Level 3 CEO says balance sheet before investment

The Broomfield, Colorado-based company operates a large backbone network for phone and Internet communications, acting as a wholesale provider to other telecommunications service providers.

Chief Executive James Crowe said that telecommunications carriers had recently been holding back from investing in their networks to save costs despite growth in Internet traffic, resulting in service problems.

"Particularly for someone like us that has an extensive network to which we can add, incremental investments come with very high returns," he told a Goldman Sachs communications conference, but added: "First balance sheet, then investment."

A weak economy and tighter credit have curbed network spending and the company's second-quarter net loss increased to $134 million from $42 million a year earlier.

The company's shares rose 7 cents, or 4.7 percent, to $1.57 by mid-morning trading.

(Reporting by Ritsuko Ando, editing by Dave Zimmerman)