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Qwest earnings fell 39% in 4th quarter

A Qwest technician goes underground in Salt Lake City. Qwest expects revenue declines to slow this year.
A Qwest technician goes underground in Salt Lake City. Qwest expects revenue declines to slow this year.
Douglas C. Pizac, Associated Press

Qwest Communications International Inc., the nation's fourth largest phone company, on Tuesday said its fourth-quarter earnings fell 39 percent as customers disconnected traditional landline phones in favor of cell phones.

Unemployment, a poor business climate and weak housing cut into earnings as well, the company said. Qwest operates in 14 states, mostly in the West, where the collapse of the housing market has been acute.

Qwest has responded with a series of job cuts, decreasing its work force by 8.5 percent last year, or roughly 2,800 positions.

The phone company took a 2-cent per share charge for severance in the fourth quarter. The 2008 quarter had a penny per share severance charge.

But on Tuesday, the company said it expects revenue declines to slow this year while its pension and post-retirement costs fall.

Shares rose 8 cents, or 1.8 percent, to $4.51 Tuesday.

Qwest, based in Denver, earned $108 million, or 6 cents per share, in the quarter. That's down from $177 million, or 10 cents per share, in the same quarter a year earlier.

Revenue fell nearly 10 percent to a bit below $3 billion. Earnings fell below the 8-cents per share analysts were expecting, according to Thomson Reuters, while revenue was roughly in line with their forecasts.

For the year, Qwest earned $662 million, up 1.5 percent from the prior year, on revenue of $12.3 billion, down 8.6 percent from $13.5 billion.

"We think (the quarter) went great," said CEO Ed Mueller in an interview with The Associated Press. "We're starting to see ... the slowing of access line losses."

S&P analyst Todd Rosenbluth said in a research note that Qwest's adjusted earnings before interest, taxes, depreciation and amortization rose in the quarter, after taking out pension and other benefit expenses.

In the quarter, consumers and small businesses disconnected more than 12 percent of landlines to 6.8 million. Larger businesses cut their lines as well, by 9 percent to 2.4 million.

Phone companies have been losing customers to cable's discounted bundle of TV, Internet phone and broadband services. They've also seen customers cut ties to landlines completely. And DSL Internet service provided by phone companies is losing ground as the appetite for online video has grown. Online video requires faster hookups for smoother viewing, which cable has delivered.

Qwest continues to upgrade its fiber-optics network to offer faster speeds to more households. In the quarter, it added 4.5 percent more high-speed Internet customers for a total of 3 million.

Video customers, a service Qwest offers in partnership with DirecTV Inc., rose by 10 percent to 880,000.

Cell phone subscriptions rose by 18.5 percent to 850,000. Qwest said it has completed its shift from Sprint Nextel Corp.'s cell phone service — but branded as Qwest — to Verizon Wireless.