March 9, 2005 Broomfield, CO -- Level 3 Communications, an IP and broadband services provider, has announced that its operating subsidiary has signed agreements to acquire substantially all of 360networks' nationwide long-haul transport business.
360networks is a provider of fiber-optic network communications products and services. Through the agreements, Level 3 will acquire that company's nationwide long-haul network, as well as a multi-year contract to provide optical wavelength and private line circuits to an international carrier that had been a 360networks customer.
"We're very pleased to have executed this transaction," remarks Kevin O'Hara, Level 3's president and chief operating officer. "The assets we are acquiring, including the carrier contract, will further expand and enhance our long-haul transport business."
360networks had operated its nationwide long-haul transport business using lit fiber it acquired from Dynegy in 2002. Dynegy had initially purchased that fiber from Level 3 under a 20-year IRU in October 2000. Through the announced agreements, that fiber agreement has been terminated. As a result, 360networks will cease making monthly payments to Level 3 for operations and maintenance services associated with the dark fiber contract. In addition, Level 3 will no longer recognize amortized revenue under the pre-paid dark fiber contract as required under Generally Accepted Accounting Principles (GAAP).
In accordance with GAAP, Level 3 expects to recognize approximately $86 million in non-cash termination revenue from this agreement in the first quarter of 2005. Level 3 included the 360networks termination revenue in previously provided full-year financial projections for 2005, but it was not included in projections for the first quarter.
"360networks informed us that they were seeking to phase out their nationwide long-haul network services business in the U.S. As such, they no longer had a compelling reason to maintain their dark fiber agreement with Level 3," explains Sunit Patel, Level 3's chief financial officer. "We believe this negotiated agreement with 360networks, through which Level 3 acquires the business and an important customer contract, is in the mutual best interest of all parties."