NEW YORK – Level 3 Communications Inc posted a narrower quarterly loss Thursday, helped by higher revenue and a gain from the sale of its Vyvx advertising distribution business.

The results were stronger than investors had expected and Level 3 shares rose as much as 34 cents, or 9.5 percent, to $3.90 in early Nasdaq trading.

The communications and Internet backbone provider said it also raised its 2008 free cash flow forecast from break-even to positive for the remainder of the year. It reiterated that it expects to be free cash flow positive in 2009.

Level 3 said its second-quarter net loss was $33 million, or 2 cents per share, compared with a net loss of $202 million, or 13 cents per share, a year earlier.

Excluding a gain of $96 million from the sale of Vyvx on June 5, the company's loss would have been 8 cents per share, better than analysts' average forecast of a loss of 10 cents per share, according to Reuters Estimates.

Consolidated revenue rose 4 percent to $1.09 billion. Analysts, on average, were looking for $1.08 billion.

Core communications services revenue, a closely watched figure that includes Internet protocol and wholesale voice services, rose 9 percent to $972 million, the Broomfield, Colorado-based company said.

(Reporting by Tiffany Wu, editing by Gerald E. McCormick and John Wallace)