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Qwest Rebounds to Post Profit On Aggressive Cost Reductions
By Roger Cheng
The Wall Street Journal
Wednesday, November 1, 2006

Qwest Communications International Inc. rebounded to a third-quarter profit as aggressive cost-cutting plans continued to pay off.

The turnaround for the Denver telecommunications company was attributed to Qwest's reduction in facilities costs, which Chief Executive Dick Notebaert said represents the largest opportunity for savings.  "We're doing it at a controlled and disciplined pace," he said.

Mr. Notebaert said he sees improvement over the long term driven by lower costs, and also by raising average revenue per user to the industry average, which represents a $600 million opportunity.

The company has come a long way from a year ago, when it lost a bitter fight to acquire MCI Inc. to Verizon Communications Inc.  With continued losses at the time, many analysts doubted its ability to continue operating.  Like the rest of the former Baby Bells, it competes against cable companies, which offer rival Internet-based telephone services.  Unlike its peers, it has no stake in the fast-growing wireless business.

Qwest has shored up that gap by reselling Sprint Nextel Corp. cellular service as part of a bundle with local or Internet phone service, digital subscriber line, and satellite television with DirecTV Group Inc.

Qwest posted net income of $194 million, or nine cents a share, compared with a year-earlier net loss of $144 million, or eight cents a share.  The latest period included a gain of $92 million from a tax-sharing settlement and a severance charge of $43 million. Revenue ticked lower to $3.49 billion from $3.5 billion.

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