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Qwest improves its 2nd quarter

Loss is just $164 million vs. $776 million in ’04

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Qwest network technician Mark Hoopiiaina goes underground on a service call Tuesday in Salt Lake City. Qwest is reporting revenue gains in the second quarter.

Qwest network technician Mark Hoopiiaina goes underground on a service call Tuesday in Salt Lake City. Qwest is reporting revenue gains in the second quarter.

Douglas C. Pizac, Associated Press

DENVER — Qwest Communications International Inc. reported a 79 percent drop in its second-quarter loss Tuesday, crediting both higher revenue and lower costs after its unsuccessful battle for MCI Inc.

Chief Executive Officer Dick Notebaert was pleased with the results but left the door ajar for a potential acquisition, noting there are opportunities if the price is right.

"Acquisitions must make sense strategically, operationally and financially," he told analysts during a conference call. "We're not in any hurry, and we're not going to chase something just to make an acquisition."

In the quarter that ended June 30, Qwest reported a $164 million loss, or 9 cents a share, including one-time charges equal to 2 cents a share. That compared with a $776 million net loss, or 43 cents per share, in the 2004 second quarter, which included one-time charges of 25 cents.

Qwest, the local phone provider in 14 mostly Western states, including Utah, said revenue for the quarter rose nearly 1 percent to $3.47 billion from $3.44 billion last year.

Excluding the charges, the latest results beat analysts' expectations for a loss of 9 cents per share on sales of $3.44 billion, according to a survey by Thomson Financial.

Landline revenue increased $130 million, up 1.6 percent from the 2004 second quarter, which Notebaert credited to more sales of local, data and Internet services and wholesale settlements.

Operating expenses, which totaled $3.2 billion, were down 15 percent from the second quarter of 2004.

Qwest's stock was unchanged Tuesday at $3.89 a share on the New York Stock Exchange.

In a research note, telecommunications analyst David Barden of Banc of America Securities said Qwest's results were ahead of expectations. "Strong wireline revenue was a highlight complemented by cost-containment efforts that appear on track," he wrote.

Janco Partners telecommunications analyst Donna Jaegers said Qwest still faces the challenges of adding customers to its long-haul network and reducing overall debt of $17.5 billion.

"Overall, they've done a good job of reducing the losses and stabilizing revenues, but I don't know that they can get out of this box unless they can do something big to fix the problem," she said.

"They cut costs to where they could manage in a very slow growth, economic environment, but now growth is starting to pick up in Denver, Portland and Seattle, and I think they are going to have to add some people back into the work force."

In the first six months, Qwest reported a net loss of $107 million, or 6 cents a share, compared with a $1.1 billion net loss, or 61 cents a share, in the first six months of 2004. Revenue was $6.9 billion, compared with $6.92 billion of the previous year.

Earlier this year, Qwest and Verizon Communications Inc. engaged in a highly public battle for MCI, based in Ashburn, Va., hoping to land its nationwide fiber-optic network with a lucrative roster of government and corporate clients.

MCI's board rebuffed Qwest's offer four times, saying it was concerned about Qwest's financial health and the long-term value of the shares it planned to use as partial payment for the deal. The board also questioned whether Qwest could meet its forecast of nearly $3 billion a year in cost savings from the merger.

Qwest withdrew its $9.85 billion offer May 2 after MCI agreed to Verizon's $8.54 billion offer.

Qwest is also in contract talks with its largest employee union. Notebaert declined to discuss specifics except to say he hoped to have an agreement by an Aug. 13 deadline.