AUSWR
The Association of U S West Retirees
 

 

 

Qwest declares buyback of stock
The intent to reacquire about 12 percent of its stock is called "an enormous vote of confidence". 
By Andy Vuong, Staff Writer
Denver Post
Thursday, October 5, 2006

Qwest announced plans Wednesday to buy back up to $2 billion worth of its common stock, a move that could boost investor confidence in the Denver-based phone company.

The stock repurchase, to occur over a two-year period, represents about 12 percent of the company's market capitalization of roughly $16.5 billion.

"Twelve percent is a significant amount of the stock," said David Fried, principal of Los Angeles-based Fried Asset Management and editor of buybackletter.com, which tracks share-repurchase programs.  "When companies buy back their own stocks, it reflects an enormous vote of confidence in the stock by those who know it best -- the company's senior executives".

After nearing bankruptcy in 2002, Qwest has regained its financial footing, posting a profit for two consecutive quarters.

Qwest chief executive Richard Notebaert said in August that the company was considering a stock buyback or a reinstatement of a dividend to reward shareholders.

Notebaert said in a statement Wednesday that the buyback "represents another key milestone for Qwest".  He added that Qwest will continue to regularly review "opportunities to enhance shareholder returns".

Notebaert took over Qwest in June 1002.  The fortune 200 company hasn't bought back stock or issued a dividend in that time.

The stock buyback will likely mean that Moody's Investors Service won't upgrade Qwest debt.  The debt-rating agency said in August it was considering raising Qwest's rating from B1, which is four levels below investment grade.

Moody's analyst Dennis Saputo said then that a significant stock repurchase or dividend "would likely forestall any rating upgrade".

Qwest, the dominant local phone provider in 14 states, had $15.4 billion in debt at the end of the second quarter.  The company had roughly $1.4 billion in cash and short-term investments.

Qwest stock closed Wednesday at $8.70 a share, up 16 cents.  The buyback program was announced after markets closed.

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

http://www.denverpost.com/business_4442674