financial status mixed
Third-quarter profit clouded by dispute with retirees, loss of
By Leslie Brooks Suzukamo
St Paul Pioneer Press
Wednesday, November 1, 2006
Qwest Communications International swung to a profit for the
third-straight quarter this year, but angry company retirees in
Minnesota and elsewhere say the company is pleading poverty to
saddle them with higher health care costs.
Qwest, the largest phone company in Minnesota and 13 Western
states, reported a profit of $194 million for the third quarter,
reversing a loss of $144 million from the same period a year
ago. The results are a marked improvement from a few years ago,
when the company posted heavy losses and skirted bankruptcy.
But Qwest's financial picture was not all rosy.
While the company reported it added 175,000 new high-speed
Internet customers last quarter, a 47 percent increase over the
same period a year ago, it also lost landline customers who are
dropping phone service for their cell phones.
The company reported a 6 percent loss of landlines in the third
quarter from the previous year. Qwest now has 14 million lines
in its territory and 1.7 million in Minnesota.
Revenue fell a notch to $3.49 billion for the quarter from $3.5
billion the previous year.
Meanwhile, some of Qwest's approximately 50,000 retirees are up
in arms because the Denver-based telecommunications giant told
them earlier this month that it will no longer cover increases
in their health care premiums.
Qwest also told its retirees that it has capped life insurance
benefits at $10,000. Previously, it paid out the equivalent of
one year's salary.
"It seems to me to be a little disingenuous for the company to
plead poverty and say they are doing this (reduction of
benefits) for the sake of the health of the company," said Dave
Cosgrove, who lives in Bloomington and worked at Qwest for 30
Cosgrove, 58, said he will end up paying $222 a month next year
in health care premiums to his HMO, HealthPartners, up 79
percent from the $124 per month he pays now.
At the same time, his life-insurance benefit will drop to
$10,000 from $88,000, he said.
Qwest, which used to be known as US West, made the changes
reluctantly to control rising health care costs, spokesman Bob
Toevs said. A minority of Qwest's estimate of 48,000 retirees
will be affected, he said.
But the Association of US West Retirees disputes that, claiming
the total number of retirees is more like 50,000 to 60,000, and
that the changes will affect half that number. The association
urged its members to complain directly to Qwest CEO Richard
The National Retirees Legislative Network also sent letters to
congressional delegations and congressional candidates in the 14
states where Qwest operates. The Washington, D.C., group, which
has 2 million members, wants Congress to intervene on behalf of
the Qwest retirees, said Dick Johnson, chairman of the US West
The retirees' anger toward Notebaert is new. The group praised
Notebaert after he took over the company's helm from former CEO
Joseph Nacchio and began steering it toward profitability.
Nacchio, meanwhile, faces federal charges of fraud and
"I am shocked and appalled by your decision to reduce rather
dramatically health and death benefits for your retirees!" wrote
retiree Gerald Claessens of Roseville. "I thought that after
Joe Nacchio wrecked so many lives, your regime would have
treated the retiree group with more dignity and respect. I and
many others who thought that way were wrong."
Qwest shares closed at $8.63, down 38 cents.
Leslie Brooks Suzukamo covers telecommunications and technology
and can be reached at
firstname.lastname@example.org or 651-228-5475.
Third Qtr. ended Sept. 30
except per share)
Revenue $3,487 $3,504
Net Inc. $194 $(144)
Per Share $0.09 $(0.08)
Revenue $10,435 $10,423
Net Inc. $399 $(251)
Per Share $0.20 $(0.14)