Level3 News

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Level3 News

Cox Communications Inc., a customer of Level 3 Communications Inc has increased its purchase of long-distance minutes on Level3's global broadband network recently as it rolls out VoIP. A Level3 official, declined to give specifics, however did state that traffic from Cox on Level3's network has roughly doubled over last year.

"Every month, we continue to get a nice growth rate, which indicates to us something is going right over there," said Kevin Dundon, senior vice president of wholesale VoIP services with Level 3.

Level3, still under heavy debt after building out one of the largest fiber optic deployments, has had several major wins in the VoIP space, including AOL, Skype, Charter, and last I heard, they are in talks still with cable giant, Comcast.

Yesterday, Level 3 said it completed the purchase of $1.105 billion in debt due in 2008, reducing the amount maturing that year to $1.3 billion. The transaction also lowers the company's annual cash interest expense by about $28 million, it said. The release about this can be found here:

"It basically allows the company to turn the corner later," said Tom Friedberg, an independent financial and telecom analyst with TWF Consulting in Denver. "It gives the company more breathing room because the anticipated benefits of its global network position have not translated to new revenues and free cash flow yet." However, some analysts see Level3 merely pushing its debt maturities out as far into the future as it can because the company is unable to turn the corner today.

Needham & Company Inc. analyst Vik Grover has a different spin stating that the company's debt trimming, along with expected VoIP sales growth, VoIP "wins", as well as increases VoIP minutes purchases, such as Cox's, lead him to believe that Level3 will become cash-flow positive during the second half of 2005. I should note that Needham & Company have an ongoing investment banking relationship with Level 3.

Level 3 (Nasdaq: LVLT, $3.64) closed up 8 cents, or 2.25 percent, yesterday on heavier than normal trading volume.

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