Qwest Posts Loss On Lower Than Expected Revenue

Qwest Communications International Inc.

Qwest, the dominant local telephone company in 14 states from Minnesota to Washington, reported a net loss of $516 million, or 31 cents a share, compared with a net loss of $116 million, or 7 cents a share, a year earlier.

On a pro forma basis, it had a deeper-than-expected loss of 7 cents a share, compared with a profit of 16 cents a share a year before. The results are adjusted for its acquisition of U S West Inc. and exclude one-time restructuring charges and other items.

Wall Street analysts had expected Qwest to post a loss of 6 cents a share, according to research firm Thomson Financial/First Call.

Revenues dropped 6 percent to $4.70 billion from $5.02 billion, mainly due to reduced sales of fiber optic capacity on its network and Internet equipment. Analysts had expected revenues to be $4.78 billion, according to First Call.

"Our overall performance continues to be impacted by economic conditions nationally and in our local service region, but we are encouraged with the progress made in some of our key growth areas, including global enterprise, DSL and wireless," said Qwest Chairman Joseph Nacchio.

In December, Denver-based Qwest cut its financial forecasts for 2001 and 2002. It expects its 2002 earnings to be in the range of 17 cents a share, to 24 cents a share, on revenues of $19.4 billion to $19.8 billion. At that time, the company also increased by 7,000 the number of jobs it would cut to 11,000. It expects the cuts will be done by mid-2002.

It ended the year with 448,000 high-speed digital subscriber line (DSL) customers, a nearly 74 percent increase from the end of 2000 and slightly above the company's target of 430,000.

Wireless telephone services revenues rose 42 percent from a year earlier to $211 million in the fourth quarter. Qwest added 40,000 wireless subscribers in the fourth quarter, according to analysts, and ended the year with 1.11 million customers, which was in line with Wall Street forecasts. Average revenue per customer fell to $54.30, down 1 percent from the third quarter of 2001.

Consumer revenues rose more than 3 percent, or $48 million, compared with the fourth quarter of 2000, with continued growth in DSL and wireless services offset by a decline in access lines of 3 percent.

During the fourth quarter, local services revenue fell 2 percent, while sales of long-distance voice and data services plunged 19 percent. By mid-2002, Qwest expects to file applications to offer long-distance service in all states in its home territory.

Quarterly commercial services revenue fell 14 percent, as growth in the sales of Internet services was offset by declines in local service revenues and delays in major customer installations and acceptances during the quarter.

For the quarter, capital expenditures were $752 million, down sharply from $2.24 billion in the same period last year. For the year, capital expenditures fell to $8.54 billion from $8.99 billion in 2000.

For 2002, Qwest cut its capital spending projection to a range of $4.0 billion to $4.2 billion, which is down from a previously tempered forecast of $4.2 billion to $4.3 billion. Qwest has trimmed its capital spending budget several times from an original forecast of $7.5 billion.

Michael Bowen, an analyst with SoundView Technology Group, said "there may be more cuts in store" as the company tries to control spending and reach its goal of being free-cash-flow positive in the second quarter of 2002 and beyond. Bowen expects Qwest's capital expenditures will be only $3.7 billion for the year.

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