Jeremy Richards'  Instablog

Level 3 (LVLT) had some good news this week.  Oppenheimer said yesterday," LVLT will benefit from explosive growth of wireless data traffic" .

Oppenheimer notes:

LVLT to provide 4G wireless connectivity in major US markets.
LVLT announced that the company will provide Clearwire Communications (CLWR) with network transport services as part of their deployment of 4G WiMax services in major metropolitan markets across the United States. We view positively the company's focus on supplying the wireless space with transport services, given the solid secular growth of wireless data.  We believe that tower companies and backhaul providers are best positioned to benefit from the explosive growth of wireless data.

LVLT said late Monday that it has been selected by SevenOne Intermedia GmbH, part of Europe's second largest broadcasting group, ProSiebenSat.1 Group, for its content delivery network (CDN) services. Size of the win was not disclosed. LVLT said it will provide its services to both live and on-demand video content to viewers in Germany, Austria, and Switzerland. traffic.


RUMORS

Would it make sense for Google(GOOG) to buy LVLT?  How much would GOOG save on its bandwidth costs if it picked up Level 3? YouTube reportedly burns through a million dollars a month in bandwidth costs.  I believe the acquisition of LVLT would give GOOG the inside track on the fiber optics needed for the infastructure to build the next generation of the net, which of course will be live TV both public and private delivered on demand of all forms with reports, forms and everything else.

Is the Sprint(S) and LVLT rumor still possible?  The Wall Street Journal, cited unnamed sources who were familiar with the matter, said the two companies have held talks about a joint venture.  LVLT and S are considering a joint venture that could combine the company's long distance businesses. A joint venture between S and LVLT would create a more formidable competitor to AT&T(T) and Verizon (VZ) in the markets for carrying data across the Internet.

I believe it would a good move for both S and LVLT to get together.  LVLT has a network with approximately 54,000 intercity fiber miles and 27,000 metro fiber miles.

Telecom Ramblings Rob Powell  noted:
"S longhaul infrastructure at the fiber level is old (some of it is even direct-buried, no conduit) and they would have to spend huge amounts of cash to upgrade it.  They haven’t done so and given their other troubles these days they probably can’t.  Instead they have run the division for cash, capex as a percentage of revenues has been around the 5% level and revenues have stagnated.  But Sprint Wireline still has almost $6B in revenue and an impressive customer list, a top IP backbone by any measure, and remains financially pretty healthy.  So rather than do it alone, they are thinking of throwing it into a joint venture with LVLT who has the most modern infrastructure at the fiber level. This would allow the combined entity consolidate nearly $10B worth of revenue onto it."


Chart is looking good with very impressive money flow on both the 3 month and 1 month by daily charts. LVLT seems to have started a new uptrend. Watch for a breakout above the $1.70 area.  A short squeeze could send LVLT above $2.




Disclosure: Long LVLT and GOOG not holding any other stocks mentioned

Thursday TD Ameritrade(AMTD) disclosed of plans to sell an as yet undetermined amount of senior debt in a filing with the Securities and Exchange Commission. The company's filing lists the use of proceeds as paying down its existing senior secured term loan facilities. As of Nov. 18, the company had roughly $1.4 billion in outstanding senior borrowings, according to the filing. E*Trade(ETFC) shares pushed into positive territory after news of the filing surfaced but later sold off after remarks from analyst David Trone at Fox Pitt.

sec.gov/Archives/edgar/data/1173431/0000...

sec.gov/Archives/edgar/data/1173431/0000...

Trone says in note to clients Thursday that a sale of ETFC's brokerage arm to AMTD would "unlock significant value."

Trone currently estimates the split-up value of ETFC to shareholders at $1.72 a share, up four cents from a prior calculation. This figure is based upon AMTD being willing to pay $4.5 billion, or $2.41 a share, for the online brokerage business -- a price Trone says represents a 20% discount to the $5.6 billion he believes the business is worth.

Trone then assumes the split-up/wind down value of ETFC's bank to be 75 cents a share, which when added to the $2.41 per share number, brings the value of the company to $3.16 per share. Subtracting estimated debt repayment of $1.44 a share ($2.7 billion) from that figure gives Trone the $1.72 a share estimate.

However, he believes a deal is unlikely "until the bank-subsidiary's credit woes are clearly behind it," possibly in mid-2010. The recent comments of ETFC brass that the firm is "'about 80% out of the problem' would seem to support our view of a mid-year 2010 sale," Trone adds.

"Bank regulators need to be comfortable that the bank subsidiary could be wound down in an orderly/profitable fashion before the broker can be sold," Trone contends in the note. "We assume AMTD is still unwilling to take both."

4 Months ago Trone said He believes that a sale of the company's brokerage operations is becoming more likely. Between the unwinding of the bank subsidiary, a sale of the brokerage operations and the debt repayment, that would leave ETFC shareholders with $1.68 a share in cash proceeds for shareholders, Trone writes in a note in which he upgraded the stock to in line.

I believe a possible deal is now just days away. I expect around a $3 offer for ETFC based on part cash and AMTD stock.

Cost savings to an AMTD bottom line of a merger make a lot of sense. ETFC CEO Donald Layton will step down at the end of the year. The poison pill is out; this makes a takeover very easy.

The question is will Charles Schwab (SCHW) step in to bid before a AMTD-ETFC wedding? I think so.

ETFC stock price has spiked last 2 days on heavy upward volume in speculation of a takeover after interested remarks from AMTD.

Key clue AMTD has $6.6B cash on hand and doesn't need to issue shares to roll over its debt of $1.4B. AMTD wants to keep as much cash on hand as it can that will be used as per AMTD for acquisitions.

Disclosure: Long ETFC.