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Qwest Warns of Lower Revenue
By Jay Miller
The Wall Street Journal
Wednesday, April 8, 2009

Qwest Communications International Inc. warned that it expects first-quarter revenue to come in "modestly" below Wall Street expectations, but did say it expects adjusted earnings to come in above views.

Qwest provided the financial update as it looks to offer debt.  Originally, the company planned a $300 million offering, but late Tuesday the company increased that offering to $810.5 million.  The seven-year notes priced at just under 92.5% of par.

"We're pleased with the strong demand and success of this offer," said Joseph J. Euteneuer, Qwest executive vice president and chief financial officer.

Standard & Poor's Ratings Service assigned the notes a BBB- rating, one notch above junk.  However, the ratings agency also dropped the rating on the company's $850 million revolving credit to BB, two notches below investment grade, after catching wind of the bigger offering.

"We lowered the rating on the revolving credit due to heightened concentration of priority claims at time of default under our recovery methodology, notably additional debt at Qwest Corp., given the upsizing in the new debt issue," said Standard & Poor's credit analyst Richard Siderman.

The phone carrier, one of three remaining Baby Bells, has been hurting from a slowing economy and stiff competition from cable and wireless alternatives.  The company is hoping to offset its access-line loss and weakness in its wholesale business through growth in data and Internet services.  The weak housing market is also contributing, as it means less demand for phone lines.

The telecommunications company also said it expects its free cash flow figures to be in line with its February guidance.

Earlier Tuesday, the company said it would offer $300 million of debt securities in a private placement.  Qwest planned to use proceeds for general corporate purposes, including repayment of debt and funding investments in its telecommunications assets.

The company will report quarterly results April 29.

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