Qwest’s Q1 earnings rise 37% after cost cuts

Tue, 04/28/2009 - 8:25pm
Peter Svensson, AP Technology Writer

NEW YORK (AP) – First-quarter earnings at Qwest Communications International Inc. rose 37 percent, as the phone company was helped by cost-cutting and a lower tax rate.

Denver-based Qwest said Wednesday its net income was $206 million, or 12 cents per share, for the first three months of the year. That rose from $150 million, or 8 cents per share, a year ago.

Revenue fell 7 percent from a year ago to $3.2 billion, as consumers continued to cancel landline service. Qwest has also stopped selling wireless service under its own brand. Excluding that change, revenue fell 5 percent from a year ago. Qwest is now reselling Verizon Wireless service, which doesn't add to its revenue in the same way.

Thomson Reuters says analysts had been expecting earnings of 8 cents per share on $3.2 billion in revenue.

About half of the amount that the posted earnings exceeded estimates was due to a lower tax rate, said Stifel Nicolaus analyst Christopher King. The tax rate will return to normal levels in the current quarter, Qwest CFO Joe Euteneuer said.

Qwest shares rose 21 cents, or 5.9 percent, to $3.78 in morning trading.

Cost-paring at the company has mainly been in the form of job cuts: Qwest has slashed 10 percent of its workforce since last year, ending the quarter with 32,800 employees.

Qwest's local-phone service business, which serves Arizona and parts of 13 other states, had revenue of $1.3 billion, a decline of 11 percent from a year ago. It added 42,000 broadband customers but lost 259,000 phone lines.

Much of Qwest's capital spending is going toward building fiber lines. That lets it offer higher broadband speeds, helping compete with cable companies, which are also raising speeds this year.

Chief operating officer Tom Richards said the company is testing a broadband service that's even faster than the 20 Mbps top speed it is offering now. If the trials go well, it will be on the market this year, Richards said.

For now, Qwest can offer broadband to about 85 percent of the households in its phone-service area. CEO Ed Mueller said Qwest is looking at ways to expand that range with grants or loans from the funds set aside for broadband in the economic stimulus package. The company is waiting for the rules for the funding program to be nailed down.

"We have all our proposals ready," Mueller said. "We'll participate where we can make money."

The $7.2 billion in broadband funding is aimed at increasing availability in "unserved" and "underserved" areas, which have not yet been defined.

Business services were the bright spot for the company, despite a challenging market because of the economy. Revenue rose 3 percent to $1 billion.

Qwest's long-haul business, which carries calls and Internet traffic across the world, saw its revenue decline 11 percent to $752 million, partly due to lower traffic. Richards said the company also has ended some low-margin contracts, and international calling is down somewhat because of the economy.

Qwest said it was sticking to its 2009 projections, still expecting earnings before interest, taxes, depreciation and amortization to be $4.2 billion to $4.4 billion this year. It made the same projection three months ago.

More Broadband Direct 04/29/09:
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•  ACA makes its pitch for broadband stimulus funds
•  Comcast's wideband tier available to SMBs in Boston area
•  Qwest's Q1 earnings rise 37% after cost cuts
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•  Broadband Briefs for 04/29/09




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