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UPDATE 2-Level 3 Q2 rev misses Wall Street; shares down

* Q2 loss/shr $0.10 vs est loss/shr $0.11

* Q2 rev $908 mln vs est $909.80 mln

* Shares fall 11 percent (Adds conf call details, analysts’ comments, background, share activity)

BANGALORE, July 27 (Reuters) - Level 3 Communications Inc's LVLT.O net loss came in narrower than expected, helped by margins, but revenue missed estimates, sending the telecom services provider's shares down as much as 11 percent.

The stock was trading down 9 percent at $1.09 Tuesday in mid-day trade on Nasdaq. It touched a low of $1.07 earlier in the session.

Revenue for the quarter fell 4 percent to $908 million, below estimates of $909.80 million, according to Thomson Reuters I/B/E/S.

Capital expenditure for the quarter rose 30 percent to $104 million, hurting cash flow at the company.

Level 3 reported a cash burn of $19 million for the quarter against free cash flow of $20 million for the year-ago period.

The Broomfield, Colorado-based company, which serves enterprises and operator customers, was hit hard last year as its telecom customers aggressively cut costs and deferred purchases of network capacity.

On a conference call, the company, however, said it has a healthy pipeline of contracts to install and expects revenue to improve in the coming quarters.

Core network service (CNS) revenue rose a percent sequentially for the reported quarter.

Level 3 expects the CNS segment, which made about 77 percent of the company’s revenue this quarter, to grow sequentially for the rest of the year.

“The pricing environment continues to be stable, and we believe we can grow revenues in support of the increases in bandwidth demand that our customers are experiencing,” the company said.

“Their bullish stance is more to do with where they’re coming from,” Cowen & Co analyst Colby Synasael said.

“This is a company that saw revenue decline in 2009 by a meaningful amount, about 12.5 percent, so for them to be trudging forwards to a flat revenue in the back half of this year is relatively good,” Synasael said.

For the second quarter, the company posted net loss of $169 million, or 10 cents a share, compared with a net loss of $134 million, or 8 cents a share, a year ago.

Analysts were expecting a loss of 11 cents per share.

"It was a relatively in-line (good) quarter. I am somewhat surprised with the stock reaction... Part of it may be based off of Global Crossing GLBC.O, which had disappointing results in terms of revenue," Synasael said.

The company, whose services include broadband transport, colocation, broadband and dial-up Internet access and enterprise voice services, competes with Akamai Technologies Inc AKAM.O and Limelight Networks LLNW.O. (Reporting by Mansi Dutta in Bangalore; Editing by Don Sebastian)

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