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