Here are some highlights from today's call:
- Fourth-quarter net income was $2.7 billion, or $1.61 per diluted share. This compares with a net loss of $214 million, or $0.13 per share last quarter.
- Quarterly revenues of $3.7 billion represents a reduction of 3.1 percent sequentially and 11.2 percent from last year's fourth quarter.
- Full-year 2002 revenue was $15.5 billion, down 7.5 percent from 2001's $16.7 billion.
- Thanks in part to Qwest's restatement of accounting in light of federal inquiries (see Qwest's Amazing Shrinking Revenues), the carrier reported a net loss for the year of $35.9 billion, or $21.35 per share, compared with a loss of $4.8 billion, or $2.88 per share, last year.
- Qwest continues to "cooperate fully and transparently" with inquiries from the SEC and U.S. Department of Justice, execs said today.
- Overall debt's been reduced from $25 billion to $20 billion, thanks to a combination of selling its directory services business (see Qwest Closes QwestDex Sale ) and a controversial but successful bond exchange (see Qwest Graded Up and Down).
"We have addressed key operational and structural issues. We have made significant headway on liquidity and solvency issues. We have begun to bring our costs in line with our revenues... I am pleased with the progress we have made in the quarter," said CEO Richard Notebaert on a conference call with analysts.
Notebaert expressed "cautious optimism" about signs of stabilization in Qwest's IP and data services businesses, and he said there were fewer losses sequentially in consumer voice connections due to "wireless and broadband substitution." But none of this points to an improved picture for 2003.
"We continue to see a challenging business environment with no significant uptick in enterprise demand for telecommunication services," said Oren G. Shaffer, Qwest vice chairman and CFO, on today's call.
Qwest predicts a decline in access lines, flat sales in data networking, and "modest" growth in Frame Relay and ATM business services. Ultimately, Qwest sees the "rate of revenue decline to be comparable or slightly better than 2002 levels."
Not a fun outlook. One bright spot is DSL, the single area in which Qwest expects growth to exceed 2002 levels. The carrier plans to invest $75 million in 150 new central offices and 1,400 remote terminals to improve DSL access in its 14-state region this year. Qwest execs indicated some factors could brighten the dim big picture. The Federal Communications Commission (FCC) could rule in favor of ending UNE-P constraints on the former RBOCs like Qwest (see Hanging Fire With the FCC). Further long-distance approvals for Qwest could spur the growth of business services.
There's also hope that the second part of the carrier's sale of its QwestDex directory services will come through sometime this year, providing a further influx of over $4 billion. Qwest also expects to keep grooming off unprofitable businesses, such as the sale of CPE. And by renegotiating supplier agreements and taking other belt-tightening measures, execs say they're confident they can trim another $1 billion from operating expenses next year.
It's a tall order, but at least one analyst thinks Qwest is on the right track, even if the economy remains weak. "They are doing a great job of investigating, isolating, and fixing the problems having to do with debt, accounting, customer care, moving into new services like DSL and long distance, etc.," writes Jeff Kagan, an independent telecom analyst, in an email today. "[I]ndustry-wide issues are another story. That is not something Qwest can change."
— Mary Jander, Senior Editor, Light Reading