Qwest Communications reports fourth quarter 2003 net loss per diluted share of $0.17 - Business - Qwest Communications International Inc

Fiber Optics Weekly Update, Feb 27, 2004

Qwest Communications International announced fourth quarter and full year 2003 financial and operating results. The reported net loss for the quarter was $307 million, or $0.17 per diluted share, and net income was $1.6 billion, or $0.93 per diluted share for the year.

Revenue for the quarter was $3.5 billion, a 5.6 percent decrease from the fourth quarter of 2002. For the full year, revenue was $14.3 billion compared to $15.4 billion for 2002, or a decline of seven percent. Growth of long-distance and business and consumer data revenue in the quarter partially offset the continued competitive pressures in local voice and wireless services, as well as the de-emphasis of certain non-core services.

Total cost of sales plus selling, general and administrative (SG&A) expenses for the quarter were $2.6 billion, compared to $2.5 billion for the fourth quarter of 2002. Investments made in the quarter to support product launches, as well as increased pension and retiree healthcare costs, were the primary drivers of the increase.

Total cost of sales and SG&A expenses for the full year were $10.9 billion compared to $11.3 billion in 2002. Excluding the $393 million pre-tax charge to terminate certain unconditional purchase obligations in the third quarter, total cost of sales were flat. SG&A expenses decreased by $673 million in 2003. The decrease in SG&A was the result of focused cost savings initiatives and a reduction in bad debt expense, which more than offset increased costs to support investments in key growth areas and higher pension and retiree healthcare expenses.

The net loss for the fourth quarter was $307 million, or $0.17 per diluted share. For the quarter, the loss from continuing operations was $282 million, compared to a gain from continuing operations of $1.1 billion for the fourth quarter of 2002. In the fourth quarter of 2002, reported net income was $2.7 billion, or $1.61 per diluted share. For the full year, the loss from continuing operations was $1.2 billion, compared to a loss of $17.6 billion in 2002. The full year net income for 2003 was $1.6 billion, or $0.93 per diluted share, compared to a net loss of $38.5 billion, or $22.87 per diluted share for 2002.

Capital expenditures for the quarter were $615 million, compared to $561 million for the fourth quarter of 2002. The increase is primarily associated with the deployment of additional DSL facilities. For the full year, capital expenditures totaled $2.1 billion, compared to $2.8 billion in 2002.

The company posted strong growth in local service area long-distance and DSL, increased package penetration, and experienced stabilization in access line trends. Following the introduction of the Qwest Choice package in mid-December, Qwest has seen further improvement in key operating metrics in early 2004.

Qwest increased its long-distance subscriber base by 36 percent in the fourth quarter. As of year end, the company had approximately 2.3 million long-distance customers. In the first eight states that Qwest offered

In the quarter, the number of DSL lines increased by 60,000, or 10 percent, to a total of 637,000 lines at the end of the year. Approximately 80 percent of the growth in DSL lines occurred in the second half of 2003, as the service area was expanded to over 1,000 additional neighborhoods and communities.

Access line loss continued at the same rate as the third quarter 2003. Total access lines, excluding the impact of 145,000 MCI lines disconnected in the second quarter, decreased by 3.9 percent year-over-year compared to 4.4 percent in the fourth quarter of 2002. Sequentially, access lines declined 0.9 percent for both the third and fourth quarters of 2003.

The company continues working with Sprint to finalize the introduction of national wireless calling plans. The company expects to roll out services on March 1 to customers in its 14-state local service area.

Qwest plans to expand its VoIP coverage to the entire Minneapolis/St. Paul consumer market and introduce its business VoIP offering in the first half of 2004. Plans are in place to offer VoIP services in all major metropolitan markets within Qwest's local region by the end of 2004.

Qwest recently announced plans to offer stand-alone DSL--a revolutionary approach to delivering broadband service for customers who no longer require traditional phone service. Stand-alone DSL provides simplicity, flexibility and competitive prices and allows customers to purchase only the services they want or need, including VoIP.