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Debt plan to save Qwest $300 million
Investors push telco for larger buyback
By Jeff Smith, Rocky Mountain News
Friday, November 17, 2005

Qwest Communications said Wednesday that its annual interest expenses will be cut by more than $300 million because of the success of a debt refinancing plan.  The Denver telco said it had increased the size of its offer to buy back high-interest debt from $3 billion to about $3.4 billion because of strong investor demand.  Earlier this week, Qwest sold $1.25 billion of 3.5 percent convertible notes - $250 million more than initially envisioned.

Qwest is using cash and the proceeds from the convertible note sale to buy back debt carrying interest rates of 13 percent to 14 percent.

The success of the two-step process "marks a defining step in the company's transformation," Oren Shaffer, the company's financial officer, said in a statement.  He added that the refinancing, plus operational improvements, will accelerate the company's timetable to profitability.

Qwest executives have indicated the telco could turn a profit next year.  Some analysts agree;  others think Qwest will post a narrow loss.

The company also says it can boost revenue by $500 million if it can reach industry market penetration averages for such products as DSL high-speed Internet and long- distance.

Qwest continues to suffer serious erosion in its traditional telephone business in its 14-state region.  Based on third-quarter numbers, Qwest was losing nearly $300 million a year in local voice revenues.

The company's bond ratings remain in the "junk" category, though they are climbing closer to investment grade.

http://www.rockymountainnews.com/drmn/tech/article/0,2777,DRMN_23910_4244664,00.html