Level 3 Communications Inc LVLT
Q4 2010 Earnings Call Transcript

Transcript Call Date 02/02/2011

Operator: Good day and welcome to the Level 3 Communications Incorporated Fourth Quarter 2010 Earnings Conference Call. Today's call is being recorded.

At this time, I would like to turn the conference over Valerie Finberg, Vice President of Investor Relations. Please go ahead.

Valerie Finberg - IR: Thank you. Good morning everyone and thank you for joining us for the Level 3 Communications fourth quarter and full year 2010 earnings call. With us on the call today are Jim Crowe, Chief Executive Officer; Jeff Storey, President and Chief Operating Officer; Sunit Patel, Executive Vice President and Chief Financial Officer; and Buddy Miller, Vice Chairman.

Before we get started, as a reminder our press release, supplementary information and the presentation slides that accompany this call are all available on the Level 3 website at in the Investor Relation section on the Quarterly Financials page.

I need to cover our Safe Harbor statement, which can be found on page two of our fourth quarter '10 earnings presentation and that says that information on this call and in the presentation contains financial estimates and other forward-looking statements that are subject to risks and uncertainties. Actual results may vary significantly from those statements. A discussion of factors that may affect future results is contained in Level 3's filings with the Securities and Exchange Commission.

Finally, please note that on today's call we will be referring to certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and the most comparable GAAP financial measures are also available in the press release, which is posted on our website at

With that I'll turn the call over to Jim.

James Q. Crowe - CEO: Thanks Valerie. Consistent with our previous practice we'll begin with Sunit who will discuss financial results for the quarter for the previous year and provide an outlook for 2011. Jeff Storey will discuss operational matters including segment results and I'll provide a contextual summary, we'll open it up for questions. Sunit?

Sunit Patel - EVP and CFO: Thank you Jim and good morning, everyone. I'd like to start with some of the highlights of the quarter which can be found on slide 3 of our presentation.

We continue to make steady progress in the business demonstrating solid growth in Core Network Services revenue and in adjusted EBITDA compared to the prior quarter and the year earlier quarter.

Core Network Services sales were up 7% sequentially in the fourth quarter. We saw another quarter of margin improvement and strong positive free cash flow in the fourth quarter of 2010.

Turning to the detailed results for the fourth quarter on slide 4, Core Network Services revenue was $720 million in the fourth quarter of 2010, up 1.8% sequentially or 1.4% on a constant currency basis. Core Network Services revenue from wholesale was $347 million, up 1% sequentially.

Large enterprise and federal CNS revenue was flat at $144 million due to an expected expiration of a contract in support of the U.S. census. For large enterprise we did see sequential CNS growth of approximately 1%. Mid-market revenue continued to show nice improvement with 3% sequential growth in Core Network Services revenue to $151 million.

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