Qwest: Q4 09 revenue declined, but 2010 is looking up

Qwest's performance in Q4 09 illustrated the ongoing growing pains that all large service providers are facing in shedding their local telephone shell to become a provider of IP-based business and entertainment services.

During Q4 09, Qwest reported $108 million in profit, or 6 cents per share compared with a profit of $177 million, or 10 cents per share in the same quarter a year earlier.

The performance of Qwest's mass markets, business and wholesale segments saw inevitable gains and losses during the quarter: 

  • IP drives Business Markets: Qwest's Business Markets segment is all about the enterprise's adoption of data and IP-based services. Although overall business revenues declined 2 percent to $1.03 billion from the same period in 2008, 24 percent growth in IP services drove strategic revenue growth of seven percent in the business markets segment. Overall legacy services declined 8 percent year over year.
  • Broadband drives Mass Markets: While legacy Mass Market revenues declined 11 percent due to continued voice line losses, Mass Markets did report strong subscriber gains in satellite video (23,000), wireless (64,000) and FTTN-based broadband subscribers (23,000). In addition to seeing the lowest line loss it has seen in two years through aggressive customer retention efforts, Qwest attributed gains in broadband subscribership to increased adoption of its Fiber to the Node (FTTN)-based services. As of the end of Q4, Qwest had 420,000 total FTTN subscribers. 
  • Wholesale Market buildup: Qwest's Wholesale Market revenue declined 14 percent because of lower long-distance revenue. Overall, Qwest's wholesale segment income declined eight percent from Q4 08 and three percent from Q3 09. However gloomy the outlook on Qwest's wholesale business was during the quarter, one bright spot that could give the company a boost in 2010 will be wireless backhaul. During the quarter, Qwest signed contracts to deliver fiber-based backhaul services for a number of major wireless companies. To date, Qwest said it has "nearly 2,000 cell sites under contract with most of these expected to be built out in 2010."

While Qwest's earnings may have been down in Q4 09 due to landline voice and legacy business data service declines, the service provider's 2010 outlook surpassed the street's expectations.

For 2010, Qwest forecast adjusted earnings before interest, tax, depreciation and amortization of $4.3 to $4.4 billion. News of the positive outlook drove company shares up 1.6 percent in pre-market trading. 

Similar to its Q3 09 performance, analysts attribute the Qwest's better than expected 2010 outlook to its ongoing cost cutting efforts. "The guidance for 2010 was much better than expected. I think it's just relentless focus on cost control," said Hudson Square Research analyst Todd Rethemeier who had expected 2010 EBITDA of $4 billion in a Reuters' article.

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

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