Level 3 says dark fiber is part of service set, not the only solution for business, wholesale customers

Level 3 Communications sees dark fiber as a growth engine in the transport and fiber section of its core network services (CNS) business, but only as part of a broader solution set -- not the best or only solution as some wireless operators and content providers suggest.

Speaking to investors during the fourth quarter earnings call, Jeff Storey, CEO of Level 3, said that dark fiber and other services such as wavelengths are applied to fit the best needs of a customer.

"We have customers and applications for those customers where dark fiber is an appropriate solution," Storey said. "If you want to tie two locally located data centers together, dark fiber is a good solution for that and if you want to tie two data centers across the country our 100G wavelength service is the best solution for that."

Storey added that "we look at that the overall comprehensive portfolio and recognize that our customers have a variety of different networking challenges they're trying to solve so we match our technologies and our solutions to their networking needs."

Regardless, during the fourth quarter, the service provider reported that transport and fiber revenue within its CNS unit was $590 million. Out of that mix, dark fiber made up 6 percent of CNS revenue.

In addition to dark fiber, Level 3 has been making investments to enhance its CDN capabilities and security. The service provider launched a new tool called dedicated denial of service (DDoS) Mitigation Service that it says can help enterprises safeguard their critical data and systems, for example.

"There are other areas we have made investments that we'll talk about in the future like security services and that's something we'll be able to talk about more tangibly later in the year or next year, but in general the demand drivers for bandwidth continue to expand," said Chief Financial Officer Sunit Patel.

Level 3 reported that CNS revenue grew 6 percent year-over-year to $1.94 billion from $1.89 billion. Within the mix, it saw mixed results, with $529 million in wholesale revenues down from $537 million, while Enterprise rose 6 percent to $1.4 billion.

For the full year 2015, CNS revenues grew 5.3 percent for the full year to $7.7 billion. Likewise, Enterprise Core Network Services revenue grew by 7.2 percent to $5.5 billion.

From a regional perspective, North America continued to be the star performer in the quarter with $1.57 billion in revenues, up from $1.5 billion in the fourth quarter of 2014.

However, EMEA and Latin America did not fare as well. EMEA revenues were $212 million, down from $212 million in the same period a year ago, while Latin America declined to $160 million due to slow revenue in each region's enterprise and wholesale segments.  

Overall fourth quarter revenue was $2.05 billion, up slightly from $2.052 billion in the same quarter a year ago and $8.23 billion for the full year 2015 compared to $8.12 billion for the full year 2014.

Level 3 said the full year 2015 and the full year 2014 results include nine months and twelve months of results from the company's Venezuelan subsidiary operations. The full year 2014 results are presented on a pro forma basis assuming the tw telecom acquisition took place on Jan. 1, 2014.

Looking forward, it expects to grow overall enterprise CNS to grow in 2016. Level 3 is projecting 2016 adjusted EBITDA of $2.83 billion to $2.90 billion.

Shares of Level 3 were trading at $50.27, up $3.50, or 7.48 percent, in Thursday morning trading on the Nasdaq stock exchange.

For more:
- see the earnings release

Special report: From Adtran to Zayo: Tracking wireline earnings in Q4 2015

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