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Qwest Says It Has the Resources to Cover Debt
By Roger Cheng
The Wall Street Journal
Monday, November 24, 2008

Qwest Communications International Inc. Chief Financial Officer Joseph Euteneuer assured Wall Street that the company was generating enough free cash and had enough "levers" to pull to cover its debt.

The Denver telecommunications company views its debt-maturities profile as "manageable," Mr. Euteneuer told analysts during a Bank of America investor conference Friday, which was broadcast over the Internet.

Mr. Euteneuer said he still sees strong free cash flow and liquidity position.  The company plans to refinance some debt, and would be willing to tap the debt markets, but Mr. Euteneuer acknowledged that he wouldn't go there in the company's current condition.

The biggest concern is the $1.27 billion in convertible debt due November 2010, which Bank of America analyst David Barden called the "keystone debt."

Mr. Euteneuer agreed that the convertible debt was a focus of the company, and said Qwest preferred to use its free cash flow to pay down debt, rather than repurchasing stock.

Qwest is also focused on recurring revenue and margins, and reducing its turnover rate, he said, adding that high-speed Internet service has been positioned as the foundation of the bundle.  The company plans to unveil video services and other features stemming from Internet access, he said.

The company in the third quarter ramped up its marketing efforts after going "dark" in the previous quarter, which should allow the carrier to add more digital-subscriber-line customers.  Mr. Euteneuer said he expects the marketing campaign to provide momentum going into 2009.

Meanwhile, the Networx government contract is another potential catalyst for revenue growth on the business side.  But Mr. Euteneuer cautioned that the contract signing has been slow -- partly because of an incoming administration -- and he doesn't see a significant contribution from Networx next year.

On potential mergers and acquisitions, Mr. Euteneuer demurred on the issue, saying only that the management team is focused on shareholder value, and would be open to an attractive offer.

Write to Roger Cheng at roger.cheng@dowjones.com http://online.wsj.com/article/SB122749110726452175.html