Qwest 1Q Net Up Sharply On Lower Operating Costs

Qwest Communications International's first-quarter net income rose sharply as lower operating expenses helped offset declining voice revenue.

The Denver telecommunications company said Tuesday that earnings increased to $240 million, or 12 cents a share, from $88 million, or 5 cents a share, a year earlier.

Operating revenue fell 0.9% to $3.45 billion from $3.48 billion a year earlier. Voice-service revenue fell 6.6% to $2.08 billion, while Internet and video services revenue rose 11% to $1.22 billion.

On average, analysts polled by Thomson Financial expected earnings of 9 cents a share on revenue of $3.49 billion.

In premarket trading, Qwest shares were flat at $8.88.

Qwest, which builds and installs fiber optic communications systems, has struggled in recent years with a massive debt load, accounting problems and strategic challenges. Unlike its competition, Qwest doesn't have a wireless arm, a key source of growth. The company has partnered with Sprint Nextel to offer wireless service in its bundle.

Qwest's bundle penetration increased to 59% in the quarter, up from 53% a year ago, as sales of voice packages with three or more products continued to reduce churn, or the rate of customer cancellations.

The company's quarterly performance was helped by a 11% increase in mass markets data and Internet revenue. Qwest added 260,000 new high-speed Internet, wireless and video subscribers in the quarter.

Qwest's total access lines fell 6.8% to 13.6 million.

First-quarter operating expenses fell 6.2% to $2.93 billion due to lower facility costs, depreciation expense and realignment costs.

Last year, the company posted its first full-year profit since 2003.

Qwest said it was comfortable with its prior forecasts for revenue, earnings before interest, taxes, depreciation and amortization, and cash flow. The company said in early February it expected 2007 Ebitda increasing by $400 million.

-Jonathan Vuocolo and Josee Rose; 201-938-5964; jonathan.vuocolo@dowjones.com

(END) Dow Jones Newswires"

Posted to the site on 1st May 2007