Since Level 3 reports first amongst the nextgen carriers – in just 10 days, they get the first question. As I said in my introductory post on this subject, my purpose is to elicit a useful response. Therefore I need to ask about something they a) know the answer to, and b) are likely to be willing to talk about. So without further ado:
“In the last year, Level 3 has added over 1000 on-net buildings, yet the revenues in your business markets group have not grown in response. Business Markets revenue per lit building has been going down steadily, from about $35K per lit building in early 2007 to $31K in early 2008. Can you tell us what is driving this trend? What relationship between the depth of your on-net footprint and revenue should we expect over the next four quarters?”
What I am trying to get at is the health of their strategy of combining the longhaul and metro footprints, which is supposed to be the differentiator, a driving force behind Level 3’s return to solid revenue growth. Spending all that capex to bring over 1000 on-net buildings is cool, but only if it brings revenue growth with it. They’re going to be doing more of the same this year, and we need to understand the relationship between those plans and revenue growth better than we do now.
No, I wouldn’t ask about their position on short raids and such, I wouldn’t expect they would even have that answer. No, I would not ask about their next financing move, because they wouldn’t tell me anything new even if it were going to happen soon. Anything about M&A would get the usual non-answer of ‘not now unless something really attractive comes up but we are getting closer and expect to participate when we are ready.’ The fundamental question right now comes down to the timing (or existence) of real revenue growth, and since they can’t possibly answer the direct question on that subject, I am trying to drill down underneath it to something they can talk about.
But I am open to any critiques or even to better questions (of course, it’s my blog so I get to judge). So if you can help hone this question or replace it with a better one, please leave a comment!
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Someone should ask them (specifically Buddy Miller if he’s on the call) what “GAAP profits soon” means…like when is SOON!
In previous years, you indicated one special investor’s appetite for buying preferred shares. What progress has been made or needs to be made in order to issue preferred shares today vs. back then?
And, I’d really like to hear Crowe talk about value metrics for his network in the marketplace today.
Toes – I like the idea of the revenue per on-net building, but rather than measuring it on average revs per on-net buildings at a gross level, I would like to see it broken down the way retailers breakdown revenue. Existing store sales growth = existing on-net building revenue (% growth, avg rev, margin, histogram, etc). New store sales = new on-net building revenue (same as above).
Really good thought about driving accountability on the on-net and metro investments.
because some mystery seems to linger about LVLT’s inroads into CDN (a la Robin Gray’s comment regarding big win(s) followed by IR’s subsequent denial that she said it ), can we expect a forthcoming response to an inquiry along the lines of the level of success with CDN vs even mgt’s expectations at least–without pressuring for actual customer identification. also CDN-related, do they see more competition from the RBOCs in CDN…will LVLT participate in upcoming consolidation in this area…thanks rob
Crowe has indicated the business markets group is an important short to intermediate term driver of the company’s growth. My guess would be that the drop in average revenues was due to a loss of business in late 2007 due to all the integration problems and a larger demoninator as more buildings are added to the on net base. How quickly do these additions produce sales and is there an expectation of potential sales per on net building that they would share. I believe they have stated that the business market group operates in a 30+ billion dollar market and they have a 1% share at present. Other than on net locations, what else is required to increase this market share? Is the size of this market separate from the Fortune 500, which Level 3 says they will leave to AT&T etc?
I love your question and blog and since I get the award as being the STUPIDEST LONG of the Decade Award, I would ask ”””WHEN”’ will Level3 actually DELIVER what they have promised for two years…………WHEN will 3Unity be fully OPERATIONAL and when will FCFBE actually happen vs the crap of excuses they give on the calls…???????????
Greg Wilson, those would indeed be great statistics to have and maybe we should suggest something like that to them. I only used the BM Rev per building because we have those numbers and therefore I can reference the decline.
A cross licensing agreement between Level-3 and IBM was signed to share certain patents.
How will these agreements add to the bottom line? How will licences be used?
Level 3’s construction efforts in wireless backhaul are apparently non-existent based on the ASM. If we are to benefit at all from the upcoming Wimax and LTE traffic we need to be hold management to established metrics. That process should begin now so it can be part of the earnings feedback in coming quarters. Crowe implied we have no plans to lay fiber to towers until it is economical. Do we set the counter at zero?