Level 3 Signs Multi-Year Transmission and Colocation Services Agreement With France Telecom

Under the terms of the agreement, Level 3 will become France Telecom's primary provider of lit broadband transport and colocation services in North America. Level 3 will supply identified private line and wavelength circuits across its 19,400-mile fiber optic network in the U.S., which France Telecom Group will use as a platform to support its customers.


"This agreement stands as proof of the strength of our longstanding customer relationship with France Telecom," said Kevin O'Hara, Level 3's president and chief operating officer. "We're pleased that France Telecom will continue to rely on Level 3 as its principal network partner in North America, and we look forward to providing them with the highest quality communications services in the coming years."


The new agreement replaces and terminates an earlier, 20-year dark fiber contract signed by the companies in October 2000. Under the prior agreement, France Telecom acquired a nationwide dark fiber network from Level 3, along with ongoing maintenance and colocation services. The fiber strands leased to France Telecom in the initial transaction will revert to Level 3. The transaction is expected to be completed in the first quarter of 2005.


"This agreement makes sense for France Telecom," said Jean-Philippe Vanot, Executive Vice President of France Telecom's Networks, Carriers & IT division. "It will enable us to continue delivering the same services with the same levels of quality to customers in the retail and wholesale sectors, including our subsidiary Equant, while increasing our competitiveness. France Telecom will retain all other network assets in the United States for IP, voice and signaling traffic. Level 3 has been a reliable network partner for France Telecom over the past four years, and we're pleased to continue our relationship with them through this new agreement."


As a result of the replacement of the dark fiber contract signed in 2000 with the new lit services agreement, Level 3 will no longer recognize amortized revenue under the pre-paid dark fiber contract as required under Generally Accepted Accounting Principles (GAAP). Instead, in accordance with GAAP, Level 3 expects to recognize approximately $40 million in deferred, non-cash termination revenue in the first quarter of 2005 related to the cancellation of the 2000 dark fiber agreement. While the monthly revenue recognized pursuant to GAAP is expected to decline, Level 3 expects the cash received monthly under the new lit services contract with France Telecom to exceed the monthly cash payments Level 3 previously received from France Telecom for dark fiber maintenance and colocation services.


About France Telecom


France Telecom is one of the world's leading telecommunications carriers, with 121.5 million customers on the five continents (220 countries and territories) and consolidated operating revenues of 46.1 billion euros for 2003 (23.2 billion euros for 1st semester 2004). Through its major international brands, including Orange, Wanadoo, Equant and GlobeCast, France Telecom provides businesses, consumers and other carriers with a complete portfolio of solutions that spans local, long-distance and international telephony, wireless, Internet, multimedia, data, broadcast and cable TV services. France Telecom is the second-largest wireless operator and Internet access provider in Europe, and a world leader in telecommunications solutions for multinational corporations. France Teleccom is listed on the Paris and New York stock exchanges.

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