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Qwest loss less than expected

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DENVER — Qwest Communications International Inc., whose accounting practices are under federal investigation, said Wednesday it lost $91 million in the second quarter.

The loss amounted to 5 cents per share, smaller than the 7 cent loss expected by analysts surveyed by Thomson First Call.

Qwest did not provide a year-to-year comparison, saying its process of restating earnings for 2000 and 2001 would affect 2002 figures.

However, in August 2002, the Denver-based phone company reported a second quarter loss of $1.14 billion, blaming investment losses and WorldCom Inc.'s bankruptcy.

Revenue was $3.6 billion in the second quarter of 2003, even with what was reported a year ago but down 0.8 percent from the first quarter of 2003.

"The operating performance was disappointing," Guzman & Co. analyst Patrick Comack said. "We just didn't get enough sequential margin improvement."

Shares were down 24 cents to close at $4.40 on the New York Stock Exchange.

Qwest also said revenue was hurt by competitive pressures in local phone markets but said the decline in that area was partially offset by growth in long-distance and data services.

Qwest Chairman Richard Notebaert said that with new agreements to offer wireless service using Sprint's national network and satellite television offerings in some markets, Qwest was improving the bundled services it could offer.

"We've been working very hard on transforming the business and culture here at Qwest, and we're starting to see results," he said.

Notebaert said "two or three" parties were interested in acquiring Qwest's wireless spectrum, once customers are moved onto Sprint's network.

Excluding the effects of WorldCom's bankruptcy, Qwest reported a 1.4 percent decline in access lines amid competition from other providers and wireless phones.

Notebaert said MCI and AT&T, which can get discounted rates for using Qwest's network to provide local service, have made inroads in urban markets like Seattle and Denver.

"The company is treading water. It's not showing any substantial growth in new areas," said telecommunications analyst David Willis of META Group.

Qwest added long-distance service to 590,000 access lines in its local service area during the quarter, bringing the total number of new access lines to 1.12 million in 2003.

Chief financial officer Oren Shaffer said Qwest was nearing completion of its financial restatements.

The adjustments will include $283 million more in revenue decreases for 2000-2002 than had been reported in May, and $792 million in additional losses through the first three months of 2003, Qwest said.

The restatements may accompany a settlement with the Securities and Exchange Commission, which has been investigating Qwest's accounting, analysts said. Comack said Qwest still may face a fine or indictments relating to past sales deals.

"There's still headline risk going forward for Qwest," he said.

Shaffer said Qwest is progressing on amending unconditional purchase obligations. Under former Qwest Chief Executive Joe Nacchio, Qwest had resold equipment to Calpoint and KMC Telecom and agreed to pay the two firms set amounts to use their services, regardless of how much Qwest actually used.

Through the first half of the year, Qwest reported net income of $37 million, or 2 cents per share.