Qwest Reduces Outlook Through 2002, To Cut 7,000 Jobs

Communications Today, Dec 14, 2001

Qwest Communications International [Q] on Thursday reduced its growth outlook through 2002 and said it will cut 11 percent of its work force, or 7,000 jobs, because of a decrease in demand for bandwidth services and the weak economy.

Qwest's action represents the second time in four months that it has lowered its outlook and cut thousands of jobs. In September, Qwest lowered its 2001 and 2002 revenue estimates, slashed its capital expenditures for this year and next, and cut 4,000 jobs, or about 6 percent of its workforce. The company did not give guidance then for 2002, which raised concerns that it would slash its already-reduced expectations again.

During an analysts meeting in Denver on Thursday, Qwest CEO Joseph Nacchio said demand for the company's services "is weaker across all of our product lines" and he can't forecast "the bottom yet in terms of telecom."

On Thursday, Qwest said it expects 2001 fourth-quarter revenues at $4.8 billion with EBITDA (earnings before interest, taxes, depreciation and amortization) at $1.7 billion.

Analysts had projected the company's 2001 fourth-quarter revenues to be $5.07 billion, according to research firm Thomson Financial/First Call.

For the full year 2001, Qwest said it now expects revenues at $19.8 billion and EBITDA of $7.45 billion. For 2002, Qwest said it expects revenues in the range of $19.4 to $19.8 billion and EBITDA in the range of $7.1 to $7.3 billion.

Analysts had projected the company's 2002 revenues at $21.10 billion, according to Thomson Financial/First Call.

Qwest's reduction continues a trend of lackluster performances this year. Last month, the company posted a 2001 third-quarter loss of $142 million, or 9 cents a share, compared with a loss of $248 million, or 15 cents a share, a year ago.

Analysts said then that they were disappointed that Qwest couldn't even meet reduced expectations. They had projected the company would report a 3 cent per share profit, according to Thomson Financial/First Call.

Credit Suisse First Boston [CSR] analyst Daniel P. Reingold said Thursday that Qwest needs time to "re-prove itself after so many misses, revelations of non-recurring revenues and the obvious pressures of the economy."

"We believe it will take several quarters for investors to regain interest in [Qwest] shares and confidence in forecasts," Reingold said in a Thursday research note. "In the meantime, we belive the 2002 targets are at the high end, but that this will be offset by the concept of Qwest as a potential takeout (by a Regional Bell Operating Company).

--Rodney L. Pringle, rpringle@pbimedia.com >TK XO Communications [XOXO]: