UPDATE: Qwest 3Q Net Falls; Provides More Upbeat 2009 View
October 28 2009 - 8:26AM
Dow Jones News
Qwest Communications International Inc. (Q) posted a 6% decline
in third-quarter net income on the further deterioration of its
fixed line business, but offered a slightly rosier forecast for
full-year adjusted earnings.
The Denver telecommunications company, like its larger peers
Verizon Communications Inc. (VZ) and AT&T Inc. (T), has been
hit by the downturn in consumer spending, which has accelerated the
willingness to drop traditional phone lines. But unlike the other
major telcos, Qwest lacks a faster growing wireless arm to offset
the slowdown. Instead, it has relied on a slow upgrade of its
network to deliver faster Internet service, as well as partnerships
with Verizon Wireless and DirecTV Group Inc. (DTV) to keep pace
with its cable competitors.
Qwest reported third-quarter net income of $136 million, or 8
cents a share, compared with a year-ago profit of $145 million, or
8 cents a share. Results include a 1-cent charge for costs related
to its restructuring, severance and litigation.
Revenue, meanwhile, fell 9.6% to $3.05 billion.
Analysts, on average, had expected earnings of 7 cents a share
on revenue of $3.07 billion.
The company also said it expects its full-year adjusted earnings
before interest, taxes, depreciation and amortization to be at the
upper end of its previously projected range of $4.25 billion to
$4.4 billion. It expects full-year capital expenditures of $1.6
billion, down from a prior estimate of $1.7 billion, mainly as a
result of lower network volumes, lower maintenance requirements and
fewer projects.
Its consumer business continued to decline as consumers opt to
go with just their cellphones or switch to a cable phone service.
Its mass-market segment saw revenue fall 14% from a year ago.
The company ended the quarter with 10.6 million access lines,
down 11% from a year earlier. Meanwhile, broadband subscribers rose
5.7% to nearly 3 million, adding 28,000 during the quarter, and
video had a 13% gain. Average revenue per user, a key metric for
telecommunications companies, rose 5.4%.
The company has attempted to slow the deterioration by offering
a "quad play" of services: phone, Internet, wireless service and
satellite TV.
Qwest added 15,000 DirecTV subscribers in the quarter. It also
signed up 23,000 new customers through its partnership with Verizon
Wireless. Last year, the company switched to the carrier from
Sprint Nextel Corp. (S), and expects the transition to be complete
by the end of the month, when it completely drops Sprint's service
to customers.
The business segment's revenue fell 1% from a year ago to $1
billion. Qwest has seen a much narrower decline on the business
side than AT&T and Verizon because it has a smaller presence in
business, and still considers it a potential area of growth.
Shares rose 4.4% premarket to $3.60. The stock through Tuesday
was up 33% over the past year, but it is down 29% since peaking in
early May and is off 5.2% in 2009.
-By Roger Cheng, Dow Jones Newswires; 212-416-2153;
roger.cheng@dowjones.com