2nd consecutive quarterly profit leads it to explore ways to
By Jeff Smith
Rocky Mountain News
Wednesday, August 2, 2006
Qwest Communications posted
its second straight quarterly profit Tuesday and said it was
looking at a way to reward stockholders, with one option to
issue its first dividend in four years. Qwest made $117
million in its three months ended June 30, but revenues
remained stagnant at $3.47 billion. Sale increases in DSL
high-speed Internet services and communications "bundles"
helped offset an ongoing decline in home land lines.
"I think it was a solid performance," Qwest Chief Executive
Dick Notebaert said in a telephone interview.
Notebaert said Qwest's executive team is making a
recommendation to the board of directors on how to return
equity to shareholders, but he wouldn't elaborate.
Notebaert also serves as chairman of the board.
The Denver telco eliminated its dividend in 2002, after
former CEO Joe Nacchio had slashed it from $2.14 to 5 cents
a share annually after the merger with U S West in 2000.
Tom Friedberg, a former telecommunications analyst who now
is a wireless consultant, said Qwest might be inclined to
issue a one-time dividend or resume a quarterly payment,
given the telephone industry ethos to pay dividends.
Qwest is the only regional Bell without a dividend. Nacchio
believed it was better to invest in growth. But dividends
have their advantages in terms of attracting additional
"A lost of institutional investors by charter have to own
stocks paying a dividend," Friedberg said. He added that
while small shareholders and retirees also would favor a
dividend, resuming a dividend overall is "more
psychologically positive than actually meaningful."
Friedberg was underwhelmed by Qwest's quarter, noting
revenues were flat and land lines declined at a larger than
expected rate, down 5.3 percent year-over-year.
Denver investment manager Bruce Allen echoed that concern,
saying that while Qwest has enjoyed a remarkable turnaround
since 2002, it has largely been through cutting costs.
Allen said he worries about the company's future, in part
because it doesn't have its own wireless network, an engine
of growth for other Bells.
Both Friedberg and Allen believe Qwest stock is overvalued
compared with Verizon, AT&T and BellSouth.
Qwest shares were up again Tuesday, nearly 8 percent, to
Notebaert emphasized the company's growth areas, such as
DSL, long-distance, data services and communications.
Qwest ended the quarter with 1.8 million high-speed Internet
subscribers, up 51 percent over the same period a year ago.
The company's capital expenditures in the quarter increased
to $442 million from $352 Million, with much of the money
focused on expanding high-speed Internet service.
Average monthly revenue per customer also increased 7
percent to $49.41.
Qwest's work force declined 3.3 percent to 38,843, and
Notebaert indicated Qwest would continue to let attrition
take its course.
Qwest bought OnFiber, a business communications provider,
for $107 million during the second quarter, and Notebaert
said Qwest continues to "scan the horizon" for other deals.
But he said the company will continue to be disciplined,
looking for a short payback on the deals.