akerson. "We are disappointed that our European opportunity is not going to be realized. The current market conditions, however, demand that we direct our resources and attention to the significant opportunity that exists for XO in the United States."

With (3)Link Global Wavelength, customers purchase single or multiple wavelengths of light on particular Level 3 intercity or international network fiber routes. Level 3 terminates the wavelengths at on-net customer facilities at which customers can use their existing SONET, IP and ATM equipment, thereby reducing costs. (3)Link Global Wavelength services are available in North America, Europe, and on Level 3's transatlantic network.

(3)Link Global Wavelength is a service mark of Level 3 Communications, Inc.

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.