UPDATE 1-Sprint and Level 3 in early JV talks - report

* Level 3, Sprint in early talks on long-haul JV

* Sprint shares down 1.6 pct, Level 3 shares up 18 pct

NEW YORK, June 10 (Reuters) - Sprint Nextel Corp (S.N) and Level 3 Communications Inc (LVLT.O) are in early talks about forming a joint venture including Sprint's long-distance network, according to a report in the Wall Street Journal.

Citing unidentified people familiar with the matter, the Journal said the companies, which both serve enterprise customers, have had talks in recent weeks.

But the report said the people emphasized that the discussions were "very preliminary" and "a deal may not materialize."

Sprint, also the No. 3 U.S. mobile service, and Level 3 could also opt for a "commercial partnership, such as network sharing," according to the story.

Sprint spokesman James Fisher declined to comment. Level 3 representatives were not immediately available for comment.

The report came days after Qwest Communications International (Q.N) said it was keeping its long-distance network after it failed to attract a buyer meeting its asking price for the network.

Sprint Chief Executive Dan Hesse is often asked whether he would sell the long-distance business, and he always responds that the asset is strategic as it carries telephone calls between Sprint's wireless broadcast towers.

Sprint had about $1.465 billion revenue from its wireline business in the first quarter, down 10 percent from the year-ago quarter. As well as serving enterprise clients it uses the network to carry telephone Internet calls for cable service providers such as Time Warner Cable (TWC.N).

In the first quarter Level 3, which competes with much larger rivals such as Verizon Communications (VZ.N) at AT&T Inc (T.N), posted a loss of $132 million on revenue that fell 10 percent to $980 million.

On the New York Stock Exchange, Level 3 rose 20 cents to $1.33 after the report, while Sprint fell 8 cents, or 1.6 percent, to $4.87 late Wednesday afternoon. (Reporting by Sinead Carew; Editing by Richard Chang)