3q13 earnings presentation

Third Quarter 2013 Results October 30, 2013

© 2013 Level 3 Communications, LLC. All Rights Reserved. Level 3, Level 3 Communications, and the Level 3 Logo are either registered service marks or service marks of Level 3 Communications, LLC and/or one of its Affiliates in the United States and/or other countries. Level 3 services are provided by wholly owned subsidiaries of Level 3 Communications, Inc. Any other service names, product names, company names or logos included herein are the trademarks or service marks of their respective owners.

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Issued on October 30, 2013

Cautionary Statement 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 Global Crossing 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 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.

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Third Quarter Financial Summary

CNS revenue grew 2.9% YoY on a constant currency basis

Enterprise CNS revenue grew 7.4% YoY on a constant currency basis

CNS sales orders continued to grow on a YoY basis

Year to date, excluding severance charges, Adjusted EBITDA grew 13% compared to the first three quarters in 2012

The company refinanced approximately $2.6 billion of debt resulting in $23.5 million in annualized net cash interest savings(1)

(1) Includes both $1.4 billion in the third quarter 2013 and $1.2 billion in the fourth quarter 2013

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Core Network Services Revenue

(1) Excludes EMEA UK Government (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

CNS By Region

CNS By Customer Type

Total Enterprise CNS Revenue

($ in Millions)

CNS revenue grew to $1.397 billion or 2.9% YoY on a constant currency basis Enterprise CNS grew 7.4% YoY on

a constant currency basis:

7.8% YoY from North America

8.7% YoY from EMEA(1)

13.1% YoY from Latin America

CNS revenue churn(2) decreased to 1.4% from 1.5% in 2Q13

71%

16%

13%

North America EMEA Latin America

65%

35%

Enterprise Wholesale

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Level 3 Gross Margin / SG&A Gross Margin

($ in millions)

SG&A(1)(2)

($ in millions)

(1) SG&A excludes non-cash compensation (2) SG&A excludes $30 million, $13 million and $6 million of severance charges in 3Q13, 2Q13,

and 3Q12, respectively

Gross Margin percentage improved YoY in 3Q13. Expansion was driven by: Higher margin CNS revenue growth

Optimization initiatives

SG&A expenses(1) declined by 4.2% YoY, excluding severance charges in 3Q13 and 3Q12

$948 $949 $961

59.6%60.6% 61.2%

3Q12 2Q13 3Q13

GM $ GM %

$570 $549 $546

35.8%35.1% 34.8%

3Q12 2Q13 3Q13

SG&A SG&A % revenue

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Adjusted EBITDA(1) was $415 million for 3Q13

Year to date, excluding severance charges, Adjusted EBITDA grew 13% to $1.204 billion compared to $1.066 billion for the first three quarters in 2012

Excluding severance charges, Adjusted EBITDA margin expanded to 26.4% from 23.8% in 3Q12

Year to date, capital expenditures represent approximately 12% of total revenue

Level 3 Adjusted EBITDA and Capital Expenditures

(1) Adjusted EBITDA excludes $30 million, $13 million, and $6 million of severance charges in 3Q13, 2Q13, and 3Q12, respectively

Capital Expenditures

($ in millions)

Adjusted EBITDA

($ in millions)

(1)

$227 $208

$194

3Q12 2Q13 3Q13

$378 $400 $415

23.8%25.6% 26.4%

3Q12 2Q13 3Q13

Adj EBITDA Adj EBITDA % of Revenue

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Level 3 Cash Flow Unlevered Cash Flow – Rolling 4 Quarters

($ in millions)

On a rolling four quarter basis, Unlevered Cash Flow improved by $11 million from 2Q13 to 3Q13

Free Cash Flow was negative $90 million, compared to negative $157 million in 3Q12

Expect net cash interest expense to decrease by $46 million in 4Q13 to $132 million

On a rolling four quarter basis, Free Cash Flow improved by $67 million from 2Q13 to 3Q13

Free Cash Flow – Rolling 4 Quarters

($ in millions)

($114)($109)

($42)

1Q13 2Q13 3Q13

$542

$583$594

1Q13 2Q13 3Q13

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$775 $201

$640

$3,420 $3,471

2013 2014 2015 2016 2017 2018 2019 2020

Debt Maturity Profile The company completed the refinancing of approximately $2.6 billion in capital market

transactions during and after the close of the quarter(1)

Expect a loss on the $1.2 billion term-loan refinancing of $10 million or $0.04 per share in 4Q13

Expect $23.5 million in annualized net cash interest expense savings from all three refinancing transactions

Total debt as of September 30, 2013 of $8.6 billion

Cash on hand as of September 30, 2013 of $507 million

Net Debt to Adjusted EBITDA ratio was 5.2x

Target leverage ratio of 3x-5x

Average interest rate improved to 7.1% from 7.4% in 2Q13

Pro forma Sept 30, 2013

Note: Maturity chart excludes capital leases and other debt of approximately $91 million (1) Includes both $1.4 billion in the third quarter 2013 and $1.2 billion in the fourth quarter 2013

($ in Millions)

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Business Outlook Generally expect sequential CNS revenue growth to be stronger compared to

2012

Expect low double-digit EBITDA growth for the full year 2013 compared to the full year 2012, excluding the total of $40 million of severance charges incurred in 2Q13 and 3Q13

Expect stronger sequential growth in Adjusted EBITDA, compared to $415 million in the third quarter, excluding severance charges

Capital expenditures expected to be approximately 12% of total revenue

Expect Free Cash Flow to be positive for the full year 2013, excluding 2013 interest rate swap payments of $45 million

Expect GAAP interest expense to be approximately $665 million and net cash interest to be approximately $645 million for the full year 2013

Depreciation and Amortization expected to be approximately $800 million for the full year 2013

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Appendix

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Issued on October 30, 2013 © Level 3 Communications, Inc. All Rights Reserved.

Revenue by Region

3Q12 2Q13 3Q13

3Q13/3Q12

%Change Constant Currency

3Q13/2Q13

%Change Constant Currency

3Q13% CNS

CNS Revenue ($ in millions)North America 963$ 970$ 987$ 2.5 % 1.8 % 71 %Wholesale 386$ 367$ 365$ (5.3)% (0.6)% 26 %Enterprise 577$ 603$ 622$ 7.8 % 3.3 % 45 %

EMEA 223$ 220$ 222$ (0.9)% 0.1 % 16 %Wholesale 87$ 88$ 88$ (1.8)% (1.8)% 6 %Enterprise 94$ 99$ 102$ 8.7 % 3.1 % 8 %UK Government 42$ 33$ 32$ (20.6)% (4.0)% 2 %

Latin America 179$ 189$ 188$ 10.0 % 2.9 % 13 %Wholesale 40$ 40$ 39$ (0.7)% (1.3)% 3 %Enterprise 139$ 149$ 149$ 13.1 % 4.1 % 10 %

Total 1,365$ 1,379$ 1,397$ 2.9 % 1.7 % 100 %Wholesale 513$ 495$ 492$ (4.4)% (0.8)% 35 %Enterprise (1) 852$ 884$ 905$ 7.4 % 3.1 % 65 %

Total CNS 1,365$ 1,379$ 1,397$ 2.9 % 1.7 %Wholesale Voice Services and Other Revenue 225$ 186$ 172$ (23.5)% (7.4)%Total Revenue 1,590$ 1,565$ 1,569$ (0.8)% 0.6 %

(1) Includes EMEA UK Government

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10%

17%

35%

38%

Data Center andColocation Services

Voice Services(Local and Enterprise)

Transport & Fiber

IP and Data Services

© Level 3 Communications, Inc. All Rights Reserved.

Services Revenue

3Q13 Percent of CNS Revenue by Service Type

$ in Millions

Core Network Services Revenue 3Q12 2Q13 3Q13

3Q13/3Q12

%Change

3Q13/2Q13

%Change3Q13

% CNSColocation and Datacenter Services 139$ 145$ 144$ 3.6 % (0.7)% 10 %Transport and Fiber 491$ 488$ 491$ —% 0.6 % 35 %IP and Data Services 502$ 514$ 528$ 5.2 % 2.7 % 38 %Voice Services (local and enterprise) 233$ 232$ 234$ 0.4 % 0.9 % 17 %Total Core Network Services 1,365$ 1,379$ 1,397$ 2.3 % 1.3 % 100 %

Wholesale Voice Services and Other 225$ 186$ 172$ (23.6)% (7.5)%

Total Revenue 1,590$ 1,565$ 1,569$ (1.3)% 0.3 %

LEVEL 3 COMMUNICATIONS SUMMARY

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Non-GAAP Reconciliation

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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. 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 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.

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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). Gross Margin ($) is defined as total revenue less cost of revenue from the Consolidated Statements of Operations. Gross Margin (%) is defined as gross margin ($) divided by total revenue. Management believes that gross 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.

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Schedule To Reconcile To Non-GAAP Financial Metrics 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 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 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.

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Debt is defined as total gross debt, including capital leases from the Consolidated Balance Sheet. Net Debt to Last Twelve Months (LTM) Adjusted EBITDA Ratio is defined as debt, reduced by cash and cash equivalents and divided by LTM Adjusted EBITDA.

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Unlevered Cash Flow is defined as net cash provided by (used in) operating activities less capital expenditures, plus cash interest paid and less interest income all as disclosed in the Consolidated Statements of Cash Flows or the Consolidated Statements of Operations. Management believes that Unlevered Cash Flow is a relevant metric to provide to investors, as it is an indicator of the operational strength and performance of the company and, measured over time, provides management and investors with a sense of the underlying business’ growth pattern and ability to generate cash. Unlevered Cash Flow excludes cash used for acquisitions and debt service and the impact of exchange rate changes on cash and cash equivalents balances. There are material limitations to using Unlevered Cash Flow to measure the company’s cash performance as it excludes certain material items such as payments on and repurchases of long-term debt, interest income, cash interest expense and cash used to fund acquisitions. Comparisons of Level 3’s Unlevered 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 accounts receivable and accounts payable and capital expenditures. Unlevered Cash Flow should not be used as a substitute for net change in cash and cash equivalents in the Consolidated Statements of Cash Flows.

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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.

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$ in Millions(unaudited)

3Q12 2Q13 3Q13

Core Network Services 1,365$ 1,379$ 1,397$ Wholesale Voice Services and Other 225$ 186$ 172$ Total Revenue 1,590$ 1,565$ 1,569$

Adjusted EBITDA (1) 372$ 387$ 385$ Capital Expenditures 227$ 208$ 194$ Unlevered Cash Flow (1) 77$ 153$ 88$ Free Cash Flow (1) (157)$ 8$ (90)$

Gross Margin 59.6 % 60.6 % 61.2 %Adjusted EBITDA Margin (1) 23.4 % 24.7 % 24.5 %

LEVEL 3 COMMUNICATIONS SUMMARY FINANCIAL RESULTS

(1) See schedule of non-GAAP metrics for definition and reconciliation to GAAP measures.

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Adjusted EBITDA

2012($ in millions) Q3 Q2 Q3

Consolidated Net Loss (166)$ (24)$ (21)$ Income Tax Expense 13 11 14Total Other Expense 291 153 159Depreciation and Amortization Expense 185 199 203Non-cash Compensation Expense 49 48 30Consolidated Adjusted EBITDA 372$ 387$ 385$ Severance charges 6 13 30Adjusted EBITDA excluding severance charges 378$ 400$ 415$ YTD Adjusted EBITDA excluding severance charges 1,066$ 789$ 1,204$

Consolidated Revenue 1,590$ 1,565$ 1,569$

Adjusted EBITDA Margin 23.4 % 24.7 % 24.5 %

2013

Level 3 Communications, Inc and Consolidated Subsidiaries

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Cash Flows

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

Net Cash Provided by Operating Activities 183$ 70$ 400$ 7$ 216$ 104$ 660$ 693$ 727$ Capital Expenditures (180) (227) (198) (169) (208) (194) (774) (802) (769)Free Cash Flow 3$ (157)$ 202$ (162)$ 8$ (90)$ (114)$ (109)$ (42)$ Cash Interest Paid 110 234 123 190 145 178 657 692 636Interest Income (1) — — — — — (1) — —Unlevered Cash Flow 112$ 77$ 325$ 28$ 153$ 88$ 542$ 583$ 594$

Level 3 Communications, Inc and Consolidated Subsidiaries

Rolling Four Quarter Basis2012 2013 2013

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($ in millions)

Debt 8,598$

Cash and Cash Equivalents (507)

Net Debt 8,091$

LTM Adjusted EBITDA 1,565$

Net Debt to LTM Adjusted EBITDA Ratio 5.2

Net Debt to LTM Adjusted EBITDA ratio as of September 30, 2013Level 3 Communications, Inc and Consolidated Subsidiaries

3q13 earnings presentation

Business

service marks of level

outside level

communications services

yoy basis year

owned subsidiaries of

network failures

adjusted ebitda margin

service names