Sale Of Directory Operations Boosts Qwest's Earnings - InformationWeek

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Sale Of Directory Operations Boosts Qwest's Earnings

The carrier reported a $1.8 billion profit for its third quarter because of the sale of its QwestDex service.

DENVER (AP) -- Qwest Communications International Inc. swung to a profit of $1.8 billion in the third quarter because of the sale of its QwestDex directory service operations.

The telecommunications company said Wednesday it earned $1.05 per share for the July-September period versus a loss of $123 million, or 7 cents a share, a year earlier.

The latest profit figures included a gain of $2.5 billion for the completion of the second half of the QwestDex sale.

Revenue for the quarter totaled $3.57 billion, down from $3.77 billion a year earlier. It cited competition in the local voice and wireless services.

Qwest said despite the decline on overall revenue, its data and long-distance services revenue grew in its local service territory.

"We are confident with the foundation of customer service we have built," said Richard C. Notebaert, Qwest chairman and CEO. "We believe that by improving the customer experience and delivering a comprehensive set of voice, data and video solutions, we will become the first choice for customers' communications needs."

It had an operating loss of $523 million for the quarter in contrast to an operating profit of $76 million in the third quarter 2002 because of one-time charges of $393 million to end arrangements with Calpoint and another vendor as well as a $230 million impairment charge for its wireless division.

The company said the number of its access lines dropped from 17 million in 2002 to 16.3 million in 2003, including a loss of 145,000 due to the WorldCom bankruptcy, and its staffing levels dropped from 53,133 to 46,701, partly because of the departure of QwestDex workers.

"While the industry environment is still challenging, we are seeing signs of stabilization in our business," said Oren G. Shaffer, Qwest's vice chairman and CFO. "We continue to focus on growing profitably and pursuing opportunities to improve our financial strength."

Qwest closed the first phase of the QwestDex deal in November 2002 for its directory operations in Colorado, Iowa, Minnesota, Nebraska, New Mexico, North Dakota, and South Dakota.

In September, Qwest said it had received $4.3 billion cash for directory operations in Arizona, Idaho, Montana, Oregon, Utah, Washington, and Wyoming.

The directory business is now owned by a group of leveraged buyout firms led by The Carlyle Group. The new company will be known as Dex Media and remain based in Arapahoe County near Denver.

The company also announced a tender offer for up to $2.25 billion for several categories of notes. Officials said when that payoff of outstanding debt is completed, Qwest will have reduced its total debt by more than $7 billion since the end of the third quarter of 2002, saving an estimated $100 million annually in net interest expenses.

For the first nine months of the year, Qwest earned $1.92 billion, or $1.11 a share, versus a loss of $41.2 billion, or $24.56 a share, a year ago. Revenue fell to $10.8 billion from $11.7 billion a year earlier.

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