Qwest Cost-Cutting Lowers Losses

Qwest Communications International Inc. today reported a lower loss in earnings than compared to the second quarter a year ago, crediting cost-cutting for the better results.

The fourth-largest U.S. phone company showed a loss of $164 million, or 9 cents per share, as compared to last years second-quarter decline of $776 million, or 43 cents per share. Qwest said it lowered operating expenses in several areas, including a 28 percent reduction in capital spending and a 30 percent slash in general overhead.

Qwests revenue for the second quarter of 2005 totaled $3.47 billion, up slightly from $3.45 billion in the first quarter and $3.44 billion in the second quarter of 2004.

Reuters said analysts on average had expected Qwest to post a loss before one-time items of 9 cents per share, attributing its Reuters Research arm.

Qwest earlier this year lost its bid to acquire MCI Inc. Verizon Communications Inc. instead won the deal, which would have bolstered Qwests position in the marketplace, says telecom analyst Jeff Kagan. The next obvious question we are all asking is, what move will the company make next? Qwest is a well-run company, but it is much smaller than the other Bells, so we are all wondering in the shadow of the try for MCI what they will do next.

Qwest has been trying to manage its $17 billion debt for the past few years, and says this quarter represents the fifth consecutive quarter of stable profits, as well as year-over-year growth in mass markets and business revenue. The company resells Sprint Corp.s wireless service and says its wireless income grew 4.8 percent sequentially to $130 million and 1.6 percent, as compared to the second quarter of last year.

The company also added 68,000 high-speed Internet lines to its roster in the second quarter bringing total lines in service to 1.2 million, representing a 6 percent increase from the first quarter and a 40 percent increase compared to the second quarter of 2004.

“Improved operating results are driving meaningful expansion in free cash flow,” said Oren G. Shaffer, Qwest vice chairman and CFO, in a news release. “Our ongoing improvement in cash flow generation, coupled with our recent financing transactions, advances us in our goal to reduce debt and invest in growth.”

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