LEVEL 3 COMMUNICATIONS CONDUCTS ANALYST & INVESTOR CONFERENCE
Company To Accelerate Network Build Schedule First Demonstration Of Internet Protocol-Based Voice Service Financial Projections For Level 3's Core Business Through 2000
NEW YORK, NY, February 2, 1999 Level 3 Communications, Inc. (Nasdaq: LVLT) will hold a conference today in New York to update financial analysts and investors on the current trends in the industry and progress of the company's international IP (Internet Protocol) based network. The company's network is the first to use Internet Protocol (IP) technology end-to-end and the first to be continuously upgradeable.
At the meeting, the company will update attendees on the status of its network implementation and provide domestic and international construction metrics. Additionally, the company will review the cities where communications services are currently being offered; discuss recent construction and rights-of-way (ROW) agreements; provide the first demonstration of its IP Voice Service; and outline financial projections for 1999 and 2000.
Analyst Conference Highlights Communications Services Being Offered in 17 U.S. Cities, 2 European Cities At the end of the fourth quarter 1998, the company was offering services in 17 U.S. cities as well as one international city (Frankfurt). The company began offering services in London in January 1999.
The number of local markets where Level 3 has an operational gateway site and a sales force offering products over leased or owned facilities known as "Markets in Service Type 1" totaled 15 U.S. cities and one international city. The number of markets where Level 3 has accelerated market entry including a smaller operational gateway facility and a sales force known as "Markets in Service Type 2" totaled two U.S. cities at the end of the quarter and one international city (see attachment for complete definition of Type 1 and Type 2 markets).
First Loops Completed in Three U.S. Cities At the end of the fourth quarter 1998, local network development was underway in 25 U.S. cities. In January 1999, the company's initial local fiber loops became operational in three cities Dallas, Denver and Seattle with construction of loops in five additional cities expected to be completed in the second quarter of this year.
Construction Agreement Signed During the fourth quarter of 1998, the company signed a "turnkey" agreement for the construction of a portion of the Level 3 intercity network through Canada. The construction agreement provides all necessary rights-of-way and includes approximately 750 miles of right-of-way along the Canadian Pacific Railway's lines. The routes are from Albany, NY to Montreal (250 miles), which is being constructed by Mi-Link, LLC, a subsidiary of Michels Pipeline, of Brownsville, Wisconsin, and from Montreal to Buffalo, NY via Toronto (500 miles), which is being constructed by Worldwide Fiber, Inc. of Vancouver, BC Canada. This agreement provides Level 3 with a key component of a diverse route between New York City and Chicago.
Although Level 3 will not initially originate or terminate traffic in Canada, this agreement provides Level 3 with a diverse routing for its U.S. intercity network and will allow Level 3's future entry into the Canadian market after satisfaction of Canadian regulatory requirements.
Intercity Network Schedule Accelerated As a result of the $500 million debt offering completed in December 1998, the company added nearly 1,000 miles to the U.S. intercity network, bringing the total number of route miles to approximately 16,000 miles.
At the end of the fourth quarter, approximately 400 miles of the intercity network were completed, with approximately 800 miles under construction. Due to construction progress to date, the company has accelerated its current intercity completion schedule by over 50 percent for 1999, with the number of miles expected to be completed now totaling 6,500, up from 4,000 miles.
Rights-of-Way Agreements During the fourth quarter, the company signed a license agreement with Norfolk Southern Corporation (NYSE:NSC), providing Level 3 right-of-way access to 1,200 miles of NSC rail routes, east of the Mississippi, over which Level 3 will build its national IP technology based network. The signing of the agreements with Norfolk Southern and Canadian Pacific, along with additional highway rights-of-way, bring the Level 3 intercity rights-of-way to a total of approximately 14,500 miles, or 93 percent of total right-of-way needed to complete the Level 3 network.
European Metrics Level 3's European rollout has been accelerated from the company's original plan. The company is currently offering service in London with an operational gateway as well as internet services in Frankfurt. Additionally, technical space has been secured in Paris, Amsterdam and Frankfurt. Design and development of local city networks and the Pan-European network are currently underway in five European countries (see attached metrics).
Voice Demo At the analyst conference, the company plans to provide the first demonstration of its Internet Protocol-based voice service (known as Level 3 IP Voice Service) which seamlessly integrates Level 3's IP network with the public switched telephone network (PSTN). In a live demonstration, the company plans to show attendees at the conference that the quality of Level 3's IP Voice Service compares to traditional circuit switched voice service. In addition to the demonstration, participants can make long distance calls using the Level 3 IP Voice Service. Using other service providers, voice over IP service requires up to 36 digits to access the network to place a call. Having to dial these extra numbers is known as "double dialing." Customers utilizing Level 3's IP Voice Service will not need to double dial. The company is to begin offering its IP Voice Service in selected markets in the second quarter of 1999.
Financial Projections During the conference, Level 3 executives will review financial drivers for the core business, and their potential impact on the company's results through the year 2000. Based on a number of key variables, the company expects revenues to be in the range of $250 to $300 million for 1999 excluding coal properties and the SR-91 toll road increasing to a range of $650 to $700 million in 2000. Gross margins on communications services are expected to range from 20 percent to 35 percent in 2000, with a trend toward 60 percent in succeeding years. Operating expenses as a percentage of revenues for core businesses are expected to be in a range between 140 percent and 165 percent in 1999, between 80 percent and 100 percent in 2000, with trends toward 20 percent thereafter. Total capital expenditures are expected to approximate $2.3 billion in 1999 and $2.0 billion in 2000.
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 3s customers to meet their growing demands for advanced communications solutions. The companys 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 managements 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 3s 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.
