3q 2014 investor presentation

Issued on November 5, 2014 © 2014 Level 3 Communications, LLC. All Rights Reserved

November 5, 2014

Third Quarter 2014 Results

Issued on November 5, 2014

Cautionary Statement & Pro Forma Adjustment

2

Some statements made in this presentation are forward-looking in nature and are based on management's current

expectations or beliefs. These forward-looking statements are not a guarantee of performance and are subject to a number

of uncertainties and other factors, many of which are outside Level 3's control, which could cause actual events to differ

materially from those expressed or implied by the statements. Important factors that could prevent Level 3 from achieving its

stated goals include, but are not limited to, the company's ability to: successfully integrate the tw telecom acquisition or

otherwise realize the anticipated benefits thereof; manage risks associated with continued uncertainty in the global

economy; maintain and increase traffic on its network; develop and maintain effective business support systems; manage

system and network failures or disruptions; avert the breach of its network and computer system security measures; develop

new services that meet customer demands and generate acceptable margins; defend intellectual property and proprietary

rights; manage the future expansion or adaptation of its network to remain competitive; manage continued or accelerated

decreases in market pricing for communications services; obtain capacity for its network from other providers and

interconnect its network with other networks on favorable terms; attract and retain qualified management and other

personnel; successfully integrate the tw telecom and future acquisitions; effectively manage political, legal, regulatory,

foreign currency and other risks it is exposed to due to its substantial international operations; mitigate its exposure to

contingent liabilities; and meet all of the terms and conditions of its debt obligations. 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 presentation should be evaluated in light of these important factors. Level 3 is under no obligation to, and expressly

disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information,

future events, or otherwise.

On Sept. 25, 2014, Level 3 filed a Form 8-K with the Securities and Exchange Commission which reported that it will provide

additional disclosure related to network related expense. Level 3 is now separating out “Network Related Expenses” from

Selling, General and Administrative (SG&A) expenses and is relabeling “Cost of Revenue” as “Network Access Costs.” The

definition of “Network Access Costs” and “Network Access Margin” are unchanged from the historic definitions of Cost of

Revenue and Gross Margin, respectively.

In 2013, the company accrued 60 percent of its annual employee bonus compensation expense in the form of equity and 40

percent in cash, compared to 100 percent cash in 2014. The amount of the bonus accrued as equity based compensation in

the third quarter of 2013 was $11 million. Network Related Expenses, SG&A, Adjusted EBITDA and Adjusted EBITDA

margin for the third quarter of 2013 have been adjusted on a pro forma basis to include the $11 million to present the results

on a consistent basis with the accrual of bonus compensation expense in 2014 as 100 percent cash.


Third Quarter 2014 Highlights

3

CNS revenue grew 5.8% YoY

Enterprise CNS revenue grew 9.1% YoY

Adjusted EBITDA of $471 million

Year to date, generated Free Cash Flow of $157

million


$905 $939

$962 $984 $992

3Q13 4Q13 1Q14 2Q14 3Q144

CNS By Region CNS By Customer Type

CNS revenue grew to $1.482

billion or 5.8% YoY on a constant

currency basis

Enterprise CNS grew 9.1% YoY on

a constant currency basis:

12% YoY from North America

8.3% YoY from Latin America

3.7% YoY from EMEA(1)

CNS revenue churn(2) was 1.4% in

3Q14 and flat YoY

Core Network Services

Revenue

(1) Excludes EMEA UK Government CNS revenue

(2) Level 3 measures revenue churn as disconnects of Core Network Services

monthly recurring revenue as a percent of Core Network Services revenue. This

calculation excludes usage. Also included in the churn calculations are customers

who are disconnecting existing service, but are replacing their old service with

new, generally higher speed services

Total Enterprise CNS Revenue ($ in millions, at actual rates)

33%

67%

Wholesale Enterprise

72%

15%

13%

North America EMEA Latin America


Level 3 Network Access Margin,

Network Related Expenses and SG&A

5

Network Access Margin

improvement driven by high margin

CNS revenue growth and

optimization initiatives

3Q14 SG&A benefitted from tax

and legal adjustments

Network Access Margin($ in millions)

Network Related and SG&A Expenses(1)(2)(3)(4)

($ in millions)

(1) Network Related expenses and SG&A exclude non-cash compensation expense

(2) Third quarter 2013 Network Related expenses have been adjusted to include $6 million in bonus-related non-cash compensation expense and to exclude $7 million of severance charges

(3) Third quarter 2013 SG&A is adjusted to include $5 million in bonus-related non-cash compensation expense and to exclude $23 million of severance charges

(4) Third quarter 2014 SG&A includes a benefit of $10 million from adjustments to our accrued liabilities for legal and tax matters and $7 million of tw telecom transaction and integration-

related expenses

$961

$1,022

61.2%62.7%

3Q13 3Q14

NAM $ NAM %

$305 $304

$252 $247

35.5%

33.8%

3Q13 3Q14

NRE SG&A NRE and SG&A Expenses % total revenue

$551$557


Year to date, capital expenditures

of 12.5% as a percent of total

revenue

Level 3 Adjusted EBITDA and Capital Expenditures

6

Continued double digit growth in

Adjusted EBITDA on a YoY

basis

Adjusted EBITDA(1)

($ in millions)

$404

$471

25.7%

28.9%

3Q13 3Q14

Adj EBITDA Adj EBITDA % of Total Revenue

$194 $204

3Q13 3Q14

Capital Expenditures($ in millions)

(1) Third quarter 2013 Adjusted EBITDA and resulting Adjusted EBITDA margin are adjusted to include the $11 million in bonus-related non-cash compensation expenses and to

exclude $30 million of severance charges


Level 3 Free Cash Flow

7

Free Cash Flow – Year to Date($ in millions)

($42)

$354

3Q13 3Q14

Free Cash Flow – Rolling Four Quarters ($ in millions)

Strong improvement in Free Cash

Flow on a rolling four quarter

basis

Year to date, Free Cash Flow

of $157 million

($244)

$157

3Q13 3Q14


$475 $300

$3,420 $3,471

$640

$3,000

2014 2015 2016 2017 2018 2019 2020 2021 2022

Debt Maturity Profile

8

Raised an aggregate of $3 billion through two capital markets transactions to

facilitate the closing of the tw telecom transaction

On July 29, 2014, $1 billion aggregate principal amount of 5.375% Senior Notes due 2022

On Oct. 31, 2014, $2 billion in a single Tranche B 2022 Term Loan

Note: Maturity chart excludes capital leases and other debt of approximately $225 million

Pro forma Sept. 30, 2014

($ in Millions)


Total revenue grew 8.0% and

Enterprise revenue grew 8.4%, on a

YoY basis

M-EBITDA increased 2.9% on a

YoY basis

Total Revenue($ in millions)

M-EBITDA(1)

($ in millions)

(1) Third quarter 2014 M-EBITDA includes $1 million of merger related costs

tw telecom Total Revenue and M-EBITDA

$139 $143

35.2%

33.6%

3Q13 3Q14

M-EBITDA M-EBITDA Margin %

$393 $425

3Q13 3Q14


Full Year 2014 Standalone Business Outlook

10

Reiterating the outlook for the full year 2014, excluding the effects from the

tw telecom acquisition:

For the full year 2014, expect CNS revenue growth to be higher than the 2.9%

growth we saw for the full year 2013

Expect Adjusted EBITDA growth of 14-18% for the full year 2014 compared to the

full year 2013 (from a starting point of $1.565 billion)

Expect Free Cash Flow of $250 to $300 million for the full year 2014

Expect GAAP interest expense of approximately $600 million

Expect net cash interest expense of approximately $560 million

Expect capital expenditures of approximately 12-13% of total revenue

Expect depreciation and amortization of approximately $750 million for the full year

2014

Expect GAAP income tax expense of approximately $70 million


Synergies Create Value

$240 million expected total run-rate

synergies

• $200 million of expected annualized run-

rate Adjusted EBITDA savings

• Expect to achieve 70% of annualized

Adjusted EBITDA savings within 18

months of closing

• $40 million of expected capital

expenditure synergies

Expect integration costs of $170 million

with: • 60% from operating expenses

• 40% from capital expenditures

• Expect to incur the majority of integration

expenses by the end of 2015.

NPV of Expected Synergies of $2.2

billion

Annualized Adjusted EBITDA Savings

55%45%

NetEx OpEx


Appendix


Revenue by Region

3Q13 2Q14 3Q14

CNS Revenue ($ in millions)

North America 987$ 1,051$ 1,063$ 7.7 % 1.2 % 72 %

Wholesale 365$ 367$ 368$ 1.0 % 0.5 % 25 %

Enterprise 622$ 684$ 695$ 11.6 % 1.6 % 47 %

EMEA 222$ 229$ 219$ (4.8)% (3.3)% 15 %

Wholesale 88$ 86$ 80$ (10.2)% (4.7)% 6 %

Enterprise 134$ 143$ 139$ (1.2)% (2.4)% 9 %

Latin America 188$ 199$ 200$ 8.6 % 0.9 % 13 %

Wholesale 39$ 42$ 42$ 9.9 % (0.2)% 3 %

Enterprise 149$ 157$ 158$ 8.3 % 1.2 % 10 %

Total 1,397$ 1,479$ 1,482$ 5.8 % 0.5 % 100 %

Wholesale 492$ 495$ 490$ (0.3)% (0.5)% 33 %

Enterprise 905$ 984$ 992$ 9.1 % 0.9 % 67 %

Total CNS 1,397$ 1,479$ 1,482$ 5.8 % 0.5 %

Wholesale Voice Services and

Other Revenue172 146 147 (14.8)% 0.2 %

Total Revenue 1,569$ 1,625$ 1,629$ 3.6 % 0.4 %

Level 3 Communications($ in millions)

3Q14

% CNS

3Q14/

3Q13%

Change

Constant

Currency

3Q14/

2Q14%

Change

Constant

Currency

At Actual Rates


Services Revenue

10%

16%

34%

40%

Colocation and DataCenter Services

Voice Services(Local and Enterprise)

Transport & Fiber

IP and Data Services

3Q14 Percent of CNS

Revenue by Service

Type

Level 3 Communications($ in millions at actual rates)

Core Network Services Revenue 3Q13 2Q14 3Q14

3Q14/

3Q13%

Change

3Q14/

2Q14%

Change

3Q14

% CNS

Colocation and Datacenter Services 144$ 146$ 147$ 2.1 % 0.7 % 10 %

Transport and Fiber 483 508 511 5.8 % 0.6 % 34 %

IP and Data Services 536 588 590 10.1 % 0.3 % 40 %

Voice Services (Local and

Enterprise)234 237 234 —% (1.3)% 16 %

Total Core Network Services 1,397$ 1,479$ 1,482$ 6.1 % 0.2 % 100 %

Wholesale Voice Services and

Other172 146 147 (14.5)% 0.7 %

Total Revenue 1,569$ 1,625$ 1,629$ 3.8 % 0.2 %


Level 3 Non-GAAP Reconciliation


Schedule To Reconcile To Non-GAAP Financial Metrics

Pursuant to Regulation G, the company is hereby providing definitions of non-GAAP financial metrics

and reconciliations to the most directly comparable GAAP measures.

The following describes and reconciles those financial measures as reported under accounting

principles generally accepted in the United States (GAAP) with those financial measures as adjusted

by the items detailed below and presented in the accompanying news release. These calculations are

not prepared in accordance with GAAP and should not be viewed as alternatives to GAAP. In keeping

with its historical financial reporting practices, the company believes that the supplemental

presentation of these calculations provides meaningful non-GAAP financial measures to help investors

understand and compare business trends among different reporting periods on a consistent basis.

In addition, measures referred to in the accompanying news release as being calculated “on a constant

currency basis” or "in constant currency terms" are non-GAAP metrics intended to present the relevant

information assuming a constant exchange rate between the two periods being compared. Such

metrics are calculated by applying the currency exchange rates used in the preparation of the prior

period financial results to the subsequent period results.



Consolidated Revenue is defined as total revenue from the Consolidated Statements of Operations.

Core Network Services Revenue includes revenue from colocation and datacenter services, transport and

fiber, IP and data services, and voice services (local and enterprise).

Network Access Costs includes leased capacity, right-of-way costs, access charges, satellite transponder

lease costs and other third party costs directly attributable to providing access to customer locations from the

Level 3 network, but excludes Network Related Expenses, and depreciation and amortization. Network Access

Costs do not include any employee expenses or impairment expenses; these expenses are allocated to

Network Related Expenses or Selling, General and Administrative Expenses.

Network Related Expenses includes certain expenses associated with the delivery of services to

customers and the operation and maintenance of the Level 3 network, such as facility rent, utilities,

maintenance and other costs, each related to the operation of its communications network, as well as salaries,

wages and related benefits (including non-cash stock-based compensation expenses) associated with

personnel who are responsible for the delivery of services, operation and maintenance of its communications

network, and accretion expense on asset retirement obligations, but excludes depreciation and amortization.



Network Access Margin ($) is defined as total Revenue less Network Access Costs from the

Consolidated Statements of Operations, and excludes Network Related Expenses.

Network Access Margin (%) is defined as Network Access Margin ($) divided by total Revenue.

Management believes that network access margin is a relevant metric to provide to investors, as it is a

metric that management uses to measure the margin available to the company after it pays third party

network services costs; in essence, a measure of the efficiency of the company’s network.

Adjusted EBITDA is defined as net income (loss) from the Consolidated Statements of Operations

before income taxes, total other income (expense), non-cash impairment charges, depreciation and

amortization and non-cash stock compensation expense.

Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by total revenue.



Management believes that Adjusted EBITDA and Adjusted EBITDA Margin are relevant and useful metrics to provide to

investors, as they are an important part of the company’s internal reporting and are key measures used by Management to

evaluate profitability and operating performance of the company and to make resource allocation decisions. Management

believes such measures are especially important in a capital-intensive industry such as telecommunications. Management

also uses Adjusted EBITDA and Adjusted EBITDA Margin to compare the company’s performance to that of its competitors

and to eliminate certain non-cash and non-operating items in order to consistently measure from period to period its ability to

fund capital expenditures, fund growth, service debt and determine bonuses. Adjusted EBITDA excludes non-cash

impairment charges and non-cash stock compensation expense because of the non-cash nature of these items. Adjusted

EBITDA also excludes interest income, interest expense and income taxes because these items are associated with the

company’s capitalization and tax structures. Adjusted EBITDA also excludes depreciation and amortization expense because

these non-cash expenses primarily reflect the impact of historical capital investments, as opposed to the cash impacts of

capital expenditures made in recent periods, which may be evaluated through cash flow measures. Adjusted EBITDA

excludes the gain (or loss) on extinguishment and modification of debt and other, net because these items are not related to

the primary operations of the company.

There are limitations to using Adjusted EBITDA as a financial measure, including the difficulty associated with comparing

companies that use similar performance measures whose calculations may differ from the company’s calculations.

Additionally, this financial measure does not include certain significant items such as interest income, interest expense,

income taxes, depreciation and amortization, non-cash impairment charges, non-cash stock compensation expense, the gain

(or loss) on extinguishment and modification of debt and net other income (expense). Adjusted EBITDA and Adjusted

EBITDA Margin should not be considered a substitute for other measures of financial performance reported in accordance

with GAAP.



Free Cash Flow is defined as net cash provided by (used in) operating activities less capital

expenditures as disclosed in the Consolidated Statements of Cash Flows. Management believes

that Free Cash Flow is a relevant metric to provide to investors, as it is an indicator of the

company’s ability to generate cash to service its debt. Free Cash Flow excludes cash used for

acquisitions, principal repayments and the impact of exchange rate changes on cash and cash

equivalents balances.

There are material limitations to using Free Cash Flow to measure the company’s performance as

it excludes certain material items such as principal payments on and repurchases of long-term

debt and cash used to fund acquisitions. Comparisons of Level 3’s Free Cash Flow to that of

some of its competitors may be of limited usefulness since Level 3 does not currently pay a

significant amount of income taxes due to net operating losses, and therefore, generates higher

cash flow than a comparable business that does pay income taxes. Additionally, this financial

measure is subject to variability quarter over quarter as a result of the timing of payments related

to interest expense, accounts receivable and accounts payable and capital expenditures. Free

Cash Flow should not be used as a substitute for net change in cash and cash equivalents on the

Consolidated Statements of Cash Flows.



(1) Adjusted EBITDA and the resulting Adjusted EBITDA Margin in the third quarter of 2014 includes $7 million of tw telecom transaction and integration-related fees and a

benefit of $10 million from adjustments to our accrued liabilities for legal and tax matters.

2014 2013

($ in millions) Q3 (1) Q3

Consolidated Net Income (Loss) 85$ (21)$

Income Tax Expense (Benefit) 8 14

Total Other Expense 169 159

Depreciation and Amortization

Expense 187 203

Non-cash Compensation Expense 22 30

Consolidated Adjusted EBITDA 471$ 385$

Consolidated Revenue 1,629$ 1,569$

Adjusted EBITDA Margin 28.9 % 24.5 %

Level 3 Communications, Inc. and Consolidated Adjusted EBITDA



2012

($ in millions) Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q3 2013 Q3 2014

Q3 YTD

2013

Q3 YTD

2014

Net Cash Provided by Operating

Activities 400$ 7$ 216$ 104$ 386$ 141$ 303$ 321$ 727$ 1,151$ 327$ 765$

Capital Expenditures (198) (169) (208) (194) (189) (163) (241) (204) (769) (797) (571) (608)$

Free Cash Flow 202$ (162)$ 8$ (90)$ 197$ (22)$ 62$ 117$ (42)$ 354$ (244)$ 157$

Level 3 Communications, Inc. and Consolidated SubsidiariesCash Flows

2013 2014 Rolling Four


tw telecom Non-GAAP Reconciliation


Schedule To Reconcile To tw telecom Non-GAAP Financial

Metrics

Pursuant to Regulation G, the Company is hereby providing definitions of tw telecom’s non-GAAP financial metrics and

reconciliations to the most directly comparable GAAP measures.

The following describes and reconciles those financial measures as reported under GAAP with those financial measures as

adjusted by the items detailed below and presented in the accompanying news release. These calculations are not prepared

in accordance with GAAP and should not be viewed as alternatives to GAAP. In keeping with its historical financial reporting

practices, the company believes that the supplemental presentation of these calculations provides meaningful non-GAAP

financial measures to help investors understand and compare business trends among different reporting periods on a

consistent basis.

The management of tw telecom provides financial measures using U.S. generally accepted accounting principles (“GAAP”) as

well as adjustments to GAAP measures to describe its business trends, including Modified EBITDA. Management believes

that its definition of Modified EBITDA is a standard measure of operating performance and liquidity that is commonly reported

and widely used by analysts, investors, and other interested parties in the telecommunications industry because it eliminates

many differences in financial, capitalization, and tax structures, as well as non-cash and non-operating income or charges to

earnings. Modified EBITDA is not intended to replace operating income (loss), net income (loss), cash flow, and other

measures of financial performance and liquidity reported in accordance with GAAP. Management uses Modified EBITDA

internally to assess on-going operations and it is the basis for various financial covenants contained in the Company’s debt

agreements and for operating performance and liquidity. Modified EBITDA is reconciled to Net Income (Loss), the most

comparable GAAP measure for operating performance within the Consolidated Operations Highlights.



Metrics

Modified EBITDA (or “M-EBITDA”) is defined as net income or loss before depreciation,

amortization, accretion, impairment charges and other income and losses, interest expense, debt

extinguishment costs, interest income, income tax expense or benefit, cumulative effect of change in

accounting principle, and non-cash stock-based compensation expense. The Company defines

Modified EBITDA margin as M-EBITDA divided by total revenue.

Modified EBITDA Metric

Q3 2014

(in millions)

Net Income $ 13

Income Tax Expense 11

Interest Expenses, net of Interest Income 25

Non-Cash Stock Compensation 9

Depreciation, Amortization, Accretion 85

M-EBITDA, as reported $ 143

Merger-related costs 1

M-EBITDA, before merger-related costs $ 144

M-EBITDA Margin, before merger-related costs 33.8 %

M-EBITDA Margin, as reported 33.6 %



Metrics

Modified EBITDA Metric

Q3 2013

(in millions)

Net Loss $ (9)

Income Tax Expense (4)

Debt Extinguishment Costs 39

Interest Expenses, net of Interest Income 21

Non-Cash Stock Compensation 13

Depreciation, Amortization, Accretion 79

M-EBITDA, before merger-related costs $ 139

M-EBITDA Margin, as reported 35.2 %

3q 2014 investor presentation

Investor Relations

network failures

cost of revenue

yoyenterprise cns revenue

highlights3cns revenue

percent cash

measures revenue churn

outside level

emea1 cns revenue churn2