of Qwest investors repaid
By Andy Vuong, Staff Writer
Thursday, August 3, 2006
The big winners in Qwest's resurgence could be the longtime
shareholders who suffered significant paper losses during
the Joe Nacchio days but stayed committed to the company.
Qwest stock hit an all-time low of $1.11 in August 2002, two
months after Nacchio resigned and was replaced by Richard
Notebaert as chief executive.
Many retirees, such as Hazel Floyd, stuck with Qwest and
have realized a gain of about 700 percent on their shares
Qwest stock jumped another 4 percent Wednesday to close at
$8.75 a share, its highest close since March 2002. The
company said it is considering a stock buyback or a
"It will certainly help if they decide they can pay some
dividends," said Floyd, who said she worked for Qwest and US
West for 30 years.
Qwest acquired US West in June 2000.
An announcement on a dividend or stock buyback could come
after Qwest's next board meeting in mid-August, according to
UBS analyst John Hodulik.
"We estimate that the company could comfortably institute a
5 percent dividend yield and buy back 10 percent of the
stock," he wrote in a research note.
Many other retirees stuck around the way Floyd did, said
Nelson Phelps, executive director of the Association of US
"There's a fair amount of retirees who held on to their
stock or bought some more at a lower price," Phelps said.
"A lot of retirees who did hold on to their stock are going
to be very pleased if a dividend is declared. But even if
it's not declared, they're happier than they were under
Nacchio because the stock has increased."
On Tuesday, Qwest reported second-quarter net income of $117
million on revenue of $3.47 billion.
The solid earnings spurred Moody's Investors Service to
consider upgrading its rating on Qwest debt.
"The company has made significant progress over the last few
years in reducing debt, cutting its costs and streamlining
its operations," Moody's analyst Dennis Saputo said Wed
Saputo said Moody's will announce within 90 days whether it
will raise Qwest's debt rating from B1, four levels below
investment grade. He said Moody's may not raise Qwest's
rating if it issues a "material" dividend or buys back
stock. Moody's last raised Qwest's rating in November.
Also Wednesday, Qwest said it will issue $500 million in
debt securities in a private placement. The company said it
will use the funds to pay for general corporate expenses,
which include paying down existing debt and funding and
refinancing investments in telecommunications assets.
Staff writer Andy Vuong
can be reached at 303-820-1209 or