Monday, February 14, 2005

Qwest Passes One Million DSL Lines

Qwest Communications reported Q4 revenue was $3.4 billion, a 0.3% decline sequentially and a 1.7% decrease from fourth quarter 2003 - the lowest year-over-year decline in the past eight quarters. The fully diluted loss per share was $0.08 compared with a loss of $0.23 a year ago, which includes special items of $(0.02) and $0.06, respectively. Qwest reported improved trends in consumer local access line losses and solid gains in key growth areas, including long- distance and DSL, as well as further package and bundle penetration. However, the growth was offset by continued competitive pressures in the enterprise market and lower wireless revenues associated with the churn from the customer migration program.

Some highlights of the report:

  • During 2004, Qwest reduced its total workforce by approximately 5,500, or 12%, with the majority of the reduction in the second half of the year.

  • Facilities costs decreased by $465 million in 2004. This substantial decline is primarily the effect of the annualized benefit of approximately $410 million from the 2003 renegotiation and termination of certain underutilized purchase commitments. In addition, the company benefited from approximately $260 million in network optimization, as a result of initiatives begun earlier this year to significantly reduce fixed facilities costs.

  • Q4 CAPEX totaled $372 million, compared to $418 million in the third quarter of 2004. For the year, capital expenditures totaled $1.7 billion compared with $2.1 billion in 2003. The company expects 2005 capital expenditures to be comparable to 2004 levels.

  • Qwest added 81,000 DSL lines in Q4 and ended the year with over one million DSL lines in service. Over the last 12 months, Qwest increased subscribers by more than 60%, adding nearly 400,000 DSL lines and exceeding its goal of one million DSL lines. Qwest's consumer data and Internet revenues were up nearly 50% in 2004.

  • Qwest deployed over 4,000 remote terminals during the year. The company is now able to deliver DSL to more than 6.6 million households, exceeding its availability target of 65%.

  • The company's bundle penetration, defined as consumer retail lines with at least one additional service, including wireless, DSL or long-distance, increased to 46% compared to 43% last quarter and 24% a year ago. The company is launching additional bundling initiatives in the first half of 2005 to deliver an expanded product offering to customers, including a national wireless offering, high-speed Internet access, long-distance service and integrated satellite TV services through a marketing alliance with DIRECTV, Inc.

  • Total long-distance lines increased by 144,000 in Q4. Qwest ended the year with 4.6 million long-distance lines, more than double the 2.2 million lines a year ago. In the fourth quarter, long-distance penetration of total retail lines increased to 34%, compared to 15% a year ago. Consumer long-distance revenues grew 20% sequentially, largely attributable to the benefit of pricing initiatives introduced during the previous quarter on customer mix and average revenue per user (ARPU).

  • Wireless subscribers declined 24,000 in Q4 to 754,000, an improvement from the decline of 36,000 last quarter. Wireless revenues declined 6.1% sequentially. Over 95% of Qwest's wireless customers are now on the usage-based network. The company expects the migration to be completed in the first quarter of 2005. While the migration is driving an increase in churn, Qwest's new wireless plans, robust product offerings, and the introduction of data and enhanced features are driving a more profitable customer mix. Nearly 80% of gross additions are signing up for high-end national plans, and the penetration of the subscriber base is up to 35% on these plans.

  • Qwest reduced its rate of consumer access line losses in Q4, citing increased package and bundle penetration, win-back initiatives and its "Feet on the Street" customer acquisition program, as well as the reduction in UNE competition. Qwest's wireline retail consumer base declined by 88,000 in the fourth quarter - a substantial improvement from declines of 136,000 in the third quarter and over 227,000 in the fourth quarter of 2004.

  • Business retail access lines declined by 42,000 in Q4, an improvement from year ago declines of 70,000, but above the rate of loss in the third quarter. The company attributes the increase in the sequential rate of loss to continued competitive pressures, partially offset by growth in small-business lines.

  • The company continues to make significant inroads in stemming competitive loss from facilities-based competitors. Resold lines declined 28,000 sequentially as changes in the regulatory environment have reduced competition from UNE resellers.


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