Exhibit 99.2
[Logo] Level 3 Communications, Inc.
1025 Eldorado Boulevard
Broomfield, CO 80021
www.Level3.com
NEWS RELEASE
For Immediate Release
Level 3 Contacts:
Media: Josh Howell Investors: Robin Miller
720/888-2517 720/888-2518
Paul Lonnegren
720/888-6099
Level 3 Commissions International Network; Announces New Initiatives at Analyst
and Investor Conference
Level 3 Affirms 2001 Financial Guidance with Increases to Cash Revenue
and Adjusted EBITDA; Introduces New Guidance for 2002
Company Unveils New Program for Large Communications Carriers
with Annual Price Decline and Service Activation Commitments
NEW YORK, January 29, 2001 -- Level 3 Communications, Inc. (Nasdaq:LVLT)
announced today that it has set a new telecommunications standard with the
industry's most rapidly constructed global fiber-optic network. In 30 months,
Level 3 built a 20,000 mile multi-conduit intercity network and 32 multi-conduit
metropolitan networks in North America and Europe. Additionally, the company
constructed a transatlantic cable system connecting North America and Europe,
and has secured 6 million square feet of technical space in 63 data centers
serving 49 North American markets, 9 European markets and 2 Asian markets.
"The construction of our global communications network in only 30 months is an
unprecedented accomplishment and a strong testament to the commitment of our
employee-owners, construction and technology partners, and investors," said
James Q. Crowe, chief executive officer of Level 3. "A continuously upgradeable
network like ours is never truly complete, but we're extremely pleased to be
able to move customer traffic from leased facilities and offer services on our
own global broadband infrastructure in less than three years."
"Now that we've begun to operate our own global broadband network, we expect to
achieve higher margins and greater service scalability and performance," said
Kevin J. O'Hara, president and chief operating officer of Level 3. "Our
continuously upgradeable multi-conduit network is unlike any communications
network ever constructed. We can install new optical fiber through one of our
metro or intercity network's empty conduits, rather than having to reconstruct
the entire network. By properly matching new generations of fiber with rapidly
improving optronics, we can reduce costs and provisioning time. This means that
our customers can enjoy substantial cost advantages and bring innovative new
services to market."
In a video presentation at the conference, Level 3 will demonstrate the network
construction challenges that were overcome in this record setting time through
the use of both conventional and innovative equipment and construction
techniques, as well as the large number of permits and franchises that were
required to be obtained in order to install its network. The video will also
demonstrate, at actual speed, the rapid rate at which fiber can be deployed in a
previously installed empty conduit. For example, whereas construction of Level
3's 16,000 mile U.S. intercity conduit system took approximately 30 months to
complete, Level 3 currently estimates that it would take approximately six to
nine months to fully install a second fiber optic cable in one of Level 3's
empty conduits. This video will be available, along with the entire presentation
from the conference, on Level 3's website www.Level3.com.
Level 3 Unveils New Pricing and Service Program
At this conference, Level 3 is focusing on its view of the competitive landscape
and the company's current and anticipated new service offerings, and how these
services position Level 3 to take advantage of its continuously upgradeable
network.
While providing additional details of its (3)Center Colocation, (3)CrossRoads,
(3)Connect Modem and (3)Voice services, Level 3 also announced an innovative new
optical transport program designed initially for large communications carriers
that features annual price decline and service activation commitments. The new
family of global transport services, called (3)Link, will be officially launched
at CompTel's 20th anniversary convention in February in Orlando, Florida. These
offerings provide a cost-effective alternative for companies that might
otherwise build communications networks or install electronics to "light" dark
fiber.
"Construction of our continuously upgradeable global network marks a new
beginning for Level 3 by giving us full control over our network operating
costs, quality of service, provisioning and pricing," said O'Hara. "We believe
that (3)Link services will sharpen and accelerate our focus on providing highly
competitive network services on a global basis, and is illustrative of Level 3's
commitment to bringing Silicon Economics to the telecommunications industry."
Level 3 Updates Financial Guidance
Level 3 also announced today that it is affirming its 2001 financial guidance,
with increases to cash revenue and adjusted EBITDA, and is formally introducing
financial guidance for 2002. The company expects communications revenue of
approximately $1.7 billion in 2001 and communications revenue of approximately
$2.9 billion in 2002.
"We are pleased to reaffirm or increase all of our 2001 financial guidance,"
said Sureel A. Choksi, chief financial officer of Level 3. "Industry leading
revenue growth in 2001 of approximately 100 percent is an indication of our
confidence in the opportunities ahead. We'd also like to reiterate that our
business plan continues to be substantially prefunded through free cash flow
break even."
Financial Projections
Communications Revenue: Level 3 expects communications revenue to grow from $858
million in 2000 to approximately $1.7 billion in 2001 and $2.9 billion in 2002.
Of the $1.7 billion in 2001 communications revenue, approximately $320 million
will come from non-recurring dark fiber and infrastructure sales.
Excluding non-recurring dark fiber and infrastructure sales, communications
revenue falls into three categories: Transport, IP and Colocation, and
Softswitch enabled services. For the year, Transport is expected to generate 35
to 40 percent of communications revenue, IP and Colocation 30 to 35 percent, and
Softswitch enabled services - including reciprocal compensation - 30 to 35
percent.
Level 3 has a current backlog of approximately $5.1 billion. Backlog is defined
as total communications revenue that Level 3 expects to realize from signed
contracts that have not been provisioned, as well as current revenue run-rate.
Approximately 65 percent of our forecasted communications revenue for 2001 is
included in the $5.1 billion backlog.
Communications cash revenue, defined as communications revenue plus changes in
cash deferred revenue, is expected to grow to approximately $2.4 to $2.6 billion
in 2001, and $3.4 to $3.6 billion in 2002.
Level 3 expects communications revenue for the first quarter of 2001 to be in
the range of $360 to $370 million. Approximately $135 to $145 million of this
revenue is expected to come from non-recurring dark fiber and infrastructure
sales.
Level 3 expects communications revenue to grow at a compounded annual percentage
rate in the mid-60s and communications cash revenue to grow at a compounded
annual percentage rate in the mid-50s between 2000 and 2005.
Information Services and Other Revenue: Total information services and other
revenue was $327 million in 2000, and is expected to decrease to $220 million
for both 2001 and 2002, primarily due to reduced shipments under long-term coal
contracts and the sale of the company's 50 percent interest in Walnut Creek
Mining Company in 2000.
Gross Margin: The gross margin for the communications business is expected to
increase from 27 percent in 2000 to approximately 50 percent in 2001 and 55
percent in 2002. Consolidated gross margin is expected to be approximately 48
percent in 2001 and 53 percent in 2002.
Selling, General and Administrative Expenses (SG&A): Consolidated SG&A expenses
for the year 2001 are expected to be approximately 65 percent of total revenues
in 2001 and drop to below 50 percent of total revenues in 2002. The total number
of Level 3 employees is expected to increase to approximately 7,000 by the end
of 2001.
EBITDA: The company expects to turn consolidated EBITDA positive, excluding
stock-based compensation, on a run-rate basis by the end of the year 2001, with
EBITDA for the year 2002 reaching approximately $155 to $175 million.
Consolidated adjusted EBITDA, defined as consolidated EBITDA plus changes in
cash deferred revenue and adding back non-cash cost of goods sold, is expected
to be approximately $600 to $700 million for the year 2001 and $750 to $850
million for 2002.
Earnings Per Share: The company expects that the net loss per share will
increase from $4.01 per share in 2000 to a net loss of approximately $7.50 per
share in 2001, largely as a result of increases in stock-based compensation, net
interest expense and depreciation expenses.
Capital Expenditures: Capital expenditures for property, plant and equipment
were $5.9 billion for the year 2000. The company previously expected to spend
$6.3 billion for the year. As a result of timing differences, the remaining $400
million is expected to shift into 2001. Including this $400 million, total
capital expenditures for the year 2001 are expected to be approximately $3.4
billion. Aggregate capital expenditures for 2000 and 2001 are in line with
previous forecasts. The company expects capital expenditures to decrease in 2002
to approximately $2.0 to $2.5 billion.
Capital expenditures estimates for 2001 reflect the acceleration of the second
intercity fiber pull announced last year and the deferral of construction for
Ring 3 of Level 3's pan-European network.
"Level 3 continually assesses the many business opportunities we have," said
O'Hara. "In an effort to always deploy capital to maximize returns, we have
reprioritized some of our capital projects."
The company forecasts that it will be free cash flow break even in the first
half of 2004, and remains substantially prefunded to free cash flow break even.
Analyst and Investors Conferences
The theme for Level 3's analyst and investor conference today in New York, and
on January 31, 2001 in London, is "Breaking Away."
"We've said all along that the telecommunications industry is experiencing a
fundamental shift from a classic monopolistic, utility-based business model to a
technology-driven business model, underscored heavily by the same move toward
horizontal disaggregation that occurred in computing," said Crowe. "We've also
said that this dramatic shift will create clear winners and losers. We believe
strongly that with our global broadband infrastructure essentially complete,
we're positioned to break away this year and become one of the winners."
In addition to presentations by Level 3 executives and Corning, Inc., today's
conference in New York includes a Partners Exhibit Area where a number of Level
3's top customers and strategic technology partners will be featured.
Demonstrations and information in the exhibit area will focus on customers'
communications intensive services that Level 3 enables and the advanced
technologies deployed by Level 3 in its network.
Exhibiting companies for the New York conference include Akamai Technologies;
Corning Incorporated; Data Return Corporation; Enron Communications; Logictier;
NaviPath, Inc.; Nortel Networks; RCN Corporation; Rhythms NetConnections, Inc.;
Telseon; Yahoo! Inc.; and Yipes Communications.
Exhibiting companies for the London conference on January 31 include Cap Gemini
Ernst & Young; Data Return Corporation; Enron Communications; IC3;
Hewlett-Packard Company; Nortel Networks; and surfEU.com Ltd.
About Level 3 Communications
Level 3 (Nasdaq:LVLT) is a global communications and information services
company offering a wide selection of services including IP services, broadband
transport, colocation services and the industry's first Softswitch based
services. Level 3 offers services primarily to communications intensive
companies that deliver their services over the Level 3 Network. Its Web address
is www.Level3.com.
(3)Center Colocation, (3)CrossRoads, (3)Connect Modem, (3)Voice and (3)Link are
service marks of Level 3 Communications, Inc.
Some of the statements made by Level 3 in this press release are forward-looking
in nature. Actual results may differ materially from those projected in
forward-looking statements. Level 3 believes that its primary risk factors
include, but are not limited to: substantial capital requirements; development
of effective internal processes and systems; the ability to attract and retain
high quality employees; changes in the overall economy; technology; the number
and size of competitors in its markets; law and regulatory policy; and the mix
of products and services offered in the company's target markets. 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 release should be evaluated in light of these important factors.