Level 3, which has just completed its acquisition of tw telecom, reported that Core Network Services (CNS) revenue rose 5.8 percent to $1.48 billion, helping to offset ongoing declines in its wholesale business.
Driven by data and Internet services growth, enterprise was the key revenue driver in CNS, rising 12 percent year-over-year to $992 million.
Likewise, wholesale carrier revenue grew $4 million, or 5.3 percent year-over-year, reflecting growth in Ethernet services. However, wholesale growth was somewhat offset by churn and repricing for contract renewals, primarily in network services.
From a regional perspective, North America was once again the leader, growing 8 percent year-over-year to $1.06 billion. While Latin America CNS revenue grew 9 percent to $200 million, EMEA declined 5 percent to $219 million.
"Latin America CNS revenue grew 8.6% and enterprise CNS revenue grew 8.3%," said Sunit Patel, CFO of Level 3 during the earnings call, according to a Seeking Alpha transcript. "The Latin America region has particularly strong growth this quarter in wholesale due to a few large deals that were installed during the quarter. As we have noted before, wholesale can be lumpy with large installs or large disconnects in any given quarter."
Patel said that the performance of EMEA CNS revenue "was impacted by a few expected disconnects in both the wholesale and enterprise channels, adding that they "expect the EMEA region will continue to stabilize over the coming quarters."
tw telecom, which is now part of Level 3, reported that it grew total revenues 8 percent year-over-year and 1.2 percent sequentially to $425 million. Similar to earlier quarters, the service provider reported that it saw gains in enterprise and data and Internet revenues. Enterprise revenues grew 8.4 percent, while data and Internet revenue grew 15 percent year-over-year.
"Although we have only had a couple of days where we could share customer specific data, we found that less than 5% of the combined companies' customers overlap," said Jeff Storey, president and CEO of Level 3. "Since these customers are primarily wholesale or very large enterprise customers, the revenue overlap is greater than 5%, but less than we saw with Global Crossing."
From an overall financial perspective, Level 3's total revenue was $1.62 billion, up year-over-year from $1.56 billion in the same period a year ago.
"Level 3's and tw telecom's results reflect both companies' strong focus on execution in the enterprise market," Storey said. "Given the combined company's broad product portfolio, extensive network reach and customer-first mindset, we believe we are well-positioned to continue to capture enterprise market share."
Shares of Level 3 were listed at $46.58, down 67 cents or 1.42 percent, in Wednesday morning trading on the New York Stock Exchange.
- see the earnings release
- see the earnings transcript
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This article was updated on Nov. 6 with additional information from Level 3's earnings call.