Qwest Posts 1Q Profit After Wireless-Assets Sale

NEW YORK (Dow Jones) -- Qwest Communications International (Q) on Tuesday said it posted a net profit for the first quarter, helped by the sale of wireless assets and more cost reductions.

The Denver-based phone company, which ended its bid to acquire MCI Inc. (MCIP) on Monday, reported net income of $57 million, or three cents a share. Qwest lost $310 million, or 17 cents a share, in the year-earlier quarter.

Revenue slipped to $3.45 billion from $3.48 billion a year earlier.

Excluding a gain of $257 million from the sale of wireless licenses and related assets to Verizon Wireless, Qwest recorded a loss from operations of 11 cents a share.

The company was expected to lose 10 cents a share on revenue of $3.45 billion, according to the mean estimate of analysts polled by Thomson First Call.

During the quarter, Qwest added 85,000 high-speed Internet accounts to bring its total to 1.1 million. The company also gained 82,000 long-distance lines to end with 4.6 million in service.

Yet local phone lines in service dropped 4.4% to 15.3 million, as competition continued to erode the company's strength in its traditional market. Qwest said losses slowed owing to the introduction of new phone plans and favorable regulatory rulings.

Qwest cut operating costs by $136 million to $3.2 billion from a year earlier. The carrier also trimmed capital expenses to $313 million from $455 million.

Qwest said it reduced its total debt by more than $565 million to end the quarter at $14.9 billion. Interest expenses declined to $381 million from $397 million a year earlier.

Financial analysts say the company's high debt load made it difficult for Qwest to prevail over Verizon Communications (VZ) in the bidding war for MCI.

On Monday, Qwest said it would no longer pursue MCI after the company spurned its buyout offer for a third time.

The company's retreat paves the way for Verizon to complete its acquisition of the long-distance carrier. Verizon originally announced it would buy MCI in February, but a bidding war ensued after Qwest countered with repeated bids of its own.

MCI executives accepted less money from the larger Verizon because they viewed the company as financially stronger and better positioned strategically than Qwest.

(END) Dow Jones Newswires"

Posted to the site on 3rd May 2005