We are pleased to formalize the expansion of our previously announced Hong Kong to Japan undersea cable system to include connections to Korea and Taiwan, said Steve Liddell, chief executive officer for Level 3 Asia. Our partnership with FLAG enables us to mitigate the cost of this expansion, as well as our initial cost of building the Hong Kong to Japan segment. This agreement is important because it accelerates our speed to new markets, and effectively allows us to gain a diverse ring system by sharing the development and operating expenses with an industry partner.

The undersea system will include Level 3’s previously announced eastern link connecting Hong Kong, Taiwan and Japan, and a new western link that FLAG will build to connect Hong Kong, Korea and Japan. Level 3 expects the Hong Kong to Japan segment of the eastern link to be in service in the second quarter of 2001, with the eastern link’s Taiwan segment to follow in late 2001. The company expects the entire western link to be ready for service in early 2002. Total cost of the system is estimated to be approximately $900 million.

This agreement with FLAG will enable us to more rapidly meet the rising demand for bandwidth capacity in Asia, a region currently constrained by a significant lack of bandwidth supply, said Liddell. In addition to linking four key Asian markets to each other, the pan-Asia submarine cable system will connect Hong Kong, Japan, Korea and Taiwan to North America and Europe through Level 3’s ownership on the Japan-U.S. cable and the company’s recently completed transatlantic cable.

Level 3 is overseeing construction of the eastern link of the pan-Asia cable system, and already has completed the cable landing in Hong Kong. FLAG Telecom will oversee construction of the western link, and will manage the entire pan-Asia submarine cable system once construction of the eastern and western links is completed. Level 3 and FLAG Telecom will each own three fiber pairs throughout the new system. The initial capacity of the system is expected to be 320 gigabits per second, but with upgrades could offer maximum potential capacity of 2.5 terabits per second on the eastern link and 3.8 terabits per second on the western link.