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Qwest Posts Sharply Higher Profit, Reiterates Financial Goals

CNBC.com
Tuesday, 1 May 2007 | 8:55 AM ET

Qwest Communications International's quarterly profit nearly tripled, beating market expectations, as the phone company cut costs and increased high-speed Internet subscribers, sending shares up 2.5%.

Qwest's company headquarters in Denver, Colorado.
AP
Qwest's company headquarters in Denver, Colorado.

Qwest, which mainly serves the Midwest, said quarterly net profit rose to $240 million, or 12 cents a share, from $88 million, or 5 cents a share, a year earlier.

Wall Street analysts were looking for earnings per share of 9 cents, according to Thomson Financial.

"Cost control was the main driver," said Donna Jaegers, an analyst at Janco Partners Inc. She noted, however, that the cost cuts were not accompanied by sales growth.

"You can't keep shrinking to nothing... It could be more balanced if they could grow revenue."

Revenue fell slightly to $3.45 billion from $3.48 billion in the year-ago quarter. Analysts on average had expected revenue of $3.49 billion, according to Reuters Estimates.

Operating expenses fell 6.2% to $2.9 billion, as Qwest focused on cost cutting and improved productivity.

The company, which has struggled over the past few years to reduce its debt after the burst of the global tech bubble, said total net debt fell to $13.8 billion, down $940 million from a year earlier.

Free cash flow totaled $150 million, an improvement of $300 million year over year.

Qwest, like its bigger peers AT&T and Verizon Communications, has been helped by a rise in Internet subscribers amid a decline in traditional phone subscribers.

The company said it added more than 167,000 high-speed Internet users in the first quarter. It had gained 165,000 such users in the fourth quarter.

Domestic access lines fell 6.8% from a year earlier to 13.6 million, Qwest said.

Capital spending in 2007 is expected to be around the same levels as 2006, it said.

The company's shares rose 2.5% to $9.10 in pre-market trade, from Monday's close on the New York Stock Exchange of $8.88.

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