Sprint Nextel and Level 3 Reportedly in Partnership Talks

The telecommunications space is a-buzz today as the Wall Street Journal has reported rumors of talks between Sprint Nextel Corp. and Level 3 Communications Inc. A possible joint venture could combine long-distance units or could evolve into a lesser partnership that includes roles such as network sharing.


In addition Reuters and other outlets are reporting that the two companies have been in talks in the recent weeks -- possibly including proposals to combine their fiber optic long haul networks to create one of the largest communications networks in the world. Sources citing the talks emphasize that these discussions are very much in the preliminary stage and it is still possible that a deal may not materialize.

These latest reports on a potential partnership come just days after Qwest (News - Alert) Communications International said that it was keeping its long-distance network after it was unable to attract a buyer that could or would meet its asking price for the network.

Dan Hesse, Sprint’s (News - Alert) Chief Executive, has been asked on a number of occasions if he would sell the long-distance business. His common response is that the asset is considered to be strategic for the company as it carriers telephone calls between Sprint’s wireless broadcast towers.

The company’s wireline generated roughly $1.465 billion in revenue in the first quarter, which a 10 percent decrease from one year ago. In addition to serving enterprise clients, the company also uses the network to carry telephone Internet calls for cable service providers, including Time Warner Cable.

Level 3 competes with larger rivals such as Verizon Communications and AT&T (News - Alert) Inc. In the first quarter, the company posted a loss of $132 million on revenue that fell 10 percent to $980 million.

In the first quarter Level 3, which competes with much larger rivals such as Verizon (News - Alert) Communications at AT&T Inc., posted a loss of $132 million on revenue that fell 10 percent to $980 million.

The New York Stock Exchange showed Level 3 rising 20 cents to $1.33 after the report, while Sprint fell 8 cents, or 1.6 percent, to $4.87 late Wednesday afternoon.

The unfortunate reality for companies throughout the telecommunications space is that this past year has not been one wrought with revenue and profit-generating activity. This is not to say that all have seen losses, but plenty of the bigger companies are holding onto assets that do not generate the same revenue they once did.

With the onset of 4G technology not that far away, these companies should be focused on leveraging its assets to take advantage of new opportunities. This is not to say that a partnership between Level 3 and Sprint could not be a profitable one, but perhaps it is not a likely one.