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Technology Stocks : (LVLT) - Level 3 Communications

LVLT 53.63

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Nov 1 5:00 PM EST

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To: David Klein who wrote (1072)	6/19/1998 1:08:00 AM
From: Ken98	Read Replies (2) of 3873

All, I went to the L3 meeting in Dallas on Tuesday and took a few notes to pass along. I will try not to repeat comments made by others about these meetings, all of which were accurate. The meeting was different from what I expected which was a typical road show to provide information to analysts and brokers. Apparently, back in December Crowe went around the country talking to PKS shareholders about the new company but was short on details and left it with "we will get back to you later with more information." This recent tour was in response to that. There were 30-40 people in attendance, most of which appeared to be PKS shareholders. Major points: 1. XCOM merger was very important. The XCOM technology allows a residential or business user to place an IP call over the L3 network using a normal phone without entering additional access codes or additional waiting. Similar to the equal access change in the LD market in the 80s. This is a bridge technology. 2. Some services will begin to be offered in 3-4Q of 1998 and commercial services in 1Q 1999. 3. 8 conduits, 1 with fiber now. No mention of selection of Fore. Gateway hardware will change frequently as improvements occur and these upgrades are built into the business model. 4. Business plan consists of 5 phases. Company will not begin a phase until it has $$ in the bank to complete the phase. Each phase can stand on its own. Company has enough $$ in the bank now to complete Phase 1 and Phase 2 and will not need to go to the markets for additional capital any time soon. 5. Phase 1 and Phase 2 contemplates 25 US cities and 6 European and network between. Phase 3 adds to European network. Phase 4 adds to US network. Forgot Phase 5, sorry. 6. 80% of all $$ to go to capital expenditures, 20% to operating losses and working capital. This assures book value to remain high. 7. Approx. $130m net from CABL sale. Those were the high points, it was generally a low key meeting. Relatively speaking (just in light of the overall size) the business plan is conservative. I really got the impression that the XCOM merger was more important than we may have realized - it will be interesting to watch that aspect develop. Regards, Ken.

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