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Qwest profit falls 49 pct in 4Q, beats view
By Peter Svensson, AP Technology Writer
Denver Post
Wednesday, February 11, 2009

NEW YORK—Fourth-quarter earnings fell 49 percent at Qwest Communications International Inc. from a year ago, mainly due to tax effects, while cost-cutting helped its underlying performance beat Wall Street expectations.  Its shares rose 21 cents, or 6.2 percent, to $3.58 in morning trading.

The Denver-based phone company on Tuesday said it earned $185 million, or 11 cents per share, in the October-December period, down from $366 million, or 20 cents per share, a year ago.

The latest results included a charge of a penny per share for severance payments.  The company cut 1,700 jobs in the quarter, more than the 1,200 layoffs it had announced.

"We exceeded our goal in achieving employee reductions that will give us a leg up on this year's profitability objectives," said chief executive Ed Mueller.

Analysts polled by Thomson Reuters expected lower earnings, at 10 cents per share.

Qwest's revenue slipped 3 percent to $3.32 billion from $3.44 billion a year ago as consumers continued to drop landlines.  Also, Qwest during the year dropped an arrangement under which it resold Sprint Nextel Corp.'s wireless service under its own name.  Instead, it promotes Verizon Wireless service and gets a cut of those fees.

Analysts welcomed the results.

"We reiterate our Buy rating on Qwest and believe the solid revenue and cash flow performance in a challenging (fourth quarter) bodes well for cash flow prospects in '09," wrote Michael Rollins at Citigroup.

Qwest ended the year with 8 million consumer and small-business phone lines in service, a loss of 219,000 in the last quarter as customers continued to go wireless-only, or switch to cable phone service.

Qwest added 54,000 broadband subscribers, but growth in this segment is slowing substantially.  In the same quarter a year ago, it added 95,000 customers, which was also down from the previous year.

The company has been upgrading its network to compete with cable, and said it is now able to offer higher Internet speeds to 1.9 million households, exceeding its goal of 1.5 million.

Qwest's business services segment did relatively well, with revenue up 4 percent year over year despite a dismal business climate.

The wholesale division, which carries long-haul data and phone traffic, saw revenue decline 7 percent.

With two of its three main businesses shrinking, Qwest has been cutting jobs.  It ended the quarter with 32,937 employees, 11 percent fewer than a year ago.  That cut its expenses by 5 percent, to $2.8 billion.

Looking ahead, Qwest said it expects earnings before interest, taxes, depreciation and amortization, or EBITDA, to be $4.2 billion to $4.4 billion this year.

Analysts polled by Thomson Reuters were expecting EBITDA of $4.3 billion for 2009.

Qwest's figure includes about $200 million, or 7 cents per share, in added noncash pension and retiree benefits, compared to 2008.  Pension funds have declined in value with the stock market.  Qwest said it won't have to make a cash contribution to its funds this year, but may have to add as much as $300 million in 2010.

Unlike AT&T Inc. and Verizon Communications Inc., Qwest said it expects to maintain capital spending at about the level of 2008, when it invested $1.78 billion.  The other phone companies are cutting their spending to maintain their cash flow in lean times.  However, Qwest's level of spending is already much lower than at the other companies.

For all of 2008, Qwest earned $681 million, or 39 cents per share, compared to $2.9 billion, or $1.52 per share in 2007.  Pretax income rose 66 percent to $1.1 billion from $664 million.

Full-year revenue fell 2 percent to $13.5 billion from $13.8 billion.

http://www.denverpost.com/breakingnews/ci_11670330