Qwest hits earnings target

The long-distance and local phone giant's net earnings for the quarter, ended March 31, were $218 million, down from $239 million from the same period last year. Qwest also posted quarterly revenue growth of 11.8 percent to $5.05 billion and growth in earnings before interest, taxes, depreciation and amortization (EBITDA) of 15.8 percent to $2 billion.

The Denver-based company reported pro forma figures normalized to reflect the long-distance business that it had to divest in the 14-state territory served by US West, which Qwest acquired last year.

Qwest also expressed confidence in its fortunes for the full year.

"We are again affirming our targets for 2001," CEO Joseph Nacchio told analysts in a conference call.

Those targets project year-end revenue of $21.3 billion to $21.7 billion and EBITDA of $8.5 billion to $8.7 billion. The company should enter 2002 with a revenue growth rate of 15 percent and an EBITDA growth rate of "high teens to 20 percent," he said.

"Everyone's laying everything on the economy," Nacchio said of Qwest's competitors posting disappointing numbers. While he acknowledged that the economy could be better, he said that its effect on Qwest wasn't as bad as it might have been, in part because the former US West territory is holding up all right according to the Bureau of Labor Statistics. "We may have to work a little harder, but we'll meet our targets."

Internet and data services such as DSL (digital subscriber line), Web hosting and virtual private networks grew 44 percent in the quarter, totaling about 25 percent of revenue, Qwest said. Data and IP activities accounted for 65 percent of global sales, Nacchio said. DSL should continue to grow, with Qwest bringing optical services directly to business customers, not just operating as a wholesaler, he said.

Nacchio said that analysts could expect a small drop in capital expenditures, though that drop wouldn't signal a scaling back of Qwest's infrastructure buildout. Rather, he said, equipment suppliers are struggling right now. "It's an extremely favorable pricing environment," Nacchio said. "It's a buyer's market, and we're taking advantage of that."

For 2002, Qwest will begin to see a spike in revenue when it receives permission to provide long-distance service in some of its 14 western states, Nacchio said. The company's first application to regulators will come around August, with several more shortly after that, he said. Pointing to the 20 percent market share that SBC Communications grabbed in Texas and that Verizon Communications seized in New York, Nacchio said that Qwest has to gain only a fraction of that volume in its states to hit its 2002 revenue targets.

"We're going to do better than SBC and Verizon," Nacchio promised. "We are looking forward to introducing ourselves to AT&T's (long-distance) customers once we get in."

Long-distance revenues from former US West states will be "the pivot point for 2002," he said.

In Qwest's latest management shuffle, Nacchio announced that Annette Jacobs would be joining the company as president of its wireless voice and data phone business, which it operates in 12 western states. Jacobs has been running Verizon Wireless's Great Lakes operation. She replaces Peter Mannetti, who the company said is leaving to pursue other interests.