The new CEO says the telecom will spend $300 million to boost
broadband speed rather than roll out a costly television
By Andy Vuong
Tuesday, December 18, 2007
New Qwest chief executive Ed Mueller on Monday unveiled his
strategic plan for the company, which doesn't stray far from the
path laid by his predecessor.
Shares of Denver-based Qwest dropped 29 cents, more than 4
percent, closing at $6.72 Thursday. Since Mueller replaced
Dick Notebaert as CEO on Aug. 10, the stock is down 17 percent
During a conference call with analysts, Mueller said the company
will not launch a broad television service in 2008 because it is
Instead, Qwest will spend $300 million to boost broadband
Internet speeds for its customers, about $200 million more than
it is spending this year.
The move will increase capital expenditures to $1.8 billion next
year, up from $1.6 billion in recent years.
The fiber rollout aimed at increasing Internet speeds will reach
1.5 million homes in the company's 10 largest markets, including
and Colorado Springs,
and 10 other undisclosed markets by the end of next year.
Mueller said 23 percent of customers in the targeted fiber
footprint already subscribe to the company's highest-speed
Internet offering, spending an average of $10 more per month.
That penetration rate is projected to increase to 40 percent by
2011, and the company expects to recover its $300 million
investment within five years, Mueller said. Internet
speeds will reach as high as 20 megabits per second, up from the
current peak of 7 mbps. Qwest's most widely offered speed
is 1.5 mbps.
The faster speeds may allow the company to offer high-bandwidth
services such as video-on-demand.
Mueller wouldn't disclose the company's revenue guidance for
2008. Revenue has been stagnant in recent quarters as
losses of phone customers to cable competitors have offset
"We understand the environment is competitive and it won't be
easy," Mueller said.
He said there will be "more meat on the bones" in February after
the company announces fourth-quarter earnings.
"He's not making any big about-face from the path that Notebaert
had Qwest on," Janco Partners analyst Donna Jaegers said.
"He didn't answer questions about M&A (mergers and
acquisitions), and that's an area where in order to do more on
the enterprise side, he may end up doing some M&A."
The company said last week it would issue a quarterly dividend
of 8 cents a share in February, its first in six years.
In late 2008, Qwest will launch an offering that will allow
customers to make cellphone calls through their home Internet
service, which saves calling-plan minutes and is more reliable.
Qwest resells Sprint Nextel wireless service as part of its
bundle of voice, video and Internet services.
Mueller said the company is also looking at high-bandwidth
mobile offerings, which may lead to new partnerships.
One possibility could be a partnership with Sprint or Clearwire
on their WiMax rollout, Jaegers said. WiMax is a
wireless-broadband offering that is faster and covers more
territory than traditional wireless fidelity, or Wi-Fi,
Qwest's much larger peers, AT&T and Verizon, are investing
billions of dollars each in video services in the face of
intense competition from cable companies. Like his
predecessor, Mueller is content with reselling DirecTV
satellite-TV service and plans to strengthen that relationship.
With the new strategy, Qwest will no longer pursue cable
franchises statewide or at the municipal level, said spokeswoman
The exception will be in areas where Qwest deploys fiber to the
home. Barton said, however, that Qwest will continue to
support video franchise reform.
Andy Vuong: 303-954-1209 or
Strategic plans for 2008 laid out by chief executive Ed
- Spend $300 million to boost broadband Internet
speeds from 7 megabits per second to 20 mbps
- Pay a quarterly dividend of 8 cents a share in February,
its first in six years
- Increase capital expenditures to $1.8 billion
- Examine high-bandwidth mobile partnerships
- Postpone planned 2008 launch of broad television service