Level 3 To Acquire Progress Telecom

Purchase Price Consists of $68.5 Million in Shares of Level 3 Common Stock and

$68.5 Million in Cash

Acquisition Will Extend Level 3's Reach in Southeastern United States; Expands

Reach and Services for Key Customers

Jan 26, 2006, 00:00 ET from Level 3 Communications, Inc.

    BROOMFIELD, Colo., Jan. 26 /PRNewswire-FirstCall/ -- Level 3
 Communications, Inc. (Nasdaq:   LVLT) today announced that it has signed a
 definitive agreement to acquire all of the membership interests of Progress
 Telecom LLC, a regional wholesale network services company based in St.
 Petersburg, Florida. Progress Telecom, LLC is jointly owned by Progress
 Energy, Inc. (NYSE:   PGN) and Odyssey Telecorp, Inc.
     Under the terms of the agreement, Level 3 expects to pay total
 consideration of $137 million, consisting of $68.5 million in unregistered
 shares of Level 3 Common Stock and $68.5 million in cash. The number of shares
 to be delivered will be determined immediately prior to closing. Progress
 Telecom's network spans 9,000 miles, includes 29 metro networks and connects
 to international cable landings in South Florida and 31 mobile switching
 centers in the southeast. Progress Telecom serves approximately 200 customers
 with a significant concentration of international and wireless carrier
     "This transaction represents a unique opportunity to expand Level 3's
 footprint in the southeastern region of the United States, where we have seen
 strong demand for our services," said Kevin O'Hara, president and chief
 operating officer of Level 3. "More importantly, we serve a number of the same
 large, key customers, particularly certain wireless and international
 customers. We believe that the completion of this transaction will enable us
 to expand our relationship with these customers and offer them a broader set
 of services in more markets outside the southeast. Progress Telecom is a very
 successful wholesale carrier in the southeastern United States and this
 acquisition will increase the extent of our network coverage in the region."
     "We look forward to joining forces with Level 3," said Ronald J. Mudry,
 president and chief executive officer of Progress Telecom. "We believe our
 customers will benefit greatly from expanded access to Level 3's international
 network and its broad suite of transport, IP and VoIP service offerings."
     "We are pleased to have entered into this agreement to sell our stake in
 Progress Telecom to Level 3," said Don Davis, executive vice president of
 Diversified Operations at Progress Energy. "We will continue to rely on
 Progress Telecom for transport and network management services that are
 critical to our business. We are confident that Level 3 will continue to
 deliver the quality of service we have come to expect from Progress Telecom."
 Progress Energy is Progress Telecom's largest customer.
     "Progress Telecom has a reputation for operational excellence that we
 believe is consistent with the focus and reputation of both Level 3 and
 WilTel, which Level 3 recently acquired," said O'Hara. "Progress Telecom has a
 highly respected management team with a deep understanding of the markets in
 which they operate, and we look forward to working with them.
     "We believe that in addition to lowering our access costs in that region,
 the companies' similar service offerings and customer bases, and complementary
 infrastructure represent unique cross selling opportunities," added O'Hara.
 "While we expect to retain a significant local presence in the region, we
 believe we will be able to realize significant cost synergies by integrating
 certain operational and corporate activities. We expect to begin most network
 related integration efforts in 2007, once we have realized additional scale
 and efficiency through the integration of WilTel."
     "Progress Telecom currently generates annualized revenue of approximately
 $70 million and approximately $7 million of annualized positive free cash
 flow," said Sunit S. Patel, chief financial officer Level 3 Communications.
     "We expect to begin to realize most of the cost synergy benefits during
 2007 and as a result, we expect annualized cash flow to improve to
 approximately $30 to $35 million once we have completed the integration,"
 added Patel. "We expect a cash-on-cash breakeven for this transaction of
 approximately three years, excluding potential revenue synergies."
     The agreement provides that Level 3 will not acquire certain assets and
 liabilities related to Progress Telecom's wireless tower attachment business
 and its interests in affiliates focused on providing distributed antennae
 systems and tower backhaul services to wireless providers. Level 3 plans to
 have commercial services agreements in place to provide transport services and
 operation support to these former Progress Telecom affiliates and to cooperate
 with them on the development of complementary service offerings to better
 serve the wireless carrier segment.
     The purchase price is subject to certain customary working capital
 adjustments. Level 3 has the right to substitute cash in lieu of delivering
 common stock. Closing is expected to occur early in the second quarter of
 2006. Closing is subject to customary closing conditions, including receipt of
 applicable state and federal regulatory approvals.
     The Company expects to provide additional information concerning this
 transaction during its fourth quarter 2005 earnings call scheduled for
 Tuesday, February 7, 2006, at 10:00 a.m. Eastern.
     About Level 3 Communications
     Level 3 (Nasdaq:   LVLT) 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. Level 3 is an industry
 leader in IP and VoIP services, which it provides to cable operators, ISPs,
 carriers and others. Level 3's E-911 service offering includes both fixed
 location and nomadic VoIP E-911 capabilities, supporting an FCC-compliant E-
 911 solution for interconnected VoIP providers. Its Web address is
 http://www.Level3.com .
     The company offers information services through its subsidiary, Software
 Spectrum, and fiber-optic and satellite video delivery solutions through its
 subsidiary, Vyvx. For additional information, visit their respective Web sites
 at http://www.softwarespectrum.com and http://www.vyvx.com .
     The Level 3 logo is a registered service mark of Level 3 Communications,
 Inc. in the United States and/or other countries. Level 3 services are
 provided by a wholly owned subsidiary of Level 3 Communications, Inc.
     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: developing new products and services that
 meet customer demands and generate acceptable margins; increasing the volume
 of traffic on Level 3's network; overcoming the softness in the economy given
 its disproportionate effect on the telecommunications industry; integrating
 strategic acquisitions; attracting and retaining qualified management and
 other personnel; successfully completing commercial testing of new technology
 and information systems to support new products and services, including voice
 transmission services; ability to meet all of the terms and conditions of our
 debt obligations; overcoming Software Spectrum's reliance on financial
 incentives, volume discounts and marketing funds from software publishers;
 reducing downward pressure of Software Spectrum's margins as a result of the
 use of volume licensing and maintenance agreements; and reducing rate of price
 compression on certain of the Company's existing transport and IP services.
 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

SOURCE Level 3 Communications, Inc.