Level 3 Communications: Has The Train Left The Station?


Level 3 Communications (LVLT) has had quite the run-up since the end of August, gaining approximately 34%. So what’s going on?

Our last article we stated:

The overall numbers appear to show LVLT going nowhere, or worse, declining revenues but there is a hidden story if one starts to look under the hood. Over time enterprise growth will stand out as it becomes a bigger part of the overall revenue picture.

LVLT announced third-quarter results on October 30 but the market has been jumping aboard since September.  Why?  The CNS (Core Network Services revenue) enterprise story is coming to the forefront, i.e., the “hidden story” has surfaced.

Is it too late to climb aboard? We’ll update the CNS trends followed by a valuation and look at the debt.

CNS TRENDS:

CNS revenue consists of both Enterprise and Wholesale. The company defines each as follows:

The enterprise channel includes large, multi-national enterprises such as financial services companies, healthcare companies, content providers, and portal and search engine companies. Medium sized enterprises and regional service providers who buy services regionally or locally, as well as government markets, including the U.S. federal government, the systems integrators supporting the U.S. federal government, U.S. state and local governments, academic consortia, and certain academic institutions. The U.K. government channel is also included.

The wholesale channel includes revenue from incumbent and alternative carriers, global carriers, wireless carriers, cable companies, satellite companies, and voice service providers.

Enterprise revenue represents 65% of CNS revenue for Q3 and …
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One Response to Level 3 Communications: Has The Train Left The Station?

  1. IIEX says:

    LVLT has agreed to sell $300 million aggregate principal amount of its Floating Rate Senior Notes due 2018. The Floating Rate Senior Notes will bear interest at LIBOR plus 3.50% per annum. The net proceeds from the offering of the Floating Rate Senior Notes will be used, together with cash on hand, to redeem all $300 million Floating Rate Senior Notes due 2015.

    Going forward cash required to pay down debt is not required until 2018 assuming the stock doesn’t fall below 27 by 2015. I also do not see a need for any further refinancings for the next 5 years or not at all if growth exceeds projections ( https://iiex.sharepoint.com/Pages/LVLT_Interactive_Model.aspx ) even by a modest amount. We’ll see what the future holds.

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