Qwest Stays Frugal in Q4

Qwest Communications International Inc. (NYSE: Q)'s fiscal year 2007 ended in much the same way that it started -- conservatively. The company reported another quarter with sharply increased profits but on decreased operating expenses and not growing revenues.

For the fourth quarter of 2007, Qwest reporting earnings of $366 million, or 20 cents per share, on revenues of $3.4 billion. In the same quarter of last year, Qwest earned $194 million, or 10 cents per share, on revenues of $3.5 billion. Income beat analysts' expectations of 14 cents per share, according to Thomson Financial .

Table 1: Qwest's Q4 2007 Financial Results
4Q07 4Q06 Y/Y Change
Revenue (Millions) $3,435 $3,488 -1.52%
Earnings (Millions) $366 $194 +88.66%
GAAP EPS $0.20 $0.10 +100.00%
Access Lines 12,789,000 13,795,000 -7.29%
Broadband Subscribers 2,611,000 2,138,000 +22.12%
Video Subscribers 649,000 411,000 +57.91%

While overall revenues were flat, Qwest notes that data, Internet, and video revenues now make up 39 percent of its business and were up 8.7 percent year over year.

But overall, Qwest's bottom-line growth continues to be a product of its careful spending. It spent $739 million less in 2007 than it did in 2006 -- a decrease of 6 percent. This figure does not include the $393 million it spent in litigation charges last year, much of which went to paying former CEO Joe Nacchio's legal bills. (See Nacchio Found Guilty and Nacchio Sues Qwest for Legal Fees.)

While often criticized for relying on partnerships to deliver new growth services, Qwest continues to preach that the approach is working just fine for the company, claiming that sales of voice packages that include three or more products continue to reduce churn.

Customers are also adding more features and bandwidth, leading to an increase in ARPU (average revenue per user) from $51 to $55. Qwest's overall broadband growth, however, has begun to slow. Its bundled service penetration of 62 percent could be a partial reason. High penetration rates of broadband services is one factor that has caused broadband growth in the U.S. to begin to slow. (See US Broadband Growth Slows.)

Still, this conservative quarter is nothing new to investors. Qwest's shares were up $0.23 (4.48%) to $5.36 in pre-market trading.

— Raymond McConville, Reporter, Light Reading

minnehot 12/5/2012 | 3:47:52 PM
re: Qwest Stays Frugal in Q4 You failed to mention Qwest revenues actually DECLINED 1.5%! Landline losses continue apace and DSL growth stopped. No wireless network or fiber to the home video play, just resell deals.
Where does the growth come from? They don't say because there won't be any. This company continues to shrink, qtr in qtr out, year after year. They need to sell this dog off in a auction to the highest bidder and stop this death spiral before its too late.
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