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Qwest Gives Market a Boost

Light Reading
News Analysis
Light Reading
6/19/2001

Bucking the trend of negativity in the telecommunications business, Qwest Communications International Corp. (NYSE: Q) this morning came out with a positive forecast for earnings and held an upbeat conference call.

Shares of Qwest traded up 1.62 (5.43%) to 31.44 in midday trading after the company confirmed previously announced guidance. Citing continued strong demand, the company remains comfortable with second-quarter revenue growth of 12 percent to 13 percent over the year-ago period. For full year 2001, revenues are expected to be $21.3 billion to $21.7 billion with EBITDA of approximately $8.5 billion to $8.7 billion.

The news may not have been spectacular, but just being able to maintain a growth rate in these times is reassuring. The news also comes in stark contrast to Level 3 Communications Inc.'s (Nasdaq: LVLT) brutal cutbacks, announced yesterday (see Level 3 Shares Dip on Warning).

On the conference call, Qwest management said its business model is firing on all cylinders. Indeed, unlike some of the carriers exclusively selling raw optical bandwidth and dark fiber, Qwest has more diverse revenue streams with a combination of healthy local exchange and long-distance operations in addition to a cutting-edge fiber backbone.

As detailed in the "New Carrier Landscape" report issued by Light Reading's research service Optical Oracle, Qwest ranked number one out of 14 carriers because of its strategy of using its fiber backbone to support recurring network-based service revenues. With pricing pressure mounting for fiber service, having diverse services revenue is becoming increasingly important to carrier earnings.

— Christopher P. Bulkey, Financial Analyst, Light Reading http://www.lightreading.com

Editor's Note: Light Reading is not affiliated with Oracle Corporation.

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