Level 3 Will Become France Telecom’s Primary Provider Of Lit Broadband Transport and Colocation Services In North America
Companies To Replace Prior Dark Fiber Agreement
BROOMFIELD, Colo., December 28, 2004 – Level 3 Communications, Inc. (Nasdaq:LVLT) announced today that its operating subsidiary has signed a multi-year agreement to provide transmission and colocation services to France Telecom, one of the world’s largest telecommunications companies.
Under the terms of the agreement, Level 3 will become France Telecom’s primary provider of lit broadband transport and colocation services in North America. Level 3 will supply identified private line and wavelength circuits across its 19,400-mile fiber optic network in the U.S., which France Telecom Group will use as a platform to support its customers.
“This agreement stands as proof of the strength of our longstanding customer relationship with France Telecom,” said Kevin O’Hara, Level 3’s president and chief operating officer. “We’re pleased that France Telecom will continue to rely on Level 3 as its principal network partner in North America, and we look forward to providing them with the highest quality communications services in the coming years.”
The new agreement replaces and terminates an earlier, 20-year dark fiber contract signed by the companies in October 2000. Under the prior agreement, France Telecom acquired a nationwide dark fiber network from Level 3, along with ongoing maintenance and colocation services. The fiber strands leased to France Telecom in the initial transaction will revert to Level 3. The transaction is expected to be completed in the first quarter of 2005.
“This agreement makes sense for France Telecom,” said Jean-Philippe Vanot, Executive Vice President of France Telecom’s Networks, Carriers & IT division. “It will enable us to continue delivering the same services with the same levels of quality to customers in the retail and wholesale sectors, including our subsidiary Equant, while increasing our competitiveness. France Telecom will retain all other network assets in the United States for IP, voice and signaling traffic. Level 3 has been a reliable network partner for France Telecom over the past four years, and we’re pleased to continue our relationship with them through this new agreement.”
As a result of the replacement of the dark fiber contract signed in 2000 with the new lit services agreement,
Level 3 will no longer recognize amortized revenue under the pre-paid dark fiber contract as required under Generally Accepted Accounting Principles (GAAP). Instead, in accordance with GAAP, Level 3 expects to recognize approximately $40 million in deferred, non-cash termination revenue in the first quarter of 2005 related to the cancellation of the 2000 dark fiber agreement. While the monthly revenue recognized pursuant to GAAP is expected to decline, Level 3 expects the cash received monthly under the new lit services contract with France Telecom to exceed the monthly cash payments Level 3 previously received from France Telecom for dark fiber maintenance and colocation services.
About France Telecom
France Telecom is one of the world's leading telecommunications carriers, with 121.5 million customers on the five continents (220 countries and territories) and consolidated operating revenues of 46.1 billion euros for 2003 (23.2 billion euros for 1st semester 2004). Through its major international brands, including Orange, Wanadoo, Equant and GlobeCast, France Telecom provides businesses, consumers and other carriers with a complete portfolio of solutions that spans local, long-distance and international telephony, wireless, Internet, multimedia, data, broadcast and cable TV services. France Telecom is the second-largest wireless operator and Internet access provider in Europe, and a world leader in telecommunications solutions for multinational corporations. France Telecom (NYSE: FTE) is listed on the Paris and New York stock exchanges.
www.francetelecom.com/ (corporate information) / www.opentransit.francetelecom.com/ (carrier wholesale 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.
