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Qwest profits bring choices
Analysts say Qwest's second-quarter earnings may lead to buybacks or rewards for investors.
By Beth Potter, Staff Writer
Denver Post
Tuesday, August 1, 2006

Qwest could announce a stock buyback, a reinstatement of dividends or additional capital spending in its second-quarter earnings call today, two analysts said.

"It's going to be some kind of equity-friendly move in the next month or so," said John Hodulik, a telecommunication analyst who follows Qwest at UBS, a banking/financial firm in New York.  "It's time to reward the equity holders for sticking around."

Qwest spokesman Bob Toevs said Monday the company would have no comment until its earnings report.

The Denver-based phone company eliminated its dividend in June 2002.

Qwest's stock price has risen 19 percent in the last quarter, in part because investors expect a future dividend, said David Bowden, a telecommunication analyst at Bank of America in New York.

"We believe the sharp stock run-up in the second quarter reflects ... anticipation of coming dividends/buybacks," Bowden said in a Monday report about Qwest.

Hodulik said UBS predicts Qwest will have $1.5 billion in cash on hand in 2006, and a dividend, a stock buyback and increased capital spending are all options.

Qwest spent about $1.5 billion in capital improvements in 2005 and plans to spend a similar amount this year, spokesman Vince Hancock said last week.  The company now can offer broadband Internet service fast enough to show TV programs to 78 percent of its customers, up from about 67 percent in 2004.

Analysts expect quarterly earnings of 5 cents per share on sales of $3.5 billion, according to Thomson Financial, a national research firm.

Qwest announced its first profit in the first quarter of this year after being forced to restate $2.5 billion in net income and revenue in 2001 and 2002 following allegations of accounting fraud.

Company shares have more than doubled in the last year from $3.67 to close at $7.99 Monday.

Staff writer Beth Potter can be reached at 303-820-1503 or