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Level 3 Acquires Sprint's Wholesale Dial Internet Access Business

Posted on: Friday, 1 October 2004, 06:00 CDT

BROOMFIELD, Colo., Oct. 1 /PRNewswire-FirstCall/ -- Level 3 Communications, Inc. today announced that it has acquired the wholesale dial Internet access business of Sprint Corporation .

Level 3 will pay $34 million in cash to acquire the business, which provides dial-up Internet access to leading ISPs throughout the United States. The transaction will permit Level 3 to expand its industry-leading managed modem footprint into select secondary and tertiary markets not currently served by the Level 3 network.

Sprint plans to continue providing dial IP services to its enterprise and small-business customers as part of its remote access service product offering. Under a separate agreement, Level 3 will provide Sprint with wholesale dial IP network services in support of this service.

"Level 3 has established a uniquely strong position in the wholesale dial access market, thanks in large part to the inherent efficiency of our proprietary softswitch platform," said Sureel Choksi, president of softswitch services for Level 3. "While we recognize that the dial access business is maturing, we continue to generate attractive margins and cash flow from our managed modem operations. In addition, the underlying softswitch infrastructure used for our managed modem business supports our growing voice offerings. As such, we believe this transaction meets all of our criteria for acquisitions, and that it will create real value for our company."

"Sprint will work to ensure a smooth transition for its wholesale dial Internet customers who are included in this transaction," said Howard Janzen, president of Sprint Business Solutions. "While the wholesale dial access business is not a core focus for Sprint, this transaction also will provide a basis for Sprint to continue to offer its broad portfolio of integrated remote access services to enterprise and small-business customers."

Level 3 and Sprint have entered into a transition services agreement for the migration of customers onto the Level 3 network, which Level 3 expects to complete in mid-2005. During the migration period, a portion of the cash collected from these customers will be treated by Level 3 as a reduction in purchase price, as opposed to revenue, as required by Generally Accepted Accounting Principles. Level 3 expects the acquired business to generate positive cash flow from operations in 2005. The company plans to provide additional information regarding the transaction during its third-quarter 2004 conference call on October 27.

"Over the past two years, we have successfully acquired and integrated network assets from dial-access service providers such as McLeodUSA, Genuity and ICG," said Kevin F. Bostick, Level 3 senior vice president of softswitch services. "We're committed to providing a seamless transition for Sprint's customers, and we believe our industry-leading experience in this area will enable us to deliver the highest quality of service to these customers going forward."

About Sprint

Sprint is a global integrated communications provider serving more than 26 million customers in over 100 countries. With more than $26 billion in annual revenues in 2003, Sprint is widely recognized for developing, engineering and deploying state-of-the-art network technologies, including the United States' first nationwide all-digital, fiber-optic network and an award- winning Tier 1 Internet backbone. Sprint provides local communications services in 39 states and the District of Columbia and operates the largest 100-percent digital, nationwide PCS wireless network in the United States. For more information, visit http://www.sprint.com/.

About Level 3 Communications

Level 3 is an international communications and information services company. The company operates one of the largest Internet backbones in the world, is one of the largest providers of wholesale dial-up service to ISPs in North America and is the primary provider of Internet connectivity for millions of broadband subscribers, through its cable and DSL partners. The company offers a wide range of communications services over its 23,000-mile broadband fiber optic network including Internet Protocol (IP) services, broadband transport and infrastructure services, colocation services, and patented softswitch managed modem and voice services. Its Web address is http://www.level3.com/.

The company offers information services through its subsidiaries, Software Spectrum and (i)Structure. For additional information, visit their respective Web sites at http://www.softwarespectrum.com/ and http://www.i-structure.com/.

The Level 3 logo is a registered service mark of Level 3 Communications, Inc. in the United States and/or other countries.

Forward Looking Statement

Some of the statements made by Level 3 in this press release are forward- looking in nature. Actual results may differ materially from those projected in forward-looking statements. Level 3 believes that its primary risk factors include, but are not limited to: changes in the overall economy relating to, among other things, the September 11 attacks and subsequent events, substantial capital requirements; development of effective internal processes and systems; the ability to attract and retain high quality employees; technology; the number and size of competitors in its markets; law and regulatory policy; and the mix of products and services offered in the company's target markets. Additional information concerning these and other important factors can be found within Level 3's filings with the Securities and Exchange Commission. Statements in this release should be evaluated in light of these important factors.

Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/19990721/LVLTLOGOPRN Photo Desk, photodesk@prnewswire.com

Level 3 Communications, Inc.

CONTACT: Media, Josh Howell, +1-720-888-2517, or Media, Arthur Hodges,+1-720-888-6184, or Investors, Robin Grey, +1-720-888-2518, or Investors,Sandra Curlander, +1-720-888-2501, all of Level 3 Communications, Inc.

Web site: http://www.softwarespectrum.com/

Web site: http://www.i-structure.com/

Web site: http://www.sprint.com/

Web site: http://www.level3.com/

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