Qwest Q1 2010: A story of slow broadband growth, falling revenues

Qwest's (NYSE: Q) merger with CenturyLink (NYSE: CTL) may not be finalized until next year, but right now there's not much to smile about as the Colorado-based ILEC's profit fell by 83% with inevitable landline loss and slightly lower broadband growth. Revenue, meanwhile, declined 6.5 percent to $2.97 billion, but beat analyst forecasts of $2.94 billion.

While landline loss is an inevitable reality for all wireline-centric carriers, Qwest did manage to stem some of the bleeding in Q1 2010 losing only 166,000 PSTN lines. This was a bit lower than the 167,000 lines lost in Q4 09 and the 221,000 it lost in Q1 09. As of the end of Q1 2010, Qwest still had 5.5 million residential access lines.

Similar to Q4 09, Qwest's mass markets, business and wholesale segments saw inevitable gains and losses during the quarter: 

  • Business Markets: Revenues declined one percent to $1 billion and remained flat when compared to Q1 2009. Not surprisingly, the star in Qwest's Business Markets group was IP services, which grew 8 percent year over year. Meanwhile, legacy services declined 9 percent year over year, a factor Qwest attributes to lower local voice revenue and the migration to IP-based services.
  • Broadband drives Mass Markets: Qwest's broadband drive also showed relative ups and downs in Q1 2010. During the quarter, the RBOC signed up 40,000 new customers, an increase over the 23,000 in Q4 2009, yet slightly down from 42,000 in Q1 2009. A big contributor to Qwest's broadband Q1 results was its Fiber to the Node (FTTN) service, which attracted 60,000 new customers in addition to existing DSL customers opting to upgrade to the service. However, Q1 broadband growth declined from the 80,000 subscribers that it signed on in Q4 09 and 63,000 in Q1 09.
  • Wholesale Market buildup: While there's not much to like about Qwest's wholesale revenues, Qwest was able to reduce losses to 11 percent year over year compared with the 14 percent annual decline it reported in Q4 2009. Declining legacy long-distance voice service drove declines in its Wholesale Market division.  At the same time, Qwest Wholesale and its new parent CenturyLink will likely continue to drive more fiber to cell sites to tap into the burgeoning wireless backhaul opportunity that's coming online as wireless operators expand backhaul capacity for current 3G and upcoming LTE wireless network deployments.

Qwest's soon-to-be-new parent CenturyLink will announce their earnings results later today.

Being landline-centric operators, Qwest and CenturyLink have been hurt by not only cable defection, but a consumer population that has been ditching their landline phones for the convenience of a mobile phone plan.  

For more:
- see the earnings release here
- Reuters has this article
- OneTRAK also has this coverage

Related articles:
CenturyLink, Qwest merger consolidates more of the landline market
Qwest: Q4 09 revenue declined, but 2010 is looking up
Qwest mulls its video options
Qwest lights fiber-based mobile backhaul future
Qwest: Conservative, but aggressive - Fiber to the X

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