QUOTE AND NEWS
Telecom Ramblings  Nov 21  Comment 
With the travel, I have been playing catch-up all week on other news. Here's another roundup, this time of network operator news: Zayo picked up a wholesale carrier customer in New York City and norther New Jersey. They started delivering two...
Market Intelligence Center  Nov 20  Comment 
After closing Wednesday at $49.09, Level 3 Communications Inc (LVLT) presents an attractive opportunity to get a 4.61% return in just 58 days, which is an annualized return of 29.02% (for comparison purposes only). To enter this trade, sell one...
Telecom Ramblings  Nov 19  Comment 
One of the biggest deals in internet infrastructure this year was the combination of Level 3 and tw telecom, which just closed a couple weeks ago.  Both companies had strong momentum in the enterprise markets, and once integrated the combined...
Benzinga  Nov 17  Comment 
Level 3 Communications, Inc. (NYSE: LVLT) today announced it has agreed to sell $600 million aggregate principal amount of its 5.75% Senior Notes due 2022 in a private offering to "qualified institutional buyers," as defined in Rule 144A under the...
Telecom Ramblings  Nov 17  Comment 
After every acquisition, Level 3 goes to work on that complicated balance sheet, and this morning they are doing so again.  Although actually this one was probably in the works regardless.  Level 3 intends to raise $600M in a private offering...
Benzinga  Nov 6  Comment 
In a report published Thursday, D.A. Davidson analyst James G. Moorman reiterated a Buy rating and $54.00 price target on Level 3 Communications, Inc. (NYSE: LVLT). In the report, D.A. Davidson noted, “LVLT reported roughly in line revenue...
Wall Street Journal  Nov 5  Comment 
Level 3 Communications Inc. has strung together four straight quarters of profits, highlighting how companies hit by the telecom bust are climbing out of the rubble.




 


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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