Level 3 To Acquire WilTel Communications

Purchase Price Consists Of 115 Million Shares Of Level 3 Common Stock

And $370 Million in Cash

Transaction Includes Multi-Year SBC Contract

Company Will Acquire And Operate Vyvx Subsidiary

Oct 31, 2005, 00:00 ET from Level 3 Communications

    BROOMFIELD, Colo., Oct. 31 /PRNewswire-FirstCall/ -- Level 3
 Communications, Inc. (Nasdaq:   LVLT) today announced that it has signed a
 definitive agreement with Leucadia National Corporation (NYSE:   LUK) under
 which Level 3 will acquire WilTel Communications Group, LLC. Level 3 will pay
 115 million shares of Level 3 common stock and $370 million cash.  The
 agreement provides that Level 3 will not acquire certain assets and
 liabilities of WilTel.  Closing is expected to occur in the first quarter of
 2006, subject to customary closing conditions including receipt of state and
 federal regulatory approvals.
     Based in Tulsa, Okla., WilTel delivers a comprehensive suite of voice,
 data, video and IP services over a next-generation fiber-optic network. The
 acquisition includes all of WilTel's communications business, including a
 multi-year contract with SBC and WilTel's Vyvx video transmission business.
 The acquisition does not include WilTel's headquarters building or the
 assumption of any of WilTel's outstanding debt or mortgage obligations.  The
 parties have agreed that WilTel will have at closing $100 million in cash for
 which Level 3 will pay an additional $100 million in cash.  Additional details
 regarding the financial aspects of the transaction are described below.
     "There is a unique and compelling fit between WilTel and Level 3," said
 James Q. Crowe, chief executive officer of Level 3. "Both companies are
 experienced providers of optical and IP-based services, and both serve similar
 customer bases.
     "We believe this transaction brings together the two premier providers of
 communications backbone services and that our customers will benefit
 significantly from that shared institutional excellence. We also believe the
 combined technical and service capabilities will help support and advance our
 customers' transition to IP technology and Voice over IP," said Crowe.
     "WilTel has a reputation based on consistent delivery, operational
 excellence and proven customer satisfaction, and we believe that Level 3 has a
 similar reputation and shares our vision of the future of IP communications
 and technology convergence," said Jeff K. Storey, president and chief
 executive officer of WilTel Communications.
     Expected synergies
     "We expect to achieve substantial synergies through this transaction,"
 said Kevin O'Hara, president and chief operating officer of Level 3. "We plan
 to combine and optimize the Level 3 and WilTel networks. The merged network
 will reach 50 new markets and include 3000 new route miles compared with Level
 3's pre-acquisition facilities.  We expect to migrate substantially all of
 WilTel's IP, optical and voice transport traffic to the combined network."
     SBC contract
     The transaction includes the contract between WilTel and its largest
 customer, SBC. In January 2005, SBC announced its pending merger with AT&T and
 its intention to migrate the services provided by WilTel to the merged SBC and
 AT&T network. In anticipation of the successful completion of the SBC and AT&T
 merger, the contract between WilTel and SBC was amended.
     The amended SBC agreement runs through 2009 and provides for a purchase
 commitment of $600 million from January 2005 through the end of 2007, and $75
 million from January 2008 through the end of 2009. Only purchases of on-net
 services count toward satisfaction of this purchase commitment. Originating
 and terminating access charges paid to local phone companies are passed
 through to SBC in accordance with a formula that approximates cost.
 Additionally, the SBC agreement provides for the payment of $50 million from
 SBC if certain performance criteria are met.
     "SBC is an existing and important customer of Level 3, and we look forward
 to expanding our relationship with them," said Crowe. "We are committed to
 working hard to ensure a smooth transition for SBC throughout this process."
     "We have had a long and mutually beneficial relationship with WilTel
 Communications and Leucadia National Corporation and their management teams,"
 said James S. Kahan, senior executive vice president of corporate development
 for SBC. "We are supportive of the transaction with Level 3 and look forward
 to working with the Level 3 team as we have on numerous occasions in the
     Vyvx video business
     As a part of the transaction, Level 3 will acquire the WilTel subsidiary,
 Vyvx, LLC, the industry leader in gathering and distributing broadcast quality
 live and non-live video for the media and entertainment industry. The company
 delivers nearly 250,000 fiber and satellite video feeds, and more than 5
 million ads and promotional media content around the world each year.
     "We recognize the importance of Vyvx's customers and are committed to
 ensuring they receive the highest quality service without disruption," said
     "We believe that Vyvx's expertise in transporting video combined with its
 strong brand and customer relationships may create some additional
 opportunities for Level 3 as the video transport market evolves."
     Vyvx reported $120 million in revenue in 2004 and $59 million in revenue
 for the first six months of 2005.
     Transaction terms
     Under the terms of the Level 3 - Leucadia agreement:
      *  Level 3 will pay 115 million shares of Level 3 common stock and $370
         million in cash subject to certain adjustments as described below.
      *  Level 3 has the right to substitute cash in lieu of delivering common
      *  Leucadia will retain WilTel's existing $358 million credit facility,
         its Tulsa headquarters building, and the $60 million mortgage on the
         building. Leucadia will also retain WilTel's obligations under its
         defined benefit pension plan.
      *  Level 3's $370 million cash consideration at closing is subject to
         certain adjustments relating to working capital and time of closing.
         It is anticipated that Leucadia will retain any cash and marketable
         securities in excess of $100 million.
      *  Closing is subject to customary conditions including receipt of
         Hart-Scott-Rodino approval, and federal and state regulatory
      *  As part of the transaction, Leucadia will retain the right to receive
         a $236 million termination payment from SBC.
     Financial overview
     Including the SBC master agreement contract, Level 3 expects WilTel to
 contribute $1.5 to $1.6 billion of revenue in 2006. Based on the expected
 migration of SBC traffic to merged SBC and AT&T facilities, this amount is
 expected to decline to approximately $600 million in 2008. Level 3 expects
 WilTel to contribute approximately $50-90 million in cash flow in 2006,
 including integration costs, and approximately $125-150 million on an annual
 basis thereafter. Level 3 expects integration costs to be $100-150 million.
 Assuming the transaction closes in the first quarter of next year, the
 majority of integration costs are expected to be incurred in 2006
     "These incremental cash flow projections are preliminary, and we expect to
 refine them and provide more detail as we proceed with the integration
 planning over the next few months," said Sunit Patel, chief financial officer
 of Level 3.
     "We anticipate that integration of the network businesses will take
 approximately 15-18 months as we streamline processes and systems, and migrate
 IP, optical and voice transport traffic to an optimized Level 3 and WilTel
 network," said O'Hara. "During the integration process, we will work hard to
 identify and retain the best employees from both companies in order to create
 the strongest possible integrated organization."
     Transaction Summary
     "The transaction will increase the size and scale of Level 3's transport,
 IP and voice businesses, and add a market leading video transport business,"
 said Crowe. "It will add high credit quality customers and a group of high
 quality employees. The transaction will broaden our network capabilities,
 enabling the company to access new markets and increase capacity on major
 traffic routes. It will allow the combined operations to benefit from
 significant synergies resulting from the elimination of duplicative network
 infrastructure and common resources. And we believe that the transaction will
 significantly strengthen our financial position."
     JP Morgan and Evercore Partners acted as financial advisers to Level 3.
 Willkie Farr & Gallagher LLP acted as legal counsel to Level 3.
     Conference Call
     Level 3 will hold an investor and media conference call today to discuss
 the announcement at 10:00 a.m. Eastern Time. To join the call, please dial
 (612) 288-0318. A live broadcast of the call can also be heard on Level 3's
 Web site at http://www.Level3.com. An audio replay of the call will be
 accessible through the Web site or by dialing (320) 365-3844 -- Access Code
     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. Its Web address is
     The company offers information services through its subsidiaries, Software
 Spectrum and (i)Structure. On October 25, 2005, Level 3 announced it signed a
 definitive agreement to sell (i)Structure for approximately $81.5 million.
 Closing is subject to certain conditions. For additional information, visit
 their respective Web sites at http://www.softwarespectrum.com and
     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