Qwest’s Q1 profit tumbles on tax charges
NEW YORK (AP) – Qwest Communications International Inc., which recently agreed to be acquired by a smaller phone company, on Wednesday said its first-quarter earnings tumbled 82 percent due to one-time tax charges.
Its revenue fell 6.5 percent as customers continued to cancel landlines.
Qwest, the country's third-largest local phone company, said it earned $38 million, or 2 cents per share, in the quarter after taking tax charges totaling $166 million.
Most of the charges were related to the recent health care reform package, which ended a federal tax break for certain benefits. Other companies have also booked large charges for the same reason. Excluding the charges, earnings would have been 10 cents a share, beating the 9-cents-per-share average estimate of analysts polled by Thomson Reuters.
Earnings fell from $206 million, or 12 cents per share, in the same quarter a year earlier.
Revenue fell to $2.97 billion from $3.17 billion in the quarter. Analysts had expected $2.94 billion in revenue.
In addition to landline cancellations, the end of a deal to resell Sprint Nextel Corp.'s wireless service reduced revenue. Qwest now markets Verizon Wireless' service but doesn't book the subscriber fees as revenue.
Two weeks ago, Qwest announced a deal to be acquired by CenturyTel Inc. for about $10 billion in stock. CenturyTel's stock has declined since the merger announcement, and Qwest shares haven't seen any boost from the deal.
Qwest CEO Ed Mueller defended the deal Wednesday: "Our proposed merger with CenturyLink will combine two well-run companies to create a stronger competitor."
CenturyTel operates under the name CenturyLink.
Qwest shares rose 12 cents to $5.37 in midday trading.