Qwest, on Profit Drop, Focuses on Wireless, FTTN

Qwest Communications International Inc. will “take advantage” of nationwide open-access initiatives through its new partnership with Verizon Wireless.

“We’re really excited” about offering open access devices and applications, and 4G technologies, to subscribers, Chairman and CEO Ed Mueller told analysts during Qwest’s first-quarter earnings call on Tuesday. The five-year deal “is just one more good thing for Qwest,” he added.

The Denver-based carrier said on Monday – a day before announcing lackluster earnings – that it was dumping its wireless contract with Sprint Nextel Corp. in favor of Verizon Wireless. On Tuesday, Mueller (pronounced “Miller”) said open access was one reason why Qwest has opted to sell services from the nation’s second-largest cellco. The biggest reason was money. “The economics are much, much better,” said Mueller. Plus, he noted, “We like the attitude of Verizon, we like their openness.”

Verizon Wireless declared last November that it would open its network to third-party devices, applications and software – with certain restrictions, of course. The move was a shock considering the company’s initial fight to block an open-access mandate in the 700MHz spectrum auction, as well as continued, vehement opposition to net neutrality efforts. Open-access developments are underway.

Qwest’s agreement with Sprint expires next February. However, Qwest will start selling Verizon Wireless services and devices beginning this summer. Subscribers can migrate as they please, Mueller said.

To be sure, the timing of the Qwest-Verizon Wireless announcement looked like an attempt to downplay Qwest’s first-quarter earnings results, which were not good. The company on Tuesday reported a 35 percent drop in profit, falling from $240 million in the year-ago period to $157 million. Net income throughout 2008 also won’t compare to 2007’s numbers, said CFO John Richardson.

Sales slumped in the first quarter, too. Revenue declined 1.4 percent to $3.4 billion, down from $3.45 billion one year earlier. The problems stemmed from industry consolidation and wholesale long-distance pricing pressure, Qwest said. Landline losses also kept hitting the carrier. Access lines dropped 9.7 percent in the residential market, compared to 9.1 percent in the fourth quarter of 2007; they were down 5.1 percent in the enterprise market, compared to 4.7 percent in the fourth quarter of 2007.

Investors’ confidence faltered on the news – stocks were trading 30 cents lower, at $5.06, in the early afternoon, nearing the 52-week low of $4.38.

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