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Level 3 Communications Management Discusses Q2 2012 Results - Earnings Call Transcript

On a year-over-year basis, CNS revenues grew 3.7%, adjusting for constant currency. Keep in mind, in the second quarter 2011, Global Crossing had $9 million in termination revenue, which if excluded would improve our year-over-year revenue performance.

On another positive note, our consolidated CNS sales orders, that is signed contracts for services, grew 17% in the second quarter over the first quarter. The second quarter marked a record quarter for sales orders for the combined company.

On a regional basis, North American CNS revenue grew 1.1% sequentially and on a constant currency basis, primarily from strong sequential growth of 1.8% from our enterprise customers. Wholesale was roughly flat compared to the first quarter.

In EMEA, our sequential CNS revenue declined 2.3% on a constant currency basis, primarily driven by an expected decline in the U.K. government revenue. As we have previously indicated, we expect our U.K. government revenue to decline this year. On a constant constants basis, wholesale CNS revenues declined 1.1% while enterprise CNS revenues improved 2.5% sequentially. Excluding the U.K. government business, EMEA CNS revenue grew 0.6%. Our sales order in the EMEA enterprise business improved nicely for the second quarter, and although EMEA is still in a state of transition, we expect to see stronger performance for the balance of the year.

CNS revenue for Latin American region grew sequentially at 2.3% on a constant currency basis, driven by strong growth in the enterprise business of 2.9%.

Also, voice services and other revenues was $200 million this quarter compared to $204 million in the first quarter. We continue to expect volatility in wholesale voice services revenue going forward as we manage our combined wholesale voice platform for margin growth.

At the bottom of Slide 4, for the second quarter of 2012 we experienced a slight uptick in CNS revenue churn from 1.3% to approximately 1.6% in the second quarter. The increase in disconnects is primarily attributable to a couple of legacy large Global Crossing customers, the majority of which are the U.K. government customers I mentioned earlier.

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