Such a joint venture could create a formidable Internet backbone carrier competitor to AT&T and Verizon Communications in the race to provide services to enterprise and government customers, according to the newspaper.

Citing unnamed sources familiar with the deal, The Wall Street Journal said the two telecom companies have held preliminary discussions in the past few weeks that could either result in a joint venture or some other type of partnership such as network sharing.

Sprint is interested in exploring new ways to take advantage of its fiber optic network short of selling the unit, but would want to retain at least 51 percent of the ownership in any venture with Level 3, the Journal said.

One possible deal breaker for Sprint is Level 3's $6.4 billion debt. Other issues include a telecom industry slowdown due to the recession, as well as consolidation among smaller local telephone companies that purchase long-distance service from Sprint, Level 3 and others, the Journal said.

Sprint is no stranger to partnering with other telecom companies. The company in May of 2006 worked with several U.S. cable companies to create the new $14.5 billion Clearwire in hopes of getting a leg up on AT&T and Verizon in blanketing the country with WiMax wireless broadband.

At about the same time, Sprint completed the spin-off of its local communications operations as Embarq, which became a freestanding company.