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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