Communications Adjusted EBITDA margin was 23.6 percent in the second quarter 2008, versus 18.7 percent in the second quarter 2007 and 19.3 percent in the previous quarter.

Excluding the $12 million of previous years' deferred revenue recognized in the quarter, second quarter Communications Adjusted EBITDA was $241 million, and Communications Adjusted EBITDA margin was 22.7 percent.

Communications Adjusted EBITDA excludes non-cash compensation expense and includes severance and restructuring charges related to integration activities of $4 million, $1 million and $7 million for the second quarter 2008, second quarter 2007 and first quarter 2008, respectively. Adjusted EBITDA for the second quarter 2007 also excludes $1 million of non-cash impairment charges.

Level 3 Generates Positive Free Cash Flow; Strong Liquidity Position

During the second quarter 2008, Unlevered Cash Flow was positive $126 million, versus negative $64 million in the second quarter 2007 and negative $21 million for the previous quarter. Consolidated Free Cash Flow for the second quarter 2008 was positive $4 million, versus negative $141 million for the second quarter 2007 and negative $160 million for the first quarter 2008.

As of June 30, 2008, the company had cash and marketable securities of approximately $666 million.

Continued Operational Improvements

Level 3 continued to make operational improvements to service activation and delivery processes. Installation intervals also improved during the quarter.

Project Unity, the company's unified process and systems program, remains on track and the company generally expects to implement future releases as planned.

Sale of Vyvx Advertising Distribution Business Closes During Quarter

On June 5, 2008, the company completed the sale of its Vyvx advertising distribution business to DG FastChannel, Inc. Level 3 has retained ownership of Vyvx's core broadcast business, including the Vyvx Services Broadcast Business' content distribution capabilities.

Level 3 received gross proceeds at closing of approximately $129 million in cash. The purchase price is subject to customary working capital and certain other post-closing purchase price adjustments.

Business Outlook

'Our previous guidance for Adjusted EBITDA and Free Cash Flow included anticipated results from the Vvyx advertising distribution business,' said Sunit Patel, executive vice president and CFO of Level 3. 'For the second half of 2008, the Vvyx advertising distribution business was expected to contribute approximately $10 million in Adjusted EBITDA and cash flow. Our 2008 business outlook for both Core Communications Services revenue and Consolidated Adjusted EBITDA remains unchanged.

'In addition, we are raising our 2008 Free Cash Flow guidance from breakeven to positive for the remainder of the year. Our capital efficiency has also improved this year from enhancements in our supply chain that have resulted in tighter management of equipment inventory, better purchasing and improved capital recovery through the re-use of equipment already installed in the network. As a result, we believe our capital expenditures for 2008 will be 11 to 12 percent of Total Communications Revenue. For the longer term, we continue to believe that our capital expenditures will be 12 to 14 percent of Total Communications Revenue.'

                                   Summary

'We are pleased with the better than expected performance in the second quarter and with the improvement in our guidance for Free Cash Flow,' said Crowe. 'We remain focused on increasing sales and install rates over the remainder of 2008 and continuing to improve our already solid operating leverage through effective cost management and deploying Project Unity processes and systems.'

Conference Call and Web Site Information

Level 3 will hold a conference call to discuss the company's second quarter results at 10 a.m. EDT today. The call will be broadcast live on Level 3's Web site at www.Level3.com. If you are unable to join the call via the Web, you may access the call at 913-312-0862 or 888-631-5928.

The call will be archived and available on Level 3's Web site at http://www.level3.com/q0208report.html, or you may access an audio replay until 12:00 a.m. EDT on Friday, August 1, 2008, by dialing 888-203-1112 or 719-457-0820 access code 9144398. For additional information please call 720- 888-2502.

The company will post an investor presentation that summarizes the financial and operational progress for the second quarter 2008 on its Web site at http://www.level3.com/investor_relations/index.html.

About Level 3 Communications

Level 3 Communications, Inc. (Nasdaq: LVLT) is a leading international provider of fiber-based communications services. Enterprise, content, wholesale and government customers rely on Level 3 to deliver communications services with an industry-leading combination of scalability and quality, over an end-to-end fiber network. Level 3 offers a portfolio of metro and long haul services over an end-to-end fiber network, including transport, data, internet, content delivery and voice. For more information, visit www.Level3.com.

Level 3 Communications, Level 3, the red 3D brackets and the Level 3 Communications logo are registered service marks of Level 3 Communications, LLC and/or 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, product or company names recited herein are trademarks or service marks of their respective owners.

Forward-Looking Statement

Some of the statements made in this press release are forward looking in nature. These statements 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. The most 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 acquisitions; increase the volume of traffic on the network; defend intellectual property and proprietary rights; develop new products and services that meet customer demands and generate acceptable margins; successfully complete commercial testing of new technology and information systems to support new products and services; attract and retain qualified management and other personnel; and meet all of the terms and conditions of 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 press release 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.

1) Non-GAAP Metrics

Pursuant to Regulation G, the Company is hereby providing a reconciliation of non-GAAP financial metrics to the most directly comparable GAAP measure.

The Company provides projections that include non-GAAP metrics that the Company deems relevant to management and investors. These non-GAAP metrics are Consolidated Adjusted EBITDA, Consolidated Adjusted EBITDA Excluding the Benefit of Deferred Revenue Change and Vyvx Advertising Distribution Results, Communications Gross Margin, Communications Adjusted EBITDA Margin, Unlevered Cash Flow and Consolidated Free Cash Flow. Certain of the following reconciliations of these non-GAAP financial metrics to GAAP include forward-looking statements with respect to the information identified as a projection. Level 3 has made a number of assumptions in preparing our projections, including assumptions as to the components of financial metrics. These assumptions, including dollar amounts of the various components that comprise a financial metric, may or may not prove to be correct. We caution you that these forward-looking statements are only projections, which are subject to risks and uncertainties including technological uncertainty, financial variations, changes in the regulatory environment, industry growth and trend predictions. Please see the Company's Annual Report on Form 10-K for a description of these risks and uncertainties.

In order to provide projections with respect to non-GAAP metrics, we are required to indicate a range for GAAP measures that are components of the reconciliation of the non-GAAP metric. The provision of these ranges is in no way meant to indicate that the Company is explicitly or implicitly providing projections on those GAAP components of the reconciliation. In order to reconcile the non-GAAP financial metric to GAAP, the Company has to use ranges for the GAAP components that arithmetically add up to the non-GAAP financial metric. While the Company feels reasonably comfortable about the projections for its non-GAAP financial metrics, it fully expects that the ranges used for the GAAP components will vary from actual results. We will consider our projections of non-GAAP financial metrics to be accurate if the specific non-GAAP metric is met or exceeded, even if the GAAP components of the reconciliation are different from those provided in an earlier reconciliation.

Communications Gross Margin ($) is defined as communications revenue less communications cost of revenue from the consolidated condensed statements of operations.

Cost of Revenue for the communications business includes leased capacity, right-of-way costs, access charges and other third party circuit costs directly attributable to the network, as well as costs of assets sold. Cost of revenue also includes satellite transponder lease costs, package delivery costs and blank tape media costs attributable to the video business. Delivery costs and blank tape media costs attributable to the Vyvx advertising distribution business are included in cost of revenue through the date of the Vyvx advertising distribution business disposition on June 5, 2008. Cost of revenue does not include depreciation and amortization.

Communications Gross Margin (%) is defined as communications gross margin ($) divided by communications revenue. Management believes that communications 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.

    Communications Gross Margin                   Q208       Q108       Q207
    ($ in millions)
    Communications Revenue                       $1,072     $1,066    $1,035
    Communications Cost of Revenue                 $442       $459      $437
    Communications Gross Margin ($)                $630       $607      $598
    Communications Gross Margin (%)                58.8%      56.9%     57.8%

Consolidated Adjusted EBITDA is defined as net income/(loss) from the consolidated condensed statements of operations before income taxes, total other income/(expense), non-cash impairment charges, depreciation and amortization and non-cash stock compensation expense.

Communications Adjusted EBITDA Margin is defined as Communications Adjusted EBITDA divided by communications revenue.

Management believes that Consolidated Adjusted EBITDA and Communications 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 Consolidated Adjusted EBITDA and Communications 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. Consolidated Adjusted EBITDA excludes non-cash impairment charges and non-cash stock compensation expense because of the non-cash nature of these items. Consolidated Adjusted EBITDA also excludes interest income, interest expense and income taxes because these items are associated with the Company's capitalization and tax structures. Consolidated Adjusted EBITDA also excludes depreciation and amortization expense because these non-cash expenses reflect the impact of capital investments which management believes should be evaluated through consolidated free cash flow. Consolidated Adjusted EBITDA excludes the gain on sale of business group and other, net because these items are not related to the primary operations of the Company.

There are limitations to using non-GAAP financial measures, 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 on sale of business group and net other income/(expense). Consolidated Adjusted EBITDA and Communications Adjusted EBITDA Margin should not be considered a substitute for other measures of financial performance reported in accordance with GAAP.

Consolidated Adjusted EBITDA Excluding the Benefit of Deferred Revenue Change and Vyvx Advertising Distribution Results is defined as Consolidated Adjusted EBITDA less the benefit of deferred revenue that should have been recognized in prior years and less the Vyvx advertising distribution business Adjusted EBITDA.