Level 3 IP start-up draws big $$
[Didn't the recent BARS report say Level 3 would be a big ASND customer?]
By Kimberly Weisul, Inter@ctive Week Online
April 24, 1998 2:28 PM PDT
zdnet.com
Level 3 Communications Inc., a start-up telecom company, successfully
issued the largest junk bond offering of the '90s on April 23, raising $2 billion.
The massive money grab highlights two key facts: First, the high ambitions of Level 3,
which plans to offer long-distance and local services of all types; and second, the high
cost of building new telecommunications networks.
Level 3 plans to use the $2 billion it recently raised, as well as $2 billion already on
hand, to build a nationwide network based on Internet Protocol. Although demand is
heavy for long-distance services now, Level 3 expects that demand for an
Internet-based network will rise as more Internet services become available.
Level 3 will also benefit from a well-respected management team and a market
capitalization of roughly $10 billion. James Crowe, the head of Level 3, was the brains
behind MFS Communications Co. Inc., which pioneered the competitive local access
industry.
He later teamed up Peter Kiewit Sons' Inc. - a construction company - which took
Level 3 public earlier this month.
The company's construction plans are estimated to run up an $8 billion to $10 billion
tab, which accounts for not only equipment but auxiliary costs such as rights of way
and labor. Kiewit's help should go a long way here.
Kiewit has laid conduit before and has experience in "getting the rights of way,
trenching it, the nitty-gritty nuts and bolts of getting a nationwide network," said Tim
Caffrey, a director in Standard & Poor's ratings group. Level 3's strategy runs counter
to that of some of its competitors, which have been building local networks with plans
to later link them into a national presence.
Level 3 will be able to offer some services before its own network is completed,
thanks to a leasing agreement with Frontier Corp.
In its recent round of fund-raising, Level 3 benefited from a favorable market
environment featuring a glut of investors hungry for telecom deals, Caffrey notes. "This
is a better deal than some in this market," he said. "If you're going to invest in a
start-up telecom company, you could do worse than Jim Crowe and his company."
The bonds were rated single-B by Standard & Poor's, and single B-3 by Moody's
Investors Services.
Copyright (c) 1997 ZDNet. All rights reserved. Reproduction in whole or in part in any form or medium without express written
permission of ZDNet is prohibited. ZDNet and the ZDNet logo are trademarks of Ziff-Davis Publishing Company.
For magazine subscription savings, risk-free trial issues, newsletters, and more, click here! |
