T-Systems Will Now Use Level 3 As Its Primary Broadband
Transport Provider In North America
Level 3, 360networks Cancel Prior Dark Fiber Contract; $86 Million In Additional Termination Revenue To Be Recognized In 1Q05
BROOMFIELD, Colo., March 8, 2005 – Level 3 Communications, Inc. (Nasdaq:LVLT) announced today that its operating subsidiary has signed agreements under which it has acquired substantially all of 360networks’ nationwide long-haul transport business.
Through the agreements, Level 3 becomes the primary provider of North American optical wavelength services to T-Systems North America, Inc., a subsidiary of T-Systems International that offers communications and information services to large enterprises all over the world.
“We’re very pleased to have executed these agreements, which will further expand Level 3’s nationwide long-haul transport business,” said Kevin O’Hara, Level 3’s president and chief operating officer. “We look forward to serving as T-Systems’ network vendor in North America, and to providing them with transport services that support the growing needs of T-Systems N.A.’s business operations.”
360networks previously served as T-Systems’ broadband transport vendor in the U.S., using lit fiber that it had acquired from Dynegy Inc. in 2002. Dynegy had initially purchased that fiber from Level 3 under a 20-year IRU in October 2000. Through the agreements announced today, that fiber agreement has been terminated.
Sean Parkinson, CEO, T-Systems North America, said: “Our new agreement with Level 3 will enable us to continue serving our U.S.-based enterprise customers with industry-leading levels of efficiency, operational excellence and customer care. Level 3 Communications already serves as a valued provider of transport and other network services to T-Systems in both North America and Europe, where we have a reciprocal business arrangement, and we’re pleased to continue this relationship now that Level 3 has absorbed the network of 360networks.”
Level 3 will acquire 360networks’ nationwide long-haul network; as a result, 360networks will cease making monthly payments to Level 3 for operations and maintenance services associated with the dark fiber contract. In addition, Level 3 will no longer recognize amortized revenue under the pre-paid dark fiber contract as required under Generally Accepted Accounting Principles. In accordance with GAAP, Level 3 expects to recognize approximately $86 million in non-cash termination revenue from this agreement in the first quarter of 2005. Level 3 included the 360networks termination revenue in previously provided full-year financial projections for 2005, but it was not included in projections for the first quarter.
“360networks informed us that they were seeking to phase out their nationwide long-haul network services business in the U.S.,” said Sunit Patel, Level 3’s chief financial officer. “As such, they no longer had a compelling reason to maintain their dark fiber agreement with Level 3. We believe this negotiated agreement with 360networks, through which Level 3 acquires the business and becomes a key network services vendor to T-Systems, is in the mutual best interest of all parties.”
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.
