Qwest's earnings tumble by 35%
The telecom suffers from slowing growth in broadband, losses of
land-line customers and higher tax expenses.
By Kimberly S. Johnson
Wednesday, May 7, 2008
Slower broadband growth and increasing land-line losses
combined with higher tax expenses as Qwest reported a 35 percent
drop in first-quarter net income Tuesday.
The results sent shares of the Denver-based telecommunications
company down 6 percent, or 32 cents, to close at $5.04.
Qwest earned $157 million, or 9 cents a share, in the first
quarter, down from $240 million, or 12 cents a share, in the
same quarter a year ago. Revenue was also down 1.4
While Qwest's tax expenses rose from $2 million in the first
quarter of 2007 to $99 million this year as it began recording
income-tax expense at normal rates, growth was sluggish, said
Janco Partners equity analyst Donna Jaegers.
"What the stock reacted to was the operating numbers
underneath," she said.
Overall revenue fell 1.5 percent to $3.4 billion from $3.45
billion in 2007, which the company said was because of increased
competition in the long-distance business and industry
Chief financial officer John Richardson said Qwest would work
its way through "the challenging economic environment" that
But the company didn't say if losses were a result of a
"I was hoping they would say more about the economy. Qwest
didn't share information on bad disconnects," Jaegers said,
referring to accounts shut off for nonpayment. "It's hard
to have a lot of confidence."
Qwest reported 90,000 new Internet subscribers, including 13,000
customers signing up for the company's new fiber-to-the-node
service, which offers faster speeds. While those increases
helped offset an 8.3 percent decline in land-line services,
they're significantly lower than the 167,000 new broadband
customers Qwest added in the first quarter of 2007.
The company expects higher profit margins from its partnership
with Verizon Wireless, which it announced Monday. Chief
executive Ed Mueller said Verizon's 4G services would be
attractive to Qwest customers.
He didn't expand on financial details of the agreement, or say
how Qwest would share revenues with Verizon.
"We like their retail presence and their attitude to co-brand
with us and be a partner in our out-of-region retail space,"
Mueller said. "Verizon is a very powerful player in the
East, and that's attractive."
Kimberly S. Johnson: 303-954-1088 or