Buffett wades into telecoms

JUST when telecoms stocks seemed headed for oblivion, Warren Buffett has stepped in to bottom fish the sector. The legendary billionaire, who famously shunned hitech stocks during the 1990s, is investing £70m in struggling Colorado telecoms company Level 3, just days after the WorldCom scandal sent the sector to new lows.

Level 3 shares soared 70% on the news, showing the power of the Buffett name. Over half a century, he has turned a £70,000 initial investment in the stock market into the £70bn Berkshire Hathaway empire by taking bold, contrarian views and focusing on value.

Buffet, dubbed the Sage of Omaha, stressed that Level 3 meets his strict standards. 'Liquid resources and strong financial backing are scarce and valuable assets in today's telecoms world,' he said. 'Level 3 has both.'

The company has £1bn cash and no debt due until 2004. The shares are 95% off their peak. Buffett is buying bonds paying 9%, which he can swap into shares later. Level 3 is a US 'alternative' telecoms carrier with 18,500 miles of fibre optic cable that it markets wholesale to 2,000 customers.

The sector has been pummelled amid huge overcapacity, following the over investment of the 1990s. But the collapse of rivals is raising recovery hopes for those left alive.

The market remains sceptical that Buffett has called the turn. The tech-heavy Nasdaq index fell initially and London's techMARK was barely changed, down 0.43 to 834.94.

Buffett downplays his ability to predict the market's movements, sticking to a company-by-company focus approach. One of his oft-quoted aphorisms is: 'If you don't know jewellery, know the jeweller.' Level 3's chairman Walter Scott is both a friend and a Berkshire Hathaway non-executive director.