Exhibit 99.1
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1025 Eldorado Boulevard
Broomfield, Colorado 80021
www.Level3.com
NEWS RELEASE
Level 3 Contacts:
U.S. media: Josh Howell Investors: Robin Grey
720-888-2517 720-888-2518
Arthur Hodges Sandra Doyle
720-888-6184 720-888-2501
Asia media: Samantha English Europe media: Mark Broughton
+852-2201-8026 +44-20-7954-5077
Cannis Wong
+852-2201-8016
Reach Acquires Level 3's Asian Business
Level 3 To Reduce Costs by Approximately $300 Million,
Focus On North American and European Markets
HONG KONG, December 19, 2001 - Level 3 Communications, Inc. (Nasdaq:LVLT)
today announced that Reach will acquire Level 3's Asian business. The agreement
covers Level 3's Asian network operations, assets, liabilities and future
financial obligations. This includes its North Asian cable system (Tiger);
capacity on the Japan-US Cable System (JUS); capital and operational expenses
related to the Tiger and JUS systems; data centers in Hong Kong and Tokyo; and
existing customers on Level 3's Asian network.
"This transaction makes both sound fiscal and strategic sense for Level 3,"
said James Q. Crowe, Level 3 CEO. "Our business in Asia would require
significant additional capital investment to get to the point of free cash flow
breakeven. With this transaction, we will save approximately $300 million. Given
current economic conditions, we believe it is beneficial to focus our efforts in
North America and Europe.
"Strategically, Asia represents attractive longer term investment
opportunities. In this volatile market and economy, however, we must take steps
to focus on the immediate opportunities and to leverage our network and
management time where the returns on capital are highest - which is in our North
American and European markets."
As part of the agreement, the two companies have agreed Level 3 will
provide capacity and services to Reach over Level 3's North American backbone
network, and Level 3 will buy capacity and services from Reach in Asia. This
will allow Level 3 to continue to service its customer base with capacity needs
in Asia and give Reach access to a state-of-the-art, high capacity network in
North America and Europe. Additionally, Level 3 will maintain a sales group in
Asia to serve its global customers and Asian-based carriers with capacity needs
in North America and Europe.
"The agreement enables Level 3 to focus on its strategy of serving the 300
largest consumers of bandwidth," said Steve Liddell, president of Level 3's
Asian operations. "We have found in the current economic climate that the needs
of this core group of customers are significantly greater in North America and
Europe. We've significantly improved our overall cash flow, ensured our
continued ability to provide capacity in Asia to our global customers, and
gained a customer on our North American network."
This transaction will further strengthen Level 3's overall financial
position. The company estimates that by virtue of the transaction it will reduce
its future funding requirements by approximately $300 million through a
combination of reductions in capital expenditures, network and operating
expenses, taxes and working capital. These savings are expected to be realized
through the point in time when the company reaches free cash flow breakeven. As
a result of this transaction, Level 3 expects to recognize a one-time charge of
approximately $500 million during the fourth quarter of 2001.
Under the terms of the agreement Reach will acquire Level 3's existing
Asian business in Japan, Hong Kong, Korea, and Taiwan. This includes:
* Three fiber pairs on Level 3's Tiger submarine cable system - which
will connect Japan, Hong Kong, Taiwan and Korea - along with associated cable
landing stations and backhaul network facilities connected to the Tiger system;
* Level 3's ownership stake in the Japan-US submarine cable system and
associated backhaul systems;
* Data center and colocation facilities in Tokyo and Hong Kong; and
* Certain existing customers on Level 3's Asian network.
Level 3 was advised by Goldman Sachs in this transaction, which is expected
to close in the first quarter of 2002.
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 services, colocation services, and the industry's first Softswitch
based services. Its Web address is www.Level3.com.
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: changes in the overall economy relating to,
among other things, the September 11 attacks and subsequent events, substantial
capital requirements; development of effective internal processes and systems;
the ability to attract and retain high quality employees; 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.
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