QUOTE AND NEWS
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...
Benzinga  May 21  Comment 
Comcast and Level 3 Communications announced they have reached a new multi-year, bilateral interconnection agreement as part of a multifaceted arrangement that will help both companies meet their customers' needs into the next decade and beyond....
Telecom Ramblings  May 11  Comment 
This morning, AT&T and Level 3 announced an agreement for bilateral interconnection of their IP networks. Now, these sorts of peering deals happen all the time without much fanfare of course. But it's interesting that we've seen three such...
Telecom Ramblings  May 5  Comment 
Here's a quick look at some news from the past few days -- new SDN-powered cloud connectivity, some refinancing, an alien wave, and two executive job appointments. Level 3 is putting SDN technology to work. Yesterday they unveiled an Adaptive...
Telecom Ramblings  May 1  Comment 
Here's our recurring Friday quick look at other news from around the sector, as we digest the big metro fiber consolidation week we've had in the US. Equinix likes the Australian market at the moment, and plans to invest another $97M into what...
Benzinga  Apr 29  Comment 
Level 3 Communications, Inc. (NYSE: LVLT) reported upbeat earnings for its first quarter on Wednesday. For 2015, Level 3 also lifted its forecast for adjusted earnings before interest, taxes, depreciation and amortization. The Broomfield,...
Wall Street Journal  Apr 29  Comment 
Level 3 Communications hinted it is still in the market for expansion opportunities after its last big deal helped deliver the company’s sixth-straight quarterly profit.




 


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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