Qwest’s Q4 profit falls 39%

Tue, 02/16/2010 - 7:30am
Deborah Yao, AP Business Writer

(AP) – Qwest Communications International, the nation's fourth-largest phone company, on Tuesday said its fourth-quarter earnings fell 39 percent as customers disconnected traditional landline phones in favor of cell phones.

Unemployment, a poor business climate and weak housing cut into earnings, as well, the company said. Qwest operates in 14 states, mostly in the West, where the collapse of the housing market has been acute.

Qwest has responded with a series of job cuts, decreasing its workforce by 8.5 percent last year, or roughly 2,800 positions.

The phone company took a 2 cent per share charge for severance in the fourth quarter. The 2008 quarter had a penny per share severance charge.

And on Tuesday, the company said it expects revenue declines to slow this year while its pension and post-retirement costs fall.

Shares rose 2 percent, or 9 cents, to $4.52 in pre-market trading Tuesday.

Qwest, based in Denver, earned $108 million, or 6 cents per share, in the quarter. That's down from $177 million, or 10 cents per share, in the same quarter a year earlier.

Revenue fell nearly 10 percent to a bit below $3 billion.

For the year, Qwest earned $662 million, up 1.5 percent from the prior year, on revenue of $12.3 billion, down 8.6 percent from $13.5 billion.

In the quarter, consumers and small businesses disconnected more than 12 percent of landlines to 6.8 million. Larger businesses cut their lines, as well, by 9 percent to 2.4 million.

Phone companies have been losing customers to cable's discounted bundle of TV, Internet phone and broadband services. They've also seen customers cut ties to landlines completely. And DSL Internet service provided by phone companies has fallen out of favor as the appetite for online video has grown. Online requires faster hookups, which cable has delivered.

Still, Qwest has upgraded its fiber-optics network to offer faster speeds to more households. In the quarter, it added 4.5 percent more high-speed Internet customers for a total of 3 million.

Video customers, a service Qwest offers in partnership with DirecTV Inc., rose by 10 percent to 880,000.

Cell phone subscriptions rose by 18.5 percent to 850,000. Qwest said it has completed its shift from Sprint Nextel Corp.'s cell phone service – but branded as Qwest – to Verizon Wireless.

As it expands its fiber network, there's question as to whether Qwest eventually will begin to offer TV to its customers. Qwest CEO Ed Mueller discussed the topic in a conference call with analysts Tuesday.

QUESTION: Are you planning to use your fiber network to offer more video products for yourselves or to enable others to offer it?

RESPONSE: On the IPTV front, as you know that's the reason we built this architecture, was to take advantage of the continued movement of what I would call a la carte video. We're still very bullish on that.

It would be primarily an enablement; we would enable others. We've closed down our video product – our retail video product in our two regions – which has been good for us. We would have had to have a large capital spend to even upgrade it.

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•  Bell Canada dishes up a la carte TV in Quebec
•  Sigma Designs plans 3-D chips for set-tops, TVs
•  Qwest's Q4 profit falls 39%
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