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Qwest to report a loss
Gains in high-speed Internet and small-business revenues are likely to be offset by losses of land lines.
By Beth Potter, Staff Writer
Denver Post
Tuesday, February 14, 2006

Qwest is expected to show a jump in high-speed Internet and small-business revenues in its fourth-quarter earnings report, which is set for release today.

But analysts also expect the Denver-based phone company to show a roughly 5 percent loss of traditional telephone lines.

Donna Jaegers, an analyst at Janco Partners in Greenwood Village, said Colorado's largest public company is expected to post a loss of 31 cents per share for the year on stable revenues of about $13.9 billion.  Estimates appear to be in line with Wall Street expectations, Jaegers and other analysts said.

"They would like to surprise Wall Street on the upside," Jaegers said.  "They'll try to make it a positive outcome, but I think 2006 is going to be a tougher year for Qwest than 2005 because Comcast is rolling out their service more aggressively."

Cable giant Comcast Corp. is launching Digital Voice in many of its markets, including Denver.  The Internet call service is expected to appeal to Qwest's bread-and-butter telephone customers.

Qwest has its own Internet phone service available to high-speed Internet customers. 
Late last year, Qwest said it had 1.3 million high-speed Internet customers.

In its earnings report, the former Baby Bell is expected to say it added at least 128,000 high-speed Internet lines in the fourth quarter, according to a pre-earnings estimate from analyst David Barden at Bank of America.

Jaegers said Qwest also likely added more than 10,000 new small-business lines in the same period.

The Bank of America report also expects Qwest to show a drop of 4.8 percent in traditional phone lines to 14.8 million lines in the fourth quarter.

Qwest declined to comment Monday on fourth-quarter earnings because of Securities and Exchange Commission regulations governing such reports.  Qwest chief executive Dick Notebaert has said the company expects to be profitable sometime this year.

The company's $15 billion in long-term debt is still troubling at a time when it needs to turn up the heat to fend off cable - and satellite-TV competition, said Tim McElgunn at Frost and Sullivan, an industry analyst firm.

Qwest refinanced its debt late last year from about $17 billion to the current figure, a move expected to generate an additional $300 million in free cash flow.

McElgunn said Qwest needs to spend that money on fiber-optic network upgrades to compete.

Qwest shares closed at $5.90 Monday, a gain of more than 26 percent from its $4.66 price when third-quarter earnings were announced Nov. 1.

Staff writer Beth Potter can be reached at 303-820-1503 or bpotter@denverpost.com.

http://www.denverpost.com/business/ci_3506347