AUSWR
The Association of U S West Retirees
 

 

 

Qwest cut 1,300 jobs during '06
Filings show Colorado lost 600 slots.  Analysts question whether the firm can afford to keep it up.
By Andy Vuong, Staff Writer
Denver Post
Tuesday, February 13, 2007

Amid its return to profitability in 2006, Qwest shrunk its workforce by nearly 1,300 jobs, including 600 in Colorado.

Over the past two years, the Denver-based phone company shed 3,000 positions, including about 1,300 in the state, according to regulatory filings.  Some of the reduction has come from natural attrition, and the vast majority has come from union workers.

More cuts could be on the way as Qwest works to improve operating margins while revenue remains relatively flat, but analysts wonder how much leaner the company can get without affecting service quality.

At the end of 2006, Qwest employed 38,383 people, including about 9,400 in Colorado.  About 22,000 Qwest employees were represented by the Communications Workers of America, down from roughly 25,000 at the end of 2004.

"How do they continue to provide good service if they cut too much?" said Donna Jaegers, an analyst with Janco Partners. "I don't imagine big numbers of people being cut. There's going to be pressure on them if they continue to lose market share."

Qwest's total access lines dropped by 6.4 percent in 2006 amid growing competition from cable and Internet-based phone competitors.

Still, the company reported last week its fourth straight quarterly profit.  Cost cuts and growth in high-speed Internet subscribers helped offset access-line losses.

Qwest said in a filing with regulators that it continues to cut its workforce "in response to changes in the telecommunications industry and productivity improvements."

Rumors are circulating that the company may outsource some of its information-technology and call-center work this year.  The company closed two call centers in 2006.  Qwest spokesman Bob Toevs said the company doesn't comment about rumors or speculation.

Upgraded by analyst

Timothy Horan, an analyst with CIBC World Markets, upgraded Qwest on Monday from "sector underperformer" to "sector performer," citing management's ability to cut costs by $600 million over the past two years.

He wrote in a research note that "further reduction in operating expenses could prove challenging."

"We remain concerned about (Qwest's long-term) video strategy, ability to further lower expenses and increasing cable competition," Horan wrote.

Qwest expects to save about $150 million in expenses this year, partly from caps implemented at the beginning of the year on life-insurance and health-care benefits for retirees, according to last week's filing.

The life-insurance cap may be challenged in court by the Association of US West Retirees.  Qwest acquired US West in 2000.

In his research note, Horan suggested that Qwest could create shareholder value by dividing the company into three separate entities -- rural, urban/suburban and long-haul/out of region (classic Qwest).

Staff writer Andy Vuong can be reached at 303-954-1209 or avuong@denverpost.com.

http://www.denverpost.com/business/ci_5214623