Qwest narrows loss in Q2

In its second quarterly earnings report since abandoning its bid to acquire MCI, Qwest Communications noted improving revenue trends in several service sectors that resulted in a Q2 loss in net income of $164 million, compared to a $776 million loss in Q2 2004. The company said it is continuing to evaluate acquisition opportunities but also believes it has significant opportunity to drive growth within its existing business.

“If we could find something where we could consolidate networks and assets, that would be very good,” said Richard Notebaert, Qwest’s chairman and CEO in the company’s earnings call. “But it has to be something that has a very short payback, and we are not going to go in at some inflated price or someone’s inflated view of what their asset’s worth.”

“We’re not in any hurry, and we’re not going to chase something just to make an acquisition,” Notebaert said.

The company attributed its quarterly revenue improvement--$3.47 billion, compared to $3.45 billion in the first quarter and $3.44 billion in Q2 2004--to upticks in several service sectors, including wireless, DSL, business data, wholesale settlements, VoIP and its video alliance with DirecTV.

Qwest executives focused on the company’s in-region wireless effort, which has 744,000 users at an average revenue per user of $50 per month, up from $46 a year ago. “The most encouraging thing to me is that our ARPU is going up,” Notebaert said.

“We successfully turned a trend for both revenue and subscribers,” said Oren Shaffer, vice chairman and chief financial officer for Qwest. “With start-up and migration costs behind us, wireless gross margins have improved.”

Qwest also said new bundled offerings, more retail solutions centers and improved customer acquisition and win-back programs helped offset access line losses.

“We believe we are on track to drive modest revenue growth and continued improvement in EBITDA in 2005,” Notebaert said, noting $991 million in EBITDA for the second quarter. “Our continuing improvement in EBITDA and EBITDA margins primarily reflects our underlying revenue stability and our continued diligent focus on cost reduction and productivity improvement.”