Qwest's (NYSE: Q) future may be in IP-based broadband and business services, but the near-term reality is that as more consumers cut their landline phone service for either cable or wireless the losses made a dent in its Q2 earnings.
Amidst a growing base of broadband Internet and business customers, the decline of POTS (plain old telephone service) customers drove Qwest's revenue down from $3.09 billion in Q2 2009 to $2.93 billion in Q2 2010. However, these results met analyst expectations. The service provider, which will become part of CenturyLink (NYSE: CTL) next year, reported $158 million in net income, or 9 cents a share, down from $212 million, or 12 cents a share, in Q2 09.
Here's a breakdown of the other Qwest key segment metrics:
- Business Markets: As the global economy starts to heal, Qwest's Business Markets reported $1.0 billion in revenue, which was flat in comparison to Q2 09 and Q1 2010. There weren't many surprises in terms of growth and losses in Qwest's Business Market segment. While IP services drove strategic growth up nine percent, legacy services were down nine percent due to lower local voice revenue and the ongoing migration from legacy data to IP-based services.
- Mass Markets: Qwest's Mass Markets saw its third consecutive quarter of improve year-over-year revenue trends, a factor it attributes to increased adoption of its higher speed Fiber to the Node (FTTN)-based broadband services, increasing customer ARPU and cost management. As of the end of Q2, Qwest had 3 million broadband subscribers, including 2.9 Mass Markets subscribers and 529,000 FTTN subscribers. During the quarter, Qwest added 7,000 net broadband subscribers, while FTTN subscriber growth was offset by a decline in the legacy DSL subscriber base due to customer migrations and competitive market conditions. However, Qwest did not add any new DirecTV satellite customers, compared to 11,000 added in the first quarter and 21,000 added in Q2 09.
- Wholesale Markets: Fueled by ongoing demand for wireless backhaul services, Qwest's Wholesale Markets' revenue saw a "modest improvement in year-over-year revenue comparisons in the quarter and maintained solid profitability." During the quarter, Qwest completed fiber to the tower projects for about 600 cell sites, with plans to meet 2,000 by the end of 2011. Still, Qwest Wholesale Markets continued to see inevitable losses as segment revenue was down 10 percent year over year versus an 11 percent decline reported in Q1. Qwest attributes Wholesale Markets losses to ongoing declines in long-distance volumes and access revenues.
For the full year 2010, Qwest forecasts revenue declines to improve to a ‘low to mid single digit rate' by the end of the year with $4.3 to $4.4 billion in adjusted EBITDA.
In related news, Qwest's soon-to-be parent company CenturyLink also reported its Q2 earnings today.
- see the earnings release here
- Reuters has this story
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