Qwest Lowers Revenue, Earnings Guidance for Year

Qwest Communications International Inc. (www.qwest.com) on Thursday lowered its revenue and earnings guidance for the year, citing a sluggish economy in its 14-state local region and continued weakness in the telecommunications sector.

The Denver-based company expects total revenue of $18 billion to $18.4 billion, down from earlier guidance of $19.4 billion. Qwest anticipates adjusted earnings before interest, taxes, depreciation and amortization of $6.4 billion to $6.6 billion, down from earlier guidance of $7.1 billion.

Qwest also said it expected 2002 capital expenditures to be $3.1 billion to $3.3 billion, down from earlier guidance of $3.7 billion. Nacchio said the capex reduction would not jeopardize service or quality.

The company still expects to reach cash flow positive in the second quarter of 2002.

Qwest CEO Joe Nacchio said he thought there were some signs the telecom industry had hit rock bottom. “I think there are some mixed signals we are bouncing along the bottom as an industry,” he said during an evening conference call with the media and analysts Thursday.

“It looks like there is some modest recovery on the national level,” Nacchio said, but the Bell’s 14-state region “still remains slow.”

Explaining some of the reasons for the lower guidance, Nacchio cited lower demand for data services, increased competition in the long distance business due to other Bells entering new markets within their local regions and a decrease in access line revenues as a result of increasing competition and unbundled network element pricing reductions.

Nacchio said he expects Qwest to begin doing filings with the Federal Communications Commission (www.fcc.gov) for final long distance approval within its 14-state region by late May or early June, although the Bell does not expect significant long distance revenue in those states until 2003.

Qwest executives said the company is in compliance with its bank covenants and future asset sales would only improve their liquidity.

Nacchio confirmed Qwest is in due diligence talks with some parties to sell its QwestDex directory publishing business and wireless operations. The company also is working on selling its enterprise application services provider, Qwest Cyber Solutions, and other assets including wireless towers and access lines, he said. In total, Nacchio said non-core assets were valued at more than $10 billion.

The company also announced it would reduce its workforce by an additional 2,000 employees, bringing the total headcount to 53,000 by Sept. 30.

Qwest is scheduled to announce its results for the first quarter of 2002 April 30. Nacchio said the results would fall below a consensus of analyst estimates.

Qwest’s shares closed at $7.57 Thursday on the New York Stock Exchange (www.nyse.com).

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