Oct 31, 2006 8:51 am US/Mountain
Qwest Swings To 3Q Profit, Helped By Tax Benefit
By Sandy Shore, AP Business Writer
DENVER (AP) ―
Qwest Communications said Tuesday it swung to a profit in the third quarter as it added more customers for Internet and data services, lowered expenses and recorded a tax-related benefit.
It marked the third consecutive quarter of profit for the Denver-based company which has shifted its strategy toward selling packages of services amid competition from cable television and cell phones.
Chief Executive Officer
Dick Notebaert said Qwest Communications International Inc. hopes to finish 2006 with an annual profit for the first time since the company was formed in six years ago, with the exception of years in which asset sales boosted revenue.
Shares of Qwest dropped 38 cents or 4.2 percent to $8.63 on the New York Stock Exchange. In the past year, the shares have ranged from $4.08 to $9.22.
Notebaert attributed the share drop to an adjustment after the price rose 3.5 percent Monday after UBS analyst John C. Hodulik upgraded the company. "It's still a good performance year-to-date," Notebaert said.
Janco Partners analyst Donna Jaegers attributed the share price drop to concerns by investors over Qwest's competition from Comcast Corp. and Cox.
For the quarter ending Sept. 30, Qwest reported net income of $194 million, or 9 cents per share, compared with a loss of $144 million, or 8 cents per share, in the third quarter of 2005.
Results for the most recent quarter included a tax-related gain of $94 million and a $43 million severance charge while interest expenses fell 24 percent to $291 million.
Revenue dipped 1 percent to $3.49 billion from $3.50 billion in the year-ago quarter. Results just missed analysts' expectations for $3.5 billion in sales.
The company said third-quarter revenue benefited from improving sales in high-speed Internet, advanced data products and digital voice service, particularly sales of packages that combine more than one product. Last year's revenue included $52 million from a government contract, Qwest said.
Total access lines fell 6 percent because of a sharper-than-expected decline in retail residential lines, but margins were on the right track, UBS analyst John Hodulik said in a research note. About 175,000 DSL lines were added in the quarter.
Qwest's shares fell 35 cents, or 3.8 percent, to $8.66 a share in morning trading on the New York Stock Exchange. In the past year, the price has ranged from $4.08 a share to $9.22 a share.
In the first nine months, the Denver-based phone company reported net income of $399 million, or 20 cents a share, compared with a net loss of $251 million, or 14 cents a share, in the first nine months of 2005. Revenue totaled $10.44 billion, up from $10.42 billion in the nine-month period of 2005.
Qwest is the primary local phone service provider in 14 mostly Western and Midwestern states.
(© 2006 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
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