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Qwest's Net Profit Surges On Lower Operating Expenses
By Jonathan Vuocolo and Josee Rose
The Wall Street Journal
Tuesday, May 1, 2007

Qwest Communications International Inc.'s first-quarter net income rose sharply, as lower operating expenses helped offset declining voice revenue.

The Denver-based telecommunications company said earnings increased to $240 million, or 12 cents a share, from $88 million, or five cents a share, a year earlier.  Operating revenue slipped 0.9% to $3.45 billion from $3.48 billion a year earlier.  Voice-service revenue fell 6.6% to $2.08 billion, while Internet and video services revenue rose 11% to $1.22 billion.  On average, analysts polled by Thomson Financial expected earnings of nine cents a share on revenue of $3.49 billion.

Qwest, which builds and installs fiber-optic communications systems, has struggled in recent years with a massive debt load, accounting problems and strategic challenges.  Unlike its competition, Qwest doesn't have a wireless arm, a key source of growth.  The company has partnered with Sprint Nextel Corp. to offer wireless service in its bundle.  Qwest's bundle penetration increased to 59% in the quarter, up from 53% a year earlier, as sales of voice packages with three or more products continued to reduce churn, or the rate of customer cancellations.

The company's quarterly performance was helped by an 11% increase in mass-markets data and Internet revenue.  Qwest added 260,000 new high-speed Internet, wireless and video subscribers in the quarter.  Qwest's total access lines fell 6.8% to 13.6 million.

First-quarter operating expenses declined 6.2% to $2.93 billion due to lower facility costs, depreciation expense and realignment costs.  Last year, the company posted its first full-year profit since 2003.

Qwest said it was comfortable with its prior forecasts for revenue, earnings before interest, taxes, depreciation and amortization, and cash flow.  The company said in early February it expected 2007 Ebitda increasing by $400 million.

Write to Jonathan Vuocolo at Jonathan.Vuocolo@wsj.com and Josee Rose at josee.rose@dowjones.com

http://online.wsj.com/article/SB117802019193188074.html?mod=hps_us_at_glance_technology