Tuesday, April 28, 2009

Qwest's Revenue Declines 7% YoY as Wireless Transition Gets Underway

Qwest Communications reported Q1 revenue in the quarter was $3.2 billion, a decline of 7 percent compared to $3.4 billion in the first quarter of 2008 and a decline of 4 percent compared to the fourth quarter of 2008. In the quarter, net income was $206 million, an increase of 37 percent compared to $150 million for the first quarter of 2008. Earnings per share for the quarter were 12 cents, a 50 percent increase from the first quarter of 2008.

Total revenue for the first quarter of $3.2 billion reflects 5 percent year-over-year growth in data, Internet and video revenue, which was offset by a decline of 11 percent in voice revenue and lower wireless revenue. Data and Internet revenue growth was the result of strong service revenue growth in both Business Markets and Mass Markets. Voice revenue results reflect lower access lines and the company's efforts to improve the profitability of its wholesale long-distance business, while wireless results include the impact from the migration to the resale platform.

As expected, Qwest's move from a wireless MVNO model to a reseller model beginning in the third quarter of 2008 impacted reported revenue comparisons in the period. Excluding wireless MVNO services, revenues decreased 5 percent vs. the first quarter of 2008 and declined 3 percent sequentially. Qwest transitioned nearly 100,000 customers from its wireless MVNO operation to the Verizon Wireless resale platform in the quarter and reported 30,000 net wireless additions. Qwest has announced that it expects to terminate its wireless MVNO services in October of this year. Qwest also reported strong growth in video subscribers, adding 34,000 customers in the quarter through its partnership with DIRECTV.

Qwest said it is making steady progress on profitability goals with all segments reporting year-over-year and sequential improvement in segment margin percentages.

"Disciplined execution and focus on cost controls have produced a strong start to the year given the current economic climate", said Edward A. Mueller, Qwest Chairman and CEO. "We are seeing tangible results from our focus on our key strategies to perfect the customer experience, including demand for our leading data services and strong results from our partnerships. We continue to tightly manage spending and investments to preserve financial strength and mitigate near-term economic pressures."

Some additional highlights:

  • At the end of the first quarter, Qwest was serving 2.9 million broadband subscribers, which is an increase of 7 percent from the year-ago period.

  • The video subscriber base was 832,000 at the end of the period, an increase of 21 percent from the first quarter of 2008.
    Mass market access lines were 7.5 million at the end of the quarter and declined at an annual rate of 11.4 percent in the period.

  • The total wireless base at the end of the first quarter was 747,000, with about 60 percent of customers being served on the Verizon Wireless platform.

  • Wholesale Markets segment revenue was lower in the quarter due to lower long-distance volumes and a decline in access revenue. Revenue was impacted by the company's continued focus on improving wholesale profitability.

  • Capital spending in the quarter was $334 million, a decrease of 20 percent from the year-ago quarter and 7 percent sequentially. The decline in capital expenditures was mostly due to project timing. A significant portion of capital investment continues to be focused on broadband expansion, including fiber to the node.

  • Qwest continues to expect full year 2009 adjusted free cash flow will be $1.4 to $1.5 billion. Full year adjusted EBITDA is expected to be $4.2 to $4.4 billion, inclusive of an expected increase in non-cash pension and OPEB expense of $200 million. Capital expenditures are expected to be $1.8 billion or lower.

See also