Start-Up Level 3 Making Its Nasdaq Debut

NEW YORK —  In an unusual debut in the Nasdaq Stock Market today, an Internet-related company will begin trading as Nasdaq’s third-largest telecommunications firm, behind giants WorldCom Inc. and MCI Communications Corp.

Unlike other recent Internet start-ups such as ISS Group Inc.--which staged a stunningly popular initial public stock offering last week--this newcomer, Level 3 Communications Inc., is far from an IPO.

It already has a market capitalization of $9 billion.

Shares of its predecessor entity have more than tripled in price since early December in energetic trading on the bulletin board, an unregulated electronic market.

Nasdaq, delighted to have another glamorous new issue, is celebrating the Level 3 listing with a ceremony this morning at its New York MarketSite.

Level 3 originated as a unit of Omaha-based Peter Kiewit Sons’ Inc., a big, employee-owned construction concern. Level 3 is headed by James Q. Crowe, who ran MFS Communications Co.--an Internet/telecommunications pioneer--until its 1996 sale to WorldCom for $14.3 billion. MFS also had been a division of Kiewit before going public in 1993.

Level 3 plans to spend $3 billion developing a national fiber-optic telephone network using Internet protocol technology instead of traditional “switched” phone technology.

The technology could allow voice, data and video to be sent over the same line and at far lower cost than with current technology. Analysts say the idea has great potential but is unproved.

“Show me the beef,” said Robert Rosenberg of Insight Research in Parsippany, N.J. “There are no revenues yet.”

That’s not to say the deal might not make somebody rich. Rosenberg recalled that many of his friends who worked for Baby Bell local phone companies considered MFS such a threat to their business that they “ran out and bought the stock” when MFS went public, then made a bundle when WorldCom snapped it up.

Hoping for another Crowe home run, investors have been scouring the landscape for Kiewit D shares, which are being converted into new Level 3 shares today.

“A lot of people have been trying to get their hands on that Kiewit D,” said a spokeswoman at Footprints Research, a small Omaha brokerage that makes a market in Kiewit stock.

Until last fall, when Kiewit started making known its plans to cut the telecommunications subsidiary loose as a separate, publicly traded company, there was very little trading volume in D shares. Nearly all were held by the company’s 14,000 employees.

Around Thanksgiving, the shares were trading at about $20. On Tuesday, they closed at a bid price of $71.25 on the Nasdaq bulletin board.

Kiewit’s traditional construction business, meanwhile, is being spun off to the employees in a tax-free transaction. Those new shares will not trade publicly.