Level 3 Communications, LLC

  • Overview

Level 3 Communications makes valuable connections through its networking efforts. Operator of one of the world's largest fiber-optic communications networks, the firm connects customers in 55 countries. Its services include broadband Internet access, wholesale voice origination and termination, enterprise voice, content distribution, broadband transport, and colocation. 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, state agencies, and schools. Its content delivery unit targets video distributors, Web portals, online gaming and software companies, and social networking sites.

Geographic Reach

Based in Colorado in an 850,000-sq.-ft. campus facility outside Denver, Level 3 operates in North America, Latin America, and Asia/Pacific. The North America region accounts for 75% of the firm's revenue. Besides operating 18 data centers across North America, Latin America, and Europe, Level 3 owns or leases about 315 facilities worldwide. It boasts 200 colocation facilities in North America, supported overseas by more than 100 colocation facilities in Europe and a dozen 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 fiscal 2012 accounted for approximately 17% of Level 3's total communications revenue.

The telecommunications company has been spending more on advertising in recent years. Level 3 logged $20 million in advertising expenses in fiscal 2012, up from $15 million in 2011.

Operations

The fiber network giant generates revenue through a pair of segments: Core Network Services and Wholesale Voice Services and Other.

Its primary Core Network Services business, which accounts for 88% of revenue, comprises colocation and data center services, transport and fiber, IP and data services, and voice services. Generating 12% of Level 3's revenue, Wholesale Voice Services and Other consists of long distance voice services, revenue from managed modem and its related intercarrier compensation services, and revenue from the "SBC Master Services Agreement" (obtained through a 2005 acquisition).

Financial Performance

Although it has yet to make a profit as a public company, Level 3 logged a 47% increase in revenue -- from $4.3 billion in fiscal 2011 to $6.4 billion in fiscal 2012. The company attributes the gains to rising revenue from both its Core Network Services and Wholesale Voice Services and Other businesses. Thanks to its purchase of Global Crossing, its Core Network Services revenue jumped 55%. Excluding revenue from this acquisition, Level 3's sales still increased in the North America region and to a lesser extent the EMEA region during 2012 as compared to 2011.

The company's Wholesale Voice Services and Other business boosted revenue by 7% as a result of the Global Crossing acquisition. Excluding revenue from the purchase, Wholesale Voice Services and Other revenue dropped in 2012 due to usage declines. Level 3 anticipates continued revenue volatility as it manages its combined wholesale voice services platform for margin contribution. It's also expecting managed modem and SBC Contract Services revenue to continue to decline due to a rise in the number of subscribers migrating to broadband services and as a result of the migration of the SBC traffic to the AT&T network, respectively. Its plan is to discontinue managed modem services and, as a result, has notified the company's current managed modem customers.

Strategy

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.

To this end, Level 3 in 2013 inked a deal to provide IP VPN services to MetoKote, which specializes in protective coating application for several sectors, including automotive, computer, construction equipment, electrical, furniture, agriculture, appliance, industrial equipment, recreational, and truck and bus.

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 both XO Communications (in 2013) and tw telecom inc. (in 2012).

Level 3 also continues to expand its portfolio of services to include more bundled options for clients looking to add support for wireless broadband connectivity (Clearwire) and managed video networking services (FOX Broadcasting), among other advanced services.

Level 3 continues to develop into a global fiber-optics communications company. Effective 2013, the company provides hosting services for Rocket's websites and its data center located in Sao Paulo, Brazil. Additionally, Level 3 renewed its agreement with Grupo Salud S.A. in 2012 and entered into a new service provisioning agreement that extends through 2017. Level 3 will support the prepaid healthcare company by delivering telecommunications services, security infrastructure, and technical support that will allow its more than 1,000 doctors to share patient information throughout Ecuador. In 2013 it launched new high-speed networks in Argentina (Buenos Aires) and Colombia (Bogota). 

As Level 3 grows, the company regularly reorganizes its business, which involves workforce reductions. The company has initiated layoffs in 2013, 2012, and 2011.

Mergers and Acquisitions

In mid-2014 the company announced plans to buy 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.

While its network reaches a portion of Asia/Pacific, this is a region that has much room for expansion. To this end, Level 3 in 2011 acquired Global Crossing in a $3 billion stock deal that positions the combined company to better compete against other global network operators, particularly in Asia. Accompanying investor Singapore Technologies Telemedia (which now owns nearly a quarter of Level 3) gives Global Crossing's new parent greater access to opportunities in that region.

Company Ownership

STT Stockholder Group owns a 26% stake in Level 3 with Southeastern Asset Management holding about a 22% share in the company.

▲ Show Less▼ Show Full Description


Level 3 Communications, LLC


1025 Eldorado Blvd
Broomfield, CO 80021-8254
Phone: 1 (720) 888-1000
Fax: 1 (720) 8885422
www.level3.com

STATS


  • Employer Type: Unknown
  • Sr V Pres: Robin Grey
  • Vice President Product Management: Andrea Pierantozzi
  • Ceo-pres-mbr: Jeffrey Storey

Major Office Locations

  • Broomfield, CO

Become a Vault Basic Member

Complete your Vault Profile and get seen by top employers