Level 3's anti-dilution hedge

May 21st, 2008

I have been asked to comment on the anti-dilution hedge I mentioned in my Virtuous Circle post last week. I'll do my best, but your mileage may vary.

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Tales from the Field: The Show-Me POP

May 20th, 2008

Contributed by the_highwayman

Not all POPs are what the PR folks make them out to be.

A while back my company was integrating some acquired assets, and as part of the process I was assigned to turn down a circuit and recover the router and all equipment at a "MAJOR" POP site for the acquired network. This particular circuit was located in a very rural portion of Missouri. [Read more →]

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Who might buy Global Crossing?

May 19th, 2008

Yesterday, the Times Online reported Global Crossing might be selling its UK operations, and I contended that this likely would mean that in fact the whole company is being sold - in pieces to maximize the value for their majority owner STT. But who would buy them? In the absence of a bona fide rumor, let's just apply a bit of logic.

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Global Crossing on the block?

May 18th, 2008

The Times Online is reporting that Global Crossing is considering a sale of its UK operations. A sale of GCUK cannot exist in a vacuum, it sounds like a strategy to maximize the sale value for Singapore Technologies Telemedia (STT) by breaking it up into pieces. GCUK is the most valuable piece of GLBC and its financial lynchpin, [Read more →]

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A LVLT model from thejuice!

May 17th, 2008

Ok, here goes. first, thanks to Rob for allowing me to post information to his blog. Second, in terms of disclosure I'm long LVLT and I don't get anything for posting. This is something I do to help me keep tabs on my expectations vs. actual results. Also, I don't work in the telco industry nor am I holding myself out there as some sort of expert in anyway. I make mistakes all the time, am not embarrassed about it and appreciate feedback to help make corrections and improve the end product. Think of this work as "open source spreadsheeting" where you feel free to improve my work in anyway you see fit, including ignoring it if you think this pos is going to zero. [side bar - there's a new book out by Clay Shirky that talks about how people are organizing around new media channels like this blog as a way to reduce failure, called Here Comes Everybody.] As my initial contribution to this blog

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Abovenet emerges from coma

May 16th, 2008

The other day, something remarkable happened: Abovenet filed an annual report (10-K) with the SEC. I know, who cares, right? But this day marks the end of an era, the final curtain has come down on the telecom nuclear winter that began in 2001 in which hundreds of telecom companies went under - from Worldcom on down. All those assets filtered through bankruptcy court into new ownership, occasionally more than once, but one case always stood out. You see, Abovenet used to be known as Metromedia Fiber Networks, or MFN, and the depth of their collapse is legendary, involving a 5 year SEC investigation.

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Sea Change at Cogent?

May 15th, 2008

In Cogent Communication's latest earnings release and conference call lies an indication that their multi-year bandwidth honeymoon may be in danger. Specifically, they reported that traffic growth in Q1 was only 7% above that of Q4, and nearly all of that was in January, with February and March almost flat. They then mentioned that April's sequential traffic growth was also about 1%, although they expect traffic to continue to grow through the year.

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The story of XO: What does Icahn want?

May 14th, 2008

Perhaps the most puzzling situation amongst carriers right now is the behavior of XO, which BearOnBusiness described recently as 'reckless'. XO has great assets - an IRU for 18 fibers on the original LVLT network, substantial metro assets connecting 3000 on-net buildings, and piles of LMDS and microwave spectrum. And yet, their stock is off 90% in the past year. That's worse than Level 3, which had a simply horrible year as integration blunders decimated revenue growth, it may be the worst in the sector. And yet, XO is basically in the same position today that they were in last year, at least from a competitive standpoint - weak but holding steady. But XO's common stock, it turns out, moves almost completely independently from its fundamental performance. What drives it? Carl Icahn. [Read more →]

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The blogosphere really does have a Welcome Wagon

May 14th, 2008

In the past three days, Dan Caruso's BearOnBusiness, Ike Elliott's Telecosm, and Nyquist Capital's blog have not only linked to this blog, but have posted about it. I must say, the welcome wagon isn't sleeping on the job, this page has only been around for a few days now! Let me say that I read Telecosm and BearOnBusiness religiously and I have found them to be fantastic commentary on the telecom sector, in fact their presence is part of what inspired me to toss my own hat into the ring. I have run into Nyquist Capital many times as well, and have now added them to my daily reading list. Thanks guys! I'll do my best to live up to the billing.

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Level 3 Debt Worksheet

May 13th, 2008

This is another in a series of modeling and compiled information posts, which I intend to update over time and refer to in posts.

Because LVLT's debt is a major (if not all-encompassing) feature of its balance sheet, and because so many financial moves the company makes relate to its structure, it is worth keeping track of in some detail.

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On-net buildings, the SME, and strategy

May 12th, 2008

The media tends to portray the CLEC strategy as monolithic, each player has a certain amount of fiber and leases the rest via special access from the ILEC. But it is quite interesting just how wide ranging the various strategies out there are.

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Target: the virtuous circle

May 10th, 2008

The virtuous circle awaits Level 3, if they can only stop tripping over their own feet and get there. A virtuous circle is a pattern that reinforces itself in a feedback loop. If Level 3 can generate positive cashflow, then their stock will go above the strike price of some of their convertible debt and they can force or induce an early conversion. The interest saved then increases their cashflow, raises the stock further, and more converts can be eliminated, and so on up the ladder. So where are the rungs on this ladder? They are spaced out over the next 27 months. [Read more →]

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LVLT growth model

May 7th, 2008

As my inaugural post, I am providing my detailed model of LVLT revenues, costs, earnings, and cashflow. It is a multi-page spreadsheet, and is more comprehensive than anything I find in analyst reports etc. I don't claim perfection, if you find an error or have a suggestion for improvement please let me know.

My model allows the study of each business unit independently, calculating the total gross margin from the individual components. For historical data, I work backwards from the actual results using various assumptions in order to give a consistent context to the same numbers going forward. [Read more →]

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