Qwest profits rise on cost cutting

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A sharp decline in net interest payments coupled with further cost cutting helped Qwest Communications International, the fourth-largest US telecommunications group, report a 54 per cent increase in first quarter net profits.

Net income increased to $88m, or 5 cents a share, from $57m, or 3 cents a share, a year earlier on revenues which edged up to $3.48bn from $3.45bn – a marked contrast with the revenue declines reported in earlier periods.

In the year ago period, Qwest recorded a gain of $257m, or 14 cents a share, from the sale of its mobile-phone network to Verizon Communications. Excluding that gain, the company would have reported a loss of 11 cents a share.

Interest expense dropped by 22 per cent to $296m in the latest quarter as Qwest continued to pay down debt and restructure its balance sheet with lower coupon offerings. Over the past year it has cut total debt by $1.9bn to $15.4bn.

Meanwhile operating expenses were cut by four per cent to $3.1bn.

The Denver-based group was the last of the big four US telecommunications companies to report its quarterly financial results, which have mostly reflected the continuing industry consolidation, slowing local line losses, growing data revenues and the increasing importance of their wireless operations.

Like his counterparts, Richard Notebaert, Qwest’s chief executive, has steered the company towards broadband high-speed internet and wireless services to offset declines in the traditional local-telephone business.

Like other US telecommunications giants, Qwest faces growing competition from the consumer telephony and VoIP services launched by cable TV networks and independent competitors like Vonage, lost 193,000 local telephone lines in the quarter. Total access declined by 5.2 per cent from a year earlier to 14.55m.

But these losses were offset by the addition of 198,000 DSL lines which helped boost consumer data revenues by 11 per cent from the previous quarter. Qwest ended the period with 1.7m broadband customers.

Mr Notebaert led Qwest’s abortive bid battle for MCI last year – a battle that was ultimately won by Verizon Communications. On Tuesday he said he expected both carrier and equipment supplier consolidation to continue and while he did not rule out Qwest’s involvement in M&A he said: “It would have to be both strategic and at the right price.”

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