Qwest wrings more cash out of down 2009

The Denver Post

By Aldo Svaldi
February 17, 2010

Qwest squeezed more cash out of its operations last year despite declining revenues from a tough economy and a shrinking number of land-line customers.

Sales during the fourth quarter fell to $2.99 billion from $3.32 billion during the same quarter a year earlier, the company reported Tuesday. For the year, sales fell 8.6 percent, from $13.5 billion to $12.3 billion.

Net income declined 39 percent from $177 million, or 10 cents per share, in the fourth quarter of 2008 to $108 million, or 6 cents per share, in the fourth quarter 2009.

For the entire year, net income rose 1.5 percent to $662 million, and the company spun off $1.9 billion in "adjusted free cash flow."

"Cash flow is at the highest levels since the merger," Qwest chairman and chief executive Edward Mueller said.

Qwest and U S West merged in 2000.

Of the hit to quarterly earnings, 2 cents per share came from severance costs. Qwest last year eliminated 2,800 jobs, or 8 percent of its workforce, including 1,200 in the fourth quarter.

"While these were difficult decisions, I am confident that we will continue to provide a superior customer experience," said chief operating officer Teresa Taylor.

Qwest executives are working to reduce revenue declines to the low- to mid-single-digit range by the fourth quarter of 2010, chief financial officer Joe Euteneuer told analysts.

Qwest also shaved $1.2 billion off its debt last year and plans to tackle another $3.5 billion or so in the coming year. The company has built up $2.4 billion in cash toward that goal.

Qwest plans to make just less than $1.7 billion in capital expenditures this year, up from $1.4 billion last year. Some of it will fund an expansion that puts an additional 1 million homes within reach of Qwest's fiber-optic network.

Mueller told analysts he was bullish on "a la carte" video or television over the Internet, which could flow over the company's fiber network.

But Qwest's goal so far is to facilitate that emerging medium.

"It would be primarily an enablement; we would enable others," he said. "We've had contact with people in Silicon Valley, primarily California, who have a little different model of how to monetize this."

Shares of Qwest rose 2 cents to close at $4.45 Tuesday.

Aldo Svaldi: 303-954-1410 or asvaldi@denverpost.com