InterDigital Inc (IDCC)

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Level 3 eyes more acquisition opportunities


April 25, 2003

Reuters

Level 3 Communications sees a growing number of acquisition targets as the financial turmoil in the telecommunications industry claims more victims.

"The number of opportunities that we look at is certainly at its highest level and continues to grow," said Level 3 chief executive James Crowe said in a conference call with analysts and reporters.

"These range from whole businesses to parts and pieces of larger corporations," he said.

Last year billionaire investor Warren Buffett and two other investors spent $500 million to buy Level 3 convertible bonds. That investment, which could be converted into a 27% stake in Level 3, gave the high-speed communications network operator funds to pursue acquisitions.

Level 3 in February completed the acquisition of bankrupt rival Genuity, which Crowe cited as one of the most complicated deals of his career.

Level 3, which sells its high-speed network services to long-distance telephone companies and large Internet service providers, said it continues to look at a number of potential deals, but did not identify any specific targets.

"We're looking at distressed properties. Either distressed on a whole — some certainly in some form of reorganization — to what it would refer to as distressed subsidiaries of stronger companies," Crowe said.

Buying distressed properties can be expensive and time-consuming since it often involves negotiations with various classes of creditors or lengthy bankruptcy procedures.

"It's expensive to look at these kind of complicated deals and do any kind of thoughtful due diligence. That's why we've said over and over we're going to be disciplined about the prices we pay and results we expect," he said.

Earlier on Thursday, Level 3 posted a first-quarter profit as revenues jumped due to recent acquisitions. The company cut its revenue outlook for the year, citing weakness in its information services business, which is comprised of software companies it acquired last year.