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Technology Stocks : (LVLT) - Level 3 Communications -- Ignore unavailable to you. Want to Upgrade?

To: Frank A. Coluccio who wrote (1139)	7/20/1998 4:43:00 PM
From: Kevin G. O'Neill	Respond to of 3873

Level 3 Deal Positions Cellular King McCaw As Telecom Baron By Pallavi Gogoi Dow Jones Newswires -- July 20, 1998 [Subscribers:ÿ interactive.wsj.com!BT07/20++3247!BT07/20++1774!&time=07/20+14:22 ÿ] NEW YORK (Dow Jones)--Cellular telephone pioneer Craig McCaw moved closer Monday to becoming telecommunications baron of the 21st century. 'We've always wondered when he will get the wireless and wireline pieces together,' said Doug Bontemps, telecommunications analyst at Moody's Investors Service. 'This is one of the first steps in that process of combining the common needs of both those areas.' Monday, Internext Inc. and Level 3 Communications Inc. said they signed an agreement under which Internext will put up $700 million towards the costs of constructing Level 3's network. Internext is owned by Nextlink Communications Inc., Nextel Communications Inc. and Eagle River Investments LLC, all of which have McCaw as either chairman or chief shareholder. McCaw made his name in telephones with McCaw Cellular Communications, bought for more than $12.6 billion by AT&T Corp. in 1994. Nextlink is a Bellevue, Wash. competitive local exchange carrier or CLEC and Nextel is a McLean, Va. wireless communications provider Level 3 of Omaha, Neb., is building an international network using internet technology. As a first step it is laying 15,000 miles of fiber optic cables in the U.S. 'Clearly, McCaw recognizes the value of broad-band long distance fiber availability,' said Les Levi, high-yield telecommunications analyst at Chase Securities Inc. 'This gives his companies the right to use the fibers that Level 3 will lay out,' he added. Levi said the deal made a lot of sense for Nextlink in particular, 'though one could envision long-distance capacity usage for Nextel too. At least it is good to have the option.' Currently Level 3 is laying an intercity network with six to eight conduit pipes, the first of which will contain 96 fibers. Internext has acquired to right to use 24 of those fibers, connecting about 50 cities, said Josh Howell, senior vice president at Level 3. 'It's a win-win situation for both sides. Nextel had earlier planned to lay their own inter-city network and this deal enables both companies to lower the cost of network building,' Howell said. In effect, Internext will pay about a third of the overall cost of the inter-city network which is estimated at $2.2 billion, he added. The move is being watched closely by analysts as both Nextel Communications and Level 3 are high profile telecommunication issues, viewed as benchmark bonds in the junk bond arena. Earlier this year, Level 3 priced a highly visible $2 billion bond deal, one of the largest issues this year. Bondholders of all the companies stand to gain from the alliance, analysts noted. 'It is certainly favorable for Level 3 because it puts more equity funds into the company and helps offset capital needs to finance its network,' Chase's Levi noted. While Level 3 benefits from the capital infusion, the move holds multifarious synergies for McCaw's companies as the need for data grows and each interface interacts with the other. 'As more and more wireless customers make long distance calls, it makes more sense to own part of a long distance network rather than leasing it,' Moody's Bontemps observed. Monday morning, the benchmark bonds registered gains on the news. Nextel Communication's 9.75% debt due 2004 was quoted at 100.625, up 5/8. Level 3's 9.125% senior notes due 2008 were also quoted 3/4 point higher at 98.75 bid/99 offer. Stocks from all the companies involved also gained. Early Monday afternoon, Level 3's shares were up 4 5/8 at 76 3/8, while shares of Nextel Communications were up 1/4 to 30 3/16. Nextlink Communications shares were 1 5/16 higher at 35 3/4. Bontemps pointed out that Level 3's focus has been solely to provide an internet protocol-based network rather than multiple communications services. 'In that sense it is risky,' he said. 'But to date, their bet seems to be correct as internet protocol has developed as the optimal way to carry both voice and data.' -Pallavi Gogoi 201 938 2120; Pallavi.Gogoi@cor.dowjones.com