Level 3 boosted by $500m fighting fund

One of the world's richest men has formed a consortium to provide telecoms firm Level 3 with $500m to pick up the best bits from the smouldering remains of its rivals.

The Warren Buffet-backed Berkshire Hathaway will put up $100m, along with $300m from Longleaf Partners and an additional $100m from Legg Mason.

Buffet has avoided technology and telecoms stock like the plague in recent years, famously writing off the dotcom boom as "hallucinations." But he may have been persuaded there's money to be made in comms by Level 3 chairman Walter Scott, who is also on the board of Berkshire Hathaway.

Level 3 said that the industry's troubles meant there were bargains to be had. "It is widely recognised that the telecommunications industry is going through a period of unprecedented turmoil," said James Crowe, chief executive at Level 3.

"At the same time, however, the ongoing shakeout is creating extraordinary opportunities, as telecoms companies, their network assets and customer bases become available."

Crowe hinted that he is looking at buying firms that are already in bankruptcy, under court protection or are close to filing for chapter 11 to find the best bargains. In an interview, he said he values customer bases higher than he does additional capacity.

In a statement, Buffet said: "Liquid resources and strong financial backing are scarce and valuable assets in today's telecommunications world. Level 3 has both... [and] is well equipped to seize important opportunities that are likely to emerge in the communications industry."

Bill Miller, chief executive at Legg Mason, added that demand was still growing despite service providers falling by the way side. "Spending on communications services is non-discretionary," Miller said. "We believe more strongly than ever that Level 3 is emerging as one of the ultimate leaders, survivors and consolidators in the industry."

Level 3 has built a global 18,500-mile fibre network and sells mainly wholesale network services to over 2000 carriers, large internet service providers and cable companies.

Analysts have predicted that telecoms firms will merge as demand has failed to grow quickly enough to meet an excess of capacity built over the past few years.

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