Qwest courts analysts in N.Y. amid skepticism
By Kimberly S. Johnson
Sunday, February 24, 2008
Qwest chief executive Ed Mueller's trip to New York to meet with analysts Monday is an
important step in convincing analysts that he has a solid,
long-term plan for the company.
The last time Qwest held an "Analyst Day" was in December 2001
here in Denver,
its hometown. This year's event will be at the
About 200 people are expected to attend.
While Qwest is rolling out the red carpet, some analysts have
voiced skepticism about the meeting and Mueller's pending
"I don't know what they're going to say. I don't
anticipate too much coming out of the meeting," said Tim Horan,
CIBC World Markets analyst. "You're looking at a company
with flat (cash flow) and revenues. There's not a lot
(Mueller) can say or do with the network . I don't think they
have a lot of options."
Shares of Denver-based Qwest closed Friday at $5.29.
That's down 35 percent from when Mueller took over Aug. 10 from
former CEO Dick Notebaert. The company remains saddled
with $14 billion in debt.
So far, close to the vest
Since coming on board, Mueller has undertaken a
strategic review of the company. In December, he announced
the company would spend just under $300 million to enhance its
broadband network, but not pursue a widescale television
Mueller hasn't gone into specifics about his five-point plan to
keep Qwest moving, and he was reticent about elaborating on the
strategy during the company's fourth-quarter earnings call
earlier this month.
He hinted that the company is seeking to change its wireless
strategy — it buys minutes wholesale from Sprint — in an effort
to raise revenues. Qwest's contract ends in 2009.
Yet, those comments could be a bluff in an attempt to "increase
their leverage with Sprint," according to a report by
Denver-based Janco Partners analyst Donna Jaegers.
"So far he's been so close to the vest with everything," Jaegers
said. "If he doesn't flesh out a little bit more what his
thinking is — such as his video strategy long-term — people are
going to leave disappointed."
Qwest says it won't disappoint.
"It's an opportunity to more fully discuss our strategic
direction and the rationale behind it to an important audience,"
said Qwest spokesman Bob Toevs.
With cable and VoIP companies such as Vonage cutting into
Qwest's consumer base, analysts are looking for a deeper
understanding of how Mueller is planning to grow Qwest in the
"We need to get more clarity as to the direction of the company
and how they're going to offset the competitive pressure they're
facing," said Todd Rosenbluth, equity analyst for Standard &
Poor's equity research. "They're headed in the right
direction in terms of increasing speed with modest capital
While he applauded the company's stability and payment of a
shareholder dividend for the first time in many years,
Rosenbluth said that Qwest's $300 million broadband investment
is a minor one compared with the cash that telco giants Verizon
and AT&T are investing.
"Qwest has a challenge in that they're smaller; their balance
sheet is not as strong as AT&T's and Verizon's," Rosenbluth
said. "It's harder for them to take risks and put more
cash to work."
"You can't stand still"
Notebaert received kudos from analysts and investors for
strengthening Qwest in the years after taking over the nearly
bankrupt company in 2002.
"But during that time, the other Baby Bells have grown and
changed," said telecom analyst Jeff Kagan. "This is a
fast-moving industry, and Qwest is not moving very fast.
You can't stand still when the industry around you is moving
Kagan, who will be watching a webcast of the analysts meeting,
"The average investor or analyst has to be scratching their head
wondering what's going on with Qwest," he said. "I'm not
overly enthusiastic, because we've been disappointed so far
during every call. He's got to have a great plan and be
emotional about it. He has to get everyone pumped up on
Kimberly S. Johnson: 303-954-1088 or