Level 3 Communications, Inc. (LVLT)

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Level 3 Communications, Inc. (LVLT)

Goldman Sachs 22nd Annual Communacopia Conference Call

September 25, 2013, 8:00 AM ET

Executives

Sunit Patel - Executive Vice President and Chief Financial Officer

Analysts

Scott Goldman - Goldman Sachs

Presentation

Scott Goldman - Goldman Sachs

Good morning, everybody. Thank you for coming and welcome to day two of Communicopia. My name is Scott Goldman. I work on the communication services team here at Goldman Sachs. And very pleased to be joined to my right, by Sunit Patel, who is the Chief Financial Officer of Level 3 Communications. So thank you for joining us today.

Sunit Patel

Thanks.

Question-and-Answer Session

Scott Goldman - Goldman Sachs

We're going to jump right into the fireside chat. I'll ask series of questions and then we do have some microphones that we will be able to pass around the room later on for audience questions if there are any. I guess where I want to start off is looking back, it's been about six months now since Jeff was named the CEO to replace Jim and lead the firm. Can you talk from a higher level a little bit about the changes that he has implemented and how the business focus at Level 3 maybe different now under Jeff's leadership versus what you experienced previously under Jim?

Sunit Patel

Thanks. I think what I have seen and what we've seen in the company is Jeff's moved rather quickly to put a stamp on the company, where I think we are striking a better balance between both bottomline orientation and topline growth. So we moved to take our costs, these were our most recent one just about a month ago, which impacted about 700 people, we don't think that impacts any of our revenue growth trajectory. So I think reducing layers of management, little fewer senior people or VPs and above is I'll call it, and just streamlining the company little sharply I think with a continued focus on operational excellence. So those are some of the keys.

I think from a strategy perspective, we did finish up a fair bit of work on the strategy front, presented to the Board. There will be one more on later this year. Don't really see any right angle done from a strategy perspective other than focused more on how do we provide enterprises with the kind of services that they are purchasing. So besides this basic telecom, there are newer areas like you've known of our CDN for a while, we introduced security services for the enterprise, those are going well. We are looking at more managed and professional services for customers that want to make big move over from traditional solid based infrastructures that have had to IPVP and Ethernet. So I think a sharper focus from that that we'll see the benefits of over the next few years. So those are some of the key ones.

Scott Goldman - Goldman Sachs

I get that's sort of relating to my next question, which is really sort of any changes in terms of the revenue growth opportunities. So as you talk about some of the things like managed services, professional services or focused more on some of the enterprise and the securities. I mean are those things that with the assets you sort of have in place today and the sales force you have in place today can allow you to generate higher revenue growth than you might have otherwise or are there investments you need to make along the way to sort of do that for those types of services?

Sunit Patel

I think we're going to make small investments, but more internally in terms of product development. I don't think there is much in terms of the new capabilities that we'll need to secure. Having said that, again this is a rapidly evolving marketplace in terms of cloud services and what people are thinking of. So we are not thinking of steering away too far from what we are good at currently meeting a bandwidth oriented, network oriented, stay close to that. But we don't think it's any substantial investment.

And from a revenue growth perspective, our view continues to be, we have a very low market share in the enterprise market. And if you look at us today in all three regions, North America, India and LatAm, our enterprise business is growing at about 7% to 12% higher in Latin America, the lower-end of that in North America and in between in EMEA. And we just think that there continues to be a lot of opportunity to drive growth.

If you look at EMEA for example, our enterprise revenue is up 9% year-over-year in an economy that isn't going anywhere. So that just gives you a sense of the opportunity we have. And even in EMEA, we don't have the kind of network depth that we have in North America.

Scott Goldman - Goldman Sachs

I definitely want to return to a broader discussion on the revenue. Just continuing on with some of Jeff's changes, you mentioned the recent organizational changes I think about 700 or so. Can you talk a bit about where you're finding these efficiencies within the business? I mean is it across all regions, what types of functions are you able to find these efficiencies in?

Sunit Patel

So, you know, we are coming up to two year mark on the Global Crossing acquisition at the beginning of October. You'd heard us talk about achieving about $300 million a year in cost savings. And we stopped providing that detail at the beginning of the first -- end of the first quarter we were at $230 million. And when you look at these reductions, it really takes us right at the $300 million mark.

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