Lower Profit, Trims Full-Year Outlook
By Donna Kardos and Shirleen Dorman
The Wall Street Journal
Wednesday, August 6, 2008 11:26 a.m.
Qwest Communications International
Inc. reported a 24% drop in second-quarter profit amid declining
revenue and a tax charge. The telecommunications provider also
lowered its outlook for the year.
Qwest posted net income of $188 million, or 11 cents a share,
down from $246 million, or 13 cents, a year earlier. Qwest
blamed the decline largely on a higher income tax rate.
Revenue slid 2% to $3.38 billion.
The company ended the quarter with 12.2 million access lines,
down 8%, though broadband subscribers jumped 14% and revenue
from data, video and Internet services climbed 9%.
Despite the increase in broadband subscribers, Chief Executive
Edward Mueller said the company lost market share in the
high-speed Internet market, making the
company the latest Baby Bell to lose market share to cable
competition. Mr. Mueller cited seasonal issues, such as college
students canceling their lines when they go home for the summer,
as well as the lack of promotions, for the slower growth.
"While we lost a little ground, we feel pretty good about where
we're headed," he told analysts during a conference call
Qwest again lowered its growth full-year forecast for total
revenue to 2.5% and now sees earnings before interest, taxes,
depreciation and amortization 1% to 2% below 2007 levels.
The phone carrier 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
Qwest was hoping to improve its performance through wholesale
price increases, but that effort was dealt a major blow two
weeks ago, when the Federal Communications Commission denied the
company's request to raise wholesale prices in four markets.
Qwest had argued it faces enough competition from cable and
other phone providers in four cities to be given relief from
pricing constraints for smaller companies that use its wires to
operate, but competitors lobbied, saying they couldn't access
Separately, late Tuesday Qwest won partial regulatory relief
from the FCC from rules governing the commercial Internet
market. The FCC lifted pricing restrictions for some of Qwest's
Internet services offered to large companies that move massive
amounts of data through their networks.
Inc. all have been given similar pricing flexibility.
--Roger Cheng and Fawn Johnson contributed to this article
Write to Donna Kardos at
Shirleen Dorman at