Level 3 Communications Undervalued Regardless Of Possible Outcomes From The FCC Investigation


SUMMARY

Accumulated FCF through 2020 in excess of $7.5 billion

Venezuela deconsolidation is a non-event going forward

FCC investigation could be a huge catalyst for revenue growth

Introduction

Level 3 Communications (NYSE:LVLT) is a global communications provider headquartered in Broomfield, Colorado, that provides communications services to enterprise, government and carrier customers in more than 60 countries around the world. Level 3 operates one of the world’s largest Internet backbones.

Previous articles highlighted Level 3 Communications focus; moving from being primarily a wholesale provider to a company focused on serving the day-to-day business needs of enterprise customers. These changes are driving double digit growth in both earnings and FCF (free cash flow).

This article will touch on the following:

  • CNS (Core Network Services) revenue growth and its components
  • Market potential
  • FCC investigation
  • The effect of deconsolidating the Venezuela business
  • Long term EPS and FCF (free cash flow) growth and valuation
  • Final thoughts

Revenue: (Unless noted otherwise all data is TTM [trailing twelve month] and pro-forma for tw telecom.)

If there is any confusion about the strategic direction this company is going the CEO – Jeff Storey said it best on the conference call.

First of all, we are 100% focused on the wireline needs of enterprise customers. We’re not distracted by wireless, by consumers or by pay television. We do serve wholesale customers, but even then, we’re really targeting the needs of enterprises that those wholesale providers serve. Wireline enterprise networking isn’t a piece of our business. It isn’t an add-on to our business. It is our business…

…Click here to read the full article…

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