Qwest CEO Seeks Recurring Revenue From Wireless Deal

NEW YORK -(Dow Jones)- Qwest Communications International wants to generate recurring revenue from its wireless partnership similar to its deal with DirecTV Group, according to Chief Executive Edward Mueller.

Qwest wants to change its existing relationship with Sprint Nextel where it is a simple reseller, and wants more of an equal partnership, Mueller said in an interview with Dow Jones Newswires on Monday. While he wouldn't rule out Sprint, most believe Qwest will talk to AT&T or Verizon Communications.

Further expanding any possible relationship, Mueller said he believes Qwest can open up a retail presence in its partner's stores in its territory. The company could sell its other products in those stores, increasing their foot traffic.

Potential partners could be attracted to the deal because Qwest could offer a cheaper bundle service that the wireless player could take advantage of, he said. He added the turnover rate would likely be lower if wireless service was bundled with other products Qwest could offer.

Wall Street appeared pleased with the development. Shares of Qwest were up 6% to $5.60 on Monday.

There's a lot of buzz around the opportunities surrounding wireless, said Patrick Comack, an analyst at Zachary Investment Research. Analysts like that Qwest appears to be dumping Sprint and hitching themselves with a larger, better-performing player.

Qwest loses money on its wireless resale agreement, which mainly entails buying wireless capacity from Sprint and reselling it. The deal expires in the first quarter of next year.

Qwest's deal with DirecTV, meanwhile, provides it with a recurring revenue for each customer it signs up.

Mueller acknowledged that Qwest will have to find someone willing to share its vision of a joint strategy. He declined to comment on whether talks had commenced.

Under a new deal, it appears as if Qwest wants to sell the Verizon or AT&T brand, Comack said.

"It should be interesting to see how Qwest ties its products together," he said.

While the topic is "sexy," Comack warned that the business is small for Qwest. He maintained his sell rating on the stock.

- Roger Cheng, Dow Jones Newswires, 201-938-2020

(END) Dow Jones Newswires

Posted to the site on 25th February 2008