Level 3’s Top Holder Hawkins Signals Push for Better Results

Fund manager Mason Hawkins, the largest stockholder of Level 3 Communications Inc., signaled in a shareholder report that he may push the networking services provider to improve its financial and market performance.

“We are unhappy with Level 3’s operating results and stock price,” Hawkins and partner Staley Cates said in a third- quarter report to shareholders in their Longleaf Partners Fund, filed Nov. 19 with the U.S. Securities and Exchange Commission. “You can assume that we are neither oblivious nor idle.”

Southeastern Asset Management Inc., Hawkins’s investment advisory firm in Memphis, Tennessee, holds 29 percent of Level 3 common shares, which haven’t closed above $2 since Oct. 6, 2008. During March 2000, the height of the bubble in technology stocks, Level 3 shares sold for as much as $130 each.

Lee Harper, a spokeswoman for Southeastern Asset, didn’t immediately return a call seeking comment. The firm had $32.1 billion of assets under management as of Sept. 30, including $7.9 billion in its flagship fund, Longleaf Partners.

Jen Swonger, a spokeswoman for Broomfield, Colorado-based Level 3, declined to comment. The company provides data and communications services to corporate clients through a fiber- optics network in metropolitan areas within the U.S. and Europe, and sells wholesale capacity to other telecommunications firms.

Hawkins, 62, said in the shareholder report that Level 3 has “irreplaceable fiber assets” and that demand for bandwidth is growing rapidly with the “increasing movement of data and video across multiple platforms.” He said the company’s pace of adding new direct customers has been “disappointing” and that it needs to translate demand into revenue growth.

Netflix Contract

Earlier this month, Level 3 won a contract to provide video-streaming and storage services to Netflix Inc., the mail- order and online movie-rental company. Level 3 shares rose 7 cents, or 7 percent, to $1.07 at 2 p.m. today in Nasdaq Stock Market trading.

Hawkins and Cates were named by Morningstar Inc. as the top U.S. equity-fund managers of 2006. Longleaf Partners returned a cumulative 66 percent in the decade ended Sept. 30, compared with the 4.2 percent decline for the benchmark Standard & Poor’s 500 Index, according to the fund’s marketing materials.

To contact the reporter on this story: Miles Weiss in Washington at mweiss@bloomberg.net

To contact the editor responsible for this story Christian Baumgaertel at cbaumgaertel@bloomberg.net.

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