What Is Wrong With Level 3 Communications?


Level 3 Communications (LVLT) released its fourth quarter and full year results on February 12. The market was not pleased with results or comments relating to forward growth; pummeling the stock on heavy volume.  The stock closed down 13.6%.

Given guidance it’s reasonable to expect the company to show positive FCF (free cash flow) for the full year but far below the expectations going into their earnings report.  It should be noted that LVLT was FCF positive in 2009 before sinking back into negative territory.

So what is wrong with LVLT? The answer becomes apparent with an understanding of LVLT’s turbulent past and the factors that lead to the creation of LVLT.  Not only financial but how they envisioned the future along with the road taken. Are they at an inflection point or is the past a harbinger of the future. The discussion includes:

  • History
  • Performance
  • Conclusion


Level 3 emerged within the Kiewit Diversified Group Inc. (“KDG”), a wholly-owned subsidiary of Peter Kiewit Sons, Inc. In 1998, KDG changed its name to Level 3 Communications, Inc. On April 1, 1998, Level 3 common stock started trading on the NASDAQ stock market under the symbol LVLT.

Level 3 raised $14 billion, constructed 19,600 route miles, and built the world’s first continuously upgradeable network optimized for internet protocol.

Level 3 Communications was founded on the principles of the “Silicon Economics”. The CEO laid out four keys to Level 3’s strategy
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