QUOTE AND NEWS
Automotive World  Jun 16  Comment 
HARMAN (NYSE:HAR), the leading global infotainment, audio and software services company, today announced that the HARMAN Connected Services Division has achieved Automotive SPICE® Organizational Process Capability Level 3 certification. By...
Telecom Ramblings  Jun 16  Comment 
Here's a quick roundup of infrastructure news from around the USA early this week: With the southeast infrastructure market hopping these days, Atlanta's Colo Atl says it will invest in some more space. They're adding another 6,400 square feet...
Telecom Ramblings  Jun 9  Comment 
Verne Global will soon have some new IP connectivity at its data center campus at Keflavik in Iceland. Level 3 is set to build out a PoP in the facility, bringing its international backbone to the volcanic island nation.  Iceland has been...
Telecom Ramblings  Jun 8  Comment 
Here's a quick roundup of early news this week or late last week: Level 3 has forged yet another new interconnection agreement after what has been a busy spring on the peering front. They've inked a deal with Telefonica, which replaces an...
newratings.com  Jun 2  Comment 
WASHINGTON (dpa-AFX) - Level 3 Communications, Inc. (LVLT) and Optus Wholesale and Satellite Tuesday announced that Level 3 is providing deep-edge caching services that would enable Optus to locally cache high-demand content on its network. The...
Wall Street Journal  May 29  Comment 
Internet traffic carrier Level 3 Communications is taking an aggressive—and some say risky approach—to hacking by monitoring for criminal groups and isolating traffic believed to contain stolen data.
Benzinga  May 28  Comment 
Goldman Sachs initiated coverage on Level 3 Communications, Inc. (NYSE: LVLT) with a Buy rating. The target price for Level 3 Communications is set to $67. Level 3 Communications shares have gained 28.85 percent over the past 52 weeks, while...
Telecom Ramblings  May 22  Comment 
The summer season begins in the USA with a long holiday weekend.  Before you head out for the barbecue or the beach, here's a quick look at some other news from this week: Level 3 signed its third new interconnection agreement with the...




 


Level 3 Communications (NYSE: LVLT) is a provider of a range of integrated communications services including network and Internet services, colocation service, media services and voice services. Its operations are divided into communications and coal mining.[1] Its largest segment, communications, consists of Core Network Services, Wholesale Voice Services, and Other Communications Services.[2] Its operations are primarily located in North America and Europe. As the demand for online video, gaming, and the streaming of movies and live events continues to rise, providers of these services are striking long-term contracts to IP Upstream carriers. Reaching deals with streaming companies has been critical to Level 3’s revenue growth. [3]

Business Growth

Level 3 reported a loss of $622 on $3.65 billion in 2010 revenues, compared to a loss of $618 million on $3.76 billion in revenues in 2009.[4] The declines in profitability and revenues can be partially attributed to a decline sales from large companies. In addition, expenses have risen as a result of high interest costs associated with the company’s debt load. However, contracts with companies providing streaming services has the potential of providing new sources of revenue growth.[5]

Trends and Forces

Visual streaming services provides new growth area for diversified communications companies

Increases in consumer demand for online video, online gaming, streaming full-length movies and lives events has the potential of providing significant growth opportunities for communication services providers. In 2010, Americans spent as much time online as they did watching TV, and Level 3 expects that the amount of time spent streaming online to increase.[6] Level 3’s broadcast services network and Vyvx capabilities delivered approximately 15,000 video feeds month as well as major live events like the Super Bowl, which the network has delivered for the past 22 years. In 2010, Level 3 Communications’ IP Upstream service was selected to be a primary content delivery network (CDN) for Netflix's fast-growing streaming service.[7] However, this rapid growth is not without its costs. Level 3 says it will double its storage capacity to help accommodate the new contract. Expanding its services has the potential of forcing the company to increases its debt load, which would lead to significantly higher costs.[8]

Global Economic Crisis has forced many customers to cut or delay several communication services

In an effort to control or reduce costs, many of Level 3’s customers have deferred or foregone purchases of services.[9] In addition, customers have also had trouble making periodic payments. As a result, there has been a decline in demand for communication services, which has resulted in lower revenues for Level 3. Meanwhile, utility costs have remained relatively stable for communication companies, leading to tighter margins.[10] However, as the result of a gradual pick up in economic activity, Level 3’s profit margins on the Core Network Services have improved.[11] Increased economic activity has the potential of leading to increased revenues and profits on Level 3’s core operations.[12]

Telecommunications Companies

While rising demand for IP Upstream services provides a new growth opportunity, a slow economic recovery has led to decline in demand for many other services provided by diversified communication companies. In addition, competition for fewer contacts for many networking services has led to depressed margins.

LVLT's top three competitors in telecommunications are:[13]

References

  1. Reuters.com: Company profile for LVLT
  2. Reuters.com: Company profile for LVLT
  3. LVLT Company 10-K for 2010
  4. Morningstar.com: financials for LVLT
  5. LVLT Annual Report for 2010
  6. LVLT Annual Report for 2010
  7. Yahoo! Finance: Netflix/Level 3 Deal Underscores Communication Service Trends
  8. Yahoo! Finance: Netflix/Level 3 Deal Underscores Communication Service Trends
  9. Yahoo! Finance: Netflix/Level 3 Deal Underscores Communication Service Trends
  10. Yahoo! Finance: Netflix/Level 3 Deal Underscores Communication Service Trends
  11. Yahoo! Finance: Level 3 1Q loss narrows
  12. Yahoo! Finance: Level 3 1Q loss narrows
  13. Hoovers: LVLT Competitor Fact Sheet. Retrieved on June 20, 2008.
  14. WikInvest: Sprint Nextel. Retrieved on June 26, 2008.
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