Qwest 3Q profit down; will cut 1,200 jobs
(AP) - Qwest Communications International Inc. posted a profit for its third quarter Wednesday, but said the continued slide of its traditional phone business is forcing it to cut 1,200 jobs, 3 percent of its work force.
The cuts will come before the end of the year, which will leave the company with 33,500 employees, 9 percent fewer than at the end of last year.
That's about the same rate at which customers are canceling their phone service to go wireless or sign up with a cable company.
The cuts will come from all levels and units of the company, Chief Operating Officer Tom Richards said.
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The Denver-based phone company provides service in Minnesota and several other Midwestern states. It's the country's third-largest phone company. Qwest earned $151 million, or 9 cents per share, in the three months that ended Sept. 30.
That was down 93 percent from $2.06 billion, or $1.08 per share, a year ago, but those 2007 results were boosted by a $2.1 billion tax benefit.
Revenue fell 2 percent to $3.38 billion.
Analysts polled by Thomson Reuters had expected the company to earn 10 cents per share on $3.33 billion in revenue. Analyst Tim Horan at Oppenheimer & Co. said that Qwest met earnings expectations after taking into account a $30 million net charge for severance benefits and a lease restructuring.
Qwest also said it expects results this year to come in at the low end of its previous forecast, which called for earnings before interest, taxes, depreciation and one-time items to fall 1 or 2 percent.
Analysts were already expecting a 2.25 percent full-year decline in that earnings measure, which fell 6 percent in the third quarter to $1.08 billion.
Qwest shares fell 31 cents, or 12 percent, to $2.29 in morning trading Wednesday, nearly reversing a 17 percent gain Tuesday.
Qwest lost 320,000 phone lines during the quarter, to end with 11.9 million. The rate of decline is similar to the one reported by larger peers AT&T Inc. and Verizon Communication Inc.
Like AT&T, Qwest posted weak numbers for broadband recruitment in the second quarter but saw a minor rebound in the third quarter, adding 61,000 customers to its high-speed Internet service.
Qwest attributed the increase to an ongoing upgrade to higher download speeds, as well as aggressive marketing.
"I think we're holding our own against cable," chief executive Ed Mueller told analysts on a conference call.
Chief Financial Officer Joe Euteneuer said the company was in good shape to handle its $14 billion debt load, even as credit markets have more or less frozen.
With interest rates at "irrational levels," Qwest will be focusing on paying off debt rather than refinancing it, he said.
The company was set to spend the last $193 million of a stock buyback program in the fourth quarter, but said Wednesday that it was extending the deadline, since it can't finance the buyback by borrowing at attractive rates.
Executives said Qwest would stick to its dividend, which at 32 cents per year works out to a 13.8 percent yield on the stock.
Analyst Jason Armstrong at Goldman Sachs suggested on the call that the company slash the dividend and use it for cash requirements, since investors don't seem to be giving the company much credit for the high yield.
"We won't adjust the dividend up and down based on the current stock price," Mueller said.
Communications services for large businesses were a bright spot in the quarter, with revenue of $1 billion, up 7 percent from a year ago.
Qwest said it had good traction with the government, getting contracts from the Department of Veterans Affairs, NASA and the General Services Administration. However, profit margins declined in the segment.
(Copyright 2008 by The Associated Press. All Rights Reserved.)
