Level 3 Communications, Inc., a start-up telecom company, successfully issued the largest junk bond offering of the '90's on April 23, raising $2 billion. The massive money grab highlights two key facts: First, the high ambitions of Level 3 (www.Level3.com), which plans to offer long-distance and local services of all types; and second, the high cost of building new telecommunications networks. Level 3 plans to use the $2 billion it recently raised, as well as $2 billion already on hand, to build a nationwide network based on Internet Protocol.
Although demand is heavy for long-distance services now, Level 3 expects that demand for an Internet-based network will rise as a more Internet services become available. Level 3 will also benefit from a well-respected management team and a market capitalization of roughly $10 billion.
James Crowe, the head of Level 3, was the brains behind MFS Communication Co. Inc., which pioneered the competitive local access industry. He later teamed up Peter Kiewit Sons' Inc."a construction company" which took Level 3 public earlier this month. The company's construction plans are estimated to run up an $8 billion to $10 billion tab, which accounts for not only equipment but auxiliary costs such as rights of way and labor.
Kiewit's help should go a long way here. Kiewit has laid conduit before and has experience in "getting the rights of way, trenching it, the nitty-gritty nuts and bolts of getting a nationwide network," said Tim Caffrey, a director in Standard & Poor's ratings group.
Level 3's strategy runs counter to that of some of its competitors, which have been building local networks with plans to later link them into a national presence. Level 3 will be able to offer some services before its own network is completed, thanks to a leasing agreement with Frontier Corp. In recent round of fund-raising, Level 3 benefited from a favorable market environment featuring a glut of investors hungry for telecom deals, Caffrey notes.
"This is a better deal than some in this market," he said. "If you're going in this market," he said. "If you're going to invest in a start-up telecom company, you could do worse than Jim Crowe and his company." The bonds were rated single-By Standard & Poor's, and single B-3 by Moody's Investors Services.
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.
