Qwest Loss Widens

The carrier had a loss of $214 million, or 13 cents per share, on sales of $3.8 billion. For the year-earlier period Qwest had a loss of $142 million, or 9 cents per share, on sales of $4.4 billion.

First Call estimates were for a loss of 14 cents per share.

Qwest said its business was impacted by competitors undercutting its pricing, a decrease in demand for data and Internet services, liquidity concerns and an ongoing investigation by the Securities and Exchange Commission.

In a call with financial analysts, Qwest CEO Richard Notebaert said the telco has completed the "heavy lifting" surrounding the scrutiny into its accounting practices and has put liquidity issues to rest by extending the terms and easing the covenants of its credit facility. The pending sale of its QwestDex publishing business for an expected $7.05 billion has also eased liquidity concerns, he said.

Oren Shaffer, executive vice chairman and CFO, said that moving forward, Qwest plans to raise prices in areas such as ATM and frame relay when appropriate. The carrier also plans to sell additional lines of business, he said.

Earlier this week, Qwest said it plans to restate $531 million in revenue that was recorded prematurely. The carrier is under investigation for allegedly improperly swapping transmission capacity to inflate revenue in 2000 and 2001.

Qwest said the scope of a restatement for 2000, 2001 and 2002 has yet to be determined. Past reports from the carrier have stated that it may have to restate about $1.5 billion in revenue and costs associated with sales of optical network capacity.

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Operating expenses for the third quarter declined by $41 million compared with last year. Sequentially, the carrier said it reduced operating expenses by $99 million. "With all the headwind we've been facing, the progress we've been able to make shows our resolve," Notebaert said.

Qwest expects its guidance for 2002 to be at the low end of previously stated guidance, calling for about $17.1 billion in revenue and a loss of between 47 cents and 49 cents. This would include the money generated from the sales of its QwestDex business.

The company expects to have free cash flow of between $100 million and $200 million for the year.