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Level 3 Communications, Inc. Q2 2008 Earnings Call Transcript

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2008-07-24 13:17:10.0

Tags: Level 3 Communications Inc.

Question-and-Answer Session

[Operator Instructions]. And we will take our first question from Mike McCormack with JPMorgan.

Michael McCormack - JPMorgan

Hey, guys. Thanks. Couple of things. First on the revenue side, I mean, it sounds like from a lot of carriers, who has had a few data points out there so far this quarter that enterprise seems to be weakening a bit. So just wondering what the read through is on Business Markets Group. And there was also with someother competitors/peers talking about traffic slowing. And I just... I was trying to get a sense for revenue acceleration in the back half which I think is fairly critical for you guys. With that as a backdrop and a toughening economy, how we can get a little more comfort on that.

And second, Wholesale Voice seems to have been a bit of a grower here and I know that you have identified that it should be relatively flat year-over-year. So, I guess, the first question is, has there been any left to EBITDA recognizing it is a fairly low gross margin business. And secondly, why would we see that down so much in the second half, and you are looking at probably at 30 million per quarter take down to the second half on Wholesale Voice. What would drive that down? Thanks.

Sunit Patel - Executive, Vice President and Chief Financial Officer

Well, it's Sunit. Think about that last question, while I am answering the first three because I'm not sure we tracked that one. But with respect to enterprise, we have not seen any weakening in demand and as we've said quite a number of times. We have... we estimate about 3% of the addressable market, the market that we can address with our targeted gross margin goals, that is largely on that services. We have seen no weakening in demand period.

James Q. Crowe - President and Chief Executive Officer

With respect to traffic, I'd say again, that one attribute traffic in aggregate and that increasingly we're seeing customers substitute Private Line, Waves, Ethernet, IP VPN's, content distribution services and high-speed IP services one for the other. And we have noted that certain of our competitors who mention perhaps weakening in one service for another generally are those who have a limited or narrow product line. We've noted that the broader service providers, for instance, AT&T yesterday and Level 3 continued to note very strong overall aggregate demand. And we have seen no work weakening in that trend.

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