Forget Horseback, Mongolia Rides on Level 3

December 17th, 2009 by · 4 Comments

You know, I have noticed that it's not often one gets to write about Mongolia and the internet in the same article, but apparently today is the day.  Level 3 Communications (NYSE:LVLT, news, filings) has announced a contract with GemNet, one of Mongolia's main fiber networks.  Level 3 will be providing one of the company's main IP transit feeds which will bring US internet traffic to and from the country.  It takes a lot of IP transit deals to get anywhere these days, but every little bit counts for Level 3 at the moment.  Of course, Level 3 still doesn't have assets in Asia that I know of, so presumably Gemnet is dropping off the traffic in Seattle or San Luis Obispo or something.

Actually, although I spend a fair amount of time in Beijing - just a few hundred miles from the Mongolian border - I know little of the fiber assets up there although I'm sure they have connectivity south into China and north into Siberia.  None of that fiber has yet made it onto my Asia-Pacific-Australia network maps page.  I can't seem to reach GemNet.mn which Google seems to think is their website, but perhaps there is a network map somewhere out there to add to my list that someone can point me to?

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Categories: Internet Backbones

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4 Comments So Far


  • ES says:

    Amusing post Rob. I thought this would never be the case but is (3) finally entering ‘their’ mkt?? What I mean is if there is no growth in the rest of the economy, Level 3’s mid high single digit rev growth may get them/sector a multiple at a real premium to the S&P.

    I have been short the telcos for some time though maybe it is time to finally pair it on the long side w/ (3) again.

    A few thoughts:
    Putting mkt prices on the debt, (3) trades at 1 point premium T/VZ yet:

    1.) T & VZ have more than 50% of cash flows coming from landlines.
    2.) Wireless growth looks muted w/ price competition.
    3.) The enterprise & wholesale businesses are the good businesses at large cap telco where small cap telco has the mkt share oppty.

    If we do see growth, the leverage is powerful, financially and operationally. (3) does 60% incremental ebitda margins on call it 25% present ebitda margin. $4b in revs and $1B in ebitda.

    I think they can do double digit growth but assume just mid single digit revenue growth of 5%. In 3 years, revs are $4.6B and ebitda is $1.4B. Not many places you can find 40% ebitda growth in 3 years in what I think is a conservative topline estimate.

  • carlk says:

    You seem to have missed the lost Alltel customer that wreaked havoc on their top line, yet again.

    (3)’s CNS’ are being annualized at approx. $3.4 B as documented here:

    http://www.level3.com/index.cfm?pageID=491&PR=816

    I think Mr. Rusin’s pp&e valuation method is most appropriate assuming you believe (3), by some divinity, is the “exception to the rule.”

    There are many who will debate with you on that.

  • aL b says:

    You write: “LVLT has announced a contract with GemNet, one of Mongolia’s main fiber networks” – thusly your implication that Mongolia has more than this one main fiber network is a rather huge stretch of our imagination??

  • carlk says:

    Dear aL b,

    Lest you be confused, you must and will need the patience of JOB, and vision of “SUPERMAN” to look decades ahead with this name.

    It’s LONG TERM when most, if not all, of its original owners, including bond owners, will be DEAD assuming they hadn’t gained control of the public shell for a song, first.

    Try not to be so hard on Rob, he has already called TWTC, the heavyweight, in his defense of their powerful metro market position. 🙂

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