Level 3 Communications makes valuable connections through its networking efforts -- and without a name tag. Operator of one of the world's largest fiber-optic communications networks, the firm connects customers in 60 countries. Its services include broadband Internet access, wholesale voice origination and termination, enterprise voice, content distribution, broadband transport, and colocation services. Wholesale customers include ISPs, telecom carriers, cable-TV operators, wireless providers, and the US government. The company markets its products and services directly to businesses, government agencies, and schools. Its content delivery unit targets video distributors, Web portals, online gaming and software companies, and social networking sites.
The fiber network giant generates revenue through a pair of segments: Core Network Services and Wholesale Voice Services.
The Core Network Services business, which accounts for 91% of revenue, is composed of colocation and data center services, transport and fiber, IP and data services, and voice services. Generating 9% of Level 3's revenue, Wholesale Voice Services consists of long distance voice services sold to interexchange carriers (IXCs), wireless providers, local phone companies, cable companies, resellers, and voice-over-IP providers.
Based in Broomfield, Colorado, Level 3 operates in North America, Latin America, and Europe, the Middle East, and Africa (EMEA). The North America region accounts for about three quarters of the firm's revenue. Besides operating 20 data centers across North America, Latin America, and Europe, Level 3 owns or leases about 370 facilities worldwide. It runs 250 colocation facilities in North America, supported overseas by more than 100 colocation facilities in Europe and a dozen or more such offices in Latin America.
Sales and Marketing
Level 3 serves customers in 500-plus markets worldwide through owned fiber networks on three continents. The company's top 10 communications customers in 2015 accounted for approximately 16% of Level 3's total communications revenue.
The company's revenue rose 21% in 2015 to $8.2 billion from $6.8 billion in 2014. Revenue contributed by tw telecom, acquired in late 2014, helped boost the total. North America generated a 37% sales growth, but sales to the rest of the world fell in 2014. International revenues were hurt by the strength of the US dollar in relation to local currencies. Overall, wholesale voice services revenue dropped by nearly $100 million.
Level 3 reached a new level in 2014 when it posted a profit for the first time. In 2015, it far surpassed mere profit, posting a $3.4 billion profit made possible by a massive tax benefit. The tax benefit accounted for $3.1 billion of the profit. Level 3's net income would have been $283 million without the benefit, compared to a $314 million profit in 2014.
Level 3 generated $1.8 billion in cash flow from operations in 2014, a $694 million increase from the 2014 number.
Key to Level 3's strategy and market competitiveness is its expansive global network infrastructure, which extends to major metropolitan markets in the US, Europe, and Latin America. Expanding that network is a primary focus of the company's strategy. Relying on its own network instead of other carriers (which it needs for some locations) drives its customer targeting.
In 2016, Level 3 expanded its Ethernet services product portfolio to 27 locations across Europe and it opened a data center in Cali, Colombia.
In 2014, Level 3 expanded its government services with a contract from the US Department of Homeland Security to provide a range of local area network managed services for the agency within the National Capital Region. Under the contract, developed along the network as a service model, Level 3 will connect about 60 DHS locations.
In Brazil, the company agreed to provide Fototica, an eye care provider in Brazil, with virtual hosting, colocation and redundancy services for business operations in the Brazilian states of Sao Paulo, Bahia, Pernambuco, and Sergipe.
In 2013 the company also expanded an existing agreement with MLB Advanced Media (MLBAM) -- Major League Baseball's interactive media and Internet company -- to include data center services for the company's leading digital media products (including MLB.TV live video streaming). It has also entered long-term settlement-free Internet traffic exchange agreements (known as peering agreements) with XO Communications.
Mergers and Acquisitions
In 2015 Level 3 beefed up its security with the acquisition of Black Lotus, a provider of global Distributed Denial of Service (DDoS) mitigation services. The deal adds capabilities to Level 3's existing DDoS service and enhances its security product capabilities.
In 2014 Level 3 bought tw telecom in a stock-and-cash transaction valued at $5.7 billion in order to create a stronger competitor to the incumbents. While Level 3 has an extensive global presence, tw telecom offers a deep metropolitan footprint in the US, serving 75 markets in about 30 states.
Level 3's history goes back to Peter Kiewit Sons construction company, which was founded in Omaha, Nebraska in 1884. About a 100 years later the company used cash to get into telecommunications with the acquisition of Metropolitan Fiber Networks and its fiber optics networks for phone systems.
Today Level 3 has about 106,000 intercity route miles in North America, Europe; and Latin America; 67,000 miles of metropolitan network miles in some 350 cities; 33,000 miles of undersea fiber optic cable.