Go to the mobile version of this Web site.

Login | Contact Us | Site Map | Paid archives | Electronic edition | Subscription Questions | Extras

Level 3 CEO Crowe bullish on economy

By Jeff Smith, Rocky Mountain News (Contact)

Published December 4, 2008 at 12:05 a.m.

Text size  
"Confidence is an emotion. And confidence is at the heart of any system - economic or otherwise," Level 3 CEO Jim Crowe said.

Photo by / Rocky Mountain News/2001

"Confidence is an emotion. And confidence is at the heart of any system - economic or otherwise," Level 3 CEO Jim Crowe said.

More Tech & Telecom

More stories »

FOUR QUESTIONS FOR JAMES CROWE

CEO of Level 3 on the economy

Level 3 CEO Jim Crowe is bullish on the future of the U.S. economy and the broadband industry, once the current economy can get the blood flowing again.

Crowe was an "unabashed" early supporter of President-elect Barack Obama, and said he hopes to see a thoughtful administration that knows when to intervene and when to be hands-off.

The Broomfield-based communications carrier's stock has slid below $1 and recently lowered its revenue-growth forecast.

Perhaps the biggest issue is more than $6 billion in long-term debt. The company faces a $300 million debt payment next September with $900 million of additional debt due in 2010.

But Crowe always has had some loyal investors, and the company recently announced a plan to raise $400 million in capital from some of them to help retire 2009 and 2010 debt. The investors would include Southeastern Asset Management and Level 3 Chairman Walter Scott Jr.

The new convertible bonds would carry a high 15 percent interest rate, while most of the old debt is at 6 percent annual interest.

"It's a mixed bag," said Donna Jaegers, a telecommunications analyst with D.A. Davidson & Co. in Denver. "But to raise $400 million in this market is huge. It gives them a little more running room."

Crowe spoke to the Rocky Mountain News and w3w3.com's Larry Nelson after the governor's recent Broadband Summit hosted by Level 3.

Are we more likely to see a (national) broadband policy under President-elect Barack Obama than we would have under John McCain?

I'm looking at all of the problems that he has to deal with and you've got to wonder in 24 hours in a day which ones he's going to prioritize and how much can get done given the enormous financial burdens that he's assuming. But certainly he's indicated his support for (broadband). I'd say it differently.

He's certainly appreciated the importance of information technology. He's talked about it in health care, he's talked about it in education, he's talked about it in energy, and that's really the key - to talk about its effects on people.

What would you like to see the new administration do?

I'd like to see them get the credit crisis stabilized. I'd like to see the patient's blood supply start back up again.

You know, our economic body had a heart attack and our government has come in with paddles and said, 'Clear.' And it sputters and starts and sputters and starts. We've got to get that heart beating again. That is the blood, the money flowing. And then you've got to survey the damage done while the heart stopped.

The broader economy has some damage to it, the consumer spending. The biggest single one is the whole homeownership business and all of the industries associated with homeownership. The automobile industry, industry after industry are under stress.

What are some of the challenges we're facing, not the obvious ones, but the challenges of change?

Fundamentally we have a healthy industry. That doesn't mean everyone is healthy within the industry. In tough times, people tend to communicate more. They tend to stay home. They tend to substitute telephone and other forms of communications for cars and airplanes. Businesses (do that) for the same reasons consumers do. We're doing that. We just installed 30 more high-definition video conference set-top box systems. Yeah, we're going to have some more consolidation (in the industry). We're going to have people who have too much debt who are going to have to deal with the situation. But long term you have to be excited about our industry.

For the economy broadly, all you have to do is look at the value of the dollar to see where people are betting with their money about the future. We have a lot of challenges in the short term. But we have an enormously productive economy, an enormously wealthy society. And hopefully we'll have an administration that is thoughtful, uses good policy, knows when to be hands off, when to be helpful and we will minimize the damage done to people.

That's the key, right? We want to manage it so people don't wake up in the morning and wonder if they can pay their mortgage or can't sleep at night because they are worried about their debts. And I'm hopeful we'll be thoughtful about all of that and help people through this difficult time.

We certainly have the wealth to do it if it's properly applied.

I know you're not a psychologist, but I've always said emotion replaces logic. What about the leaders of different organizations that are going through a lot of emotional stuff right now?

You make a good point. Confidence is an emotion. And confidence is at the heart of any system - economic or otherwise. I'm a capitalist. I've been a great beneficiary of the free market. But to think that the free market can somehow exist without the government is to say that greed itself will produce good results and to ignore the fact that confidence is absolutely necessary for a market.

What causes confidence? The belief that government is going to enforce the rules, that you're not being tricked. That what you're told is accurate, that there's transparency. I don't think the fundamental problem was good loans, bad loans. It's that they weren't visible to investors. If they were visible, people would have made decisions: I'm not going to take that risk. There's always lessons out of any difficulty. The lesson out of this - I hope - is the recognition that good government is necessary for a good economy.

Comments

  • December 4, 2008

    7:14 a.m.

    Suggest removal

    jacka writes:

    "The new convertible bonds would carry a high 15 percent interest rate, while most of the old debt is at 6 percent annual interest."

    Sounds like a big problem here. I googled this stock and debt is $8B+ with Revs of $4B+. I didn't waste time going any further so I don't know what their cash flow numbers are, but that those first numbers don't sound like they generate a coverage ratio ... especially LT at 15% debt cost.

  • December 4, 2008

    7:51 a.m.

    Suggest removal

    Insider writes:

    I don't think Level 3 can carry this size of debt. in the short term the writting is on the wall, no company can carry $6 billon in debt.

    Its firesale time again

  • December 4, 2008

    9:05 a.m.

    Suggest removal

    wowbmw writes:

    Sure hope you guys are wrong. This Colorado company has outstanding leadership and that ought to count for a great deal in these times of mistrust and greed. Level 3 provides telecommunication services that are increasing in demand. A firesale is no guarantee that the quality of the company would stay intact. Colorado needs companies whose products and services are relevant and recession proof. I'm sending them positive energy and wishing them well.

  • December 4, 2008

    2:45 p.m.

    Suggest removal

    jacka writes:

    wowbmw,
    Wow beamer you should buy their bonds. It will capture all your desires and needs.

  • December 9, 2008

    4:13 a.m.

    Suggest removal

    Insider writes:

    Re; outstanding leadership

    Great leadership does not run up debt's of over $8 billon.