The Association of U S West Retirees



Qwest financial status mixed
Third-quarter profit clouded by dispute with retirees, loss of landline customers

By Leslie Brooks Suzukamo
St Paul Pioneer Press
Wednesday, November 1, 2006

Qwest Communications International swung to a profit for the third-straight quarter this year, but angry company retirees in Minnesota and elsewhere say the company is pleading poverty to saddle them with higher health care costs.

Qwest, the largest phone company in Minnesota and 13 Western states, reported a profit of $194 million for the third quarter, reversing a loss of $144 million from the same period a year ago.  The results are a marked improvement from a few years ago, when the company posted heavy losses and skirted bankruptcy.

But Qwest's financial picture was not all rosy.

While the company reported it added 175,000 new high-speed Internet customers last quarter, a 47 percent increase over the same period a year ago, it also lost landline customers who are dropping phone service for their cell phones.

The company reported a 6 percent loss of landlines in the third quarter from the previous year.  Qwest now has 14 million lines in its territory and 1.7 million in Minnesota.

Revenue fell a notch to $3.49 billion for the quarter from $3.5 billion the previous year.

Meanwhile, some of Qwest's approximately 50,000 retirees are up in arms because the Denver-based telecommunications giant told them earlier this month that it will no longer cover increases in their health care premiums.

Qwest also told its retirees that it has capped life insurance benefits at $10,000.  Previously, it paid out the equivalent of one year's salary.

"It seems to me to be a little disingenuous for the company to plead poverty and say they are doing this (reduction of benefits) for the sake of the health of the company," said Dave Cosgrove, who lives in Bloomington and worked at Qwest for 30 years.

Cosgrove, 58, said he will end up paying $222 a month next year in health care premiums to his HMO, HealthPartners, up 79 percent from the $124 per month he pays now.

At the same time, his life-insurance benefit will drop to $10,000 from $88,000, he said.

Qwest, which used to be known as US West, made the changes reluctantly to control rising health care costs, spokesman Bob Toevs said.  A minority of Qwest's estimate of 48,000 retirees will be affected, he said.

But the Association of US West Retirees disputes that, claiming the total number of retirees is more like 50,000 to 60,000, and that the changes will affect half that number.  The association urged its members to complain directly to Qwest CEO Richard Notebaert.

The National Retirees Legislative Network also sent letters to congressional delegations and congressional candidates in the 14 states where Qwest operates.  The Washington, D.C., group, which has 2 million members, wants Congress to intervene on behalf of the Qwest retirees, said Dick Johnson, chairman of the US West retirees.

The retirees' anger toward Notebaert is new.  The group praised Notebaert after he took over the company's helm from former CEO Joseph Nacchio and began steering it toward profitability.  Nacchio, meanwhile, faces federal charges of fraud and securities violations.

"I am shocked and appalled by your decision to reduce rather dramatically health and death benefits for your retirees!" wrote retiree Gerald Claessens of Roseville.  "I thought that after Joe Nacchio wrecked so many lives, your regime would have treated the retiree group with more dignity and respect.  I and many others who thought that way were wrong."

Qwest shares closed at $8.63, down 38 cents.

Leslie Brooks Suzukamo covers telecommunications and technology and can be reached at or 651-228-5475.

Third Qtr. ended Sept. 30
(in millions, except per share)

  2006 2005
Revenue $3,487 $3,504
Net Inc. $194 $(144)

Per Share $0.09 $(0.08)
Nine Months

Revenue $10,435 $10,423
Net Inc. $399 $(251)

Per Share $0.20 $(0.14)