DENVER—Qwest Communications International Inc. said Wednesday its second-quarter net income more than doubled as the telecommunications company cut operating expenses by 4 percent, which offset lower sales.
Denver-based Qwest continued to add customers for its bundled packages of Internet, phone and television services while the number of traditional phone service customers fell 7 percent.
Chief Executive Officer Dick Notebaert, who is preparing to retire, said he expects an announcement on a successor soon and that he will stay until the new CEO assumes responsibility.
Notebaert took over in June 2002 after then-CEO Joe Nacchio resigned during a multibillion dollar accounting scandal that forced the company to restate $2.2 billion in revenue.
Nacchio last week received a six-year prison sentence years after he was convicted on 19 counts of insider trading for $52 million in stock sales.
Notebaert declined to talk about the Nacchio case but told The Associated Press, “I think we have to look at the thing and respect the court’s decision.”
The company said in a Securities and Exchange Commission filing later Wednesday that it believes the Justice Department’s criminal investigation of Qwest has ended.
A spokesman for the U.S. attorney’s office declined comment on the report. In December 2005 when Nacchio was indicted, then-U.S. Attorney William Leone said the criminal investigation was virtually complete.
For the quarter ending June 30, net income rose to $246 million, or 13 cents per share, from $117 million, or 6 cents per share, in the second quarter of 2006.
Revenue slipped to $3.46 billion from $3.47 billion last year, slightly beneath analyst expectations of $3.47 billion. Operating expenses declined 4 percent to $2.93 billion.
Analysts surveyed by Thomson Financial had forecast, on average, 15 cents per share on revenue of $3.47 billion.
The results included a charge of about $8 million related to employee severance and realignment costs, the company said. The number of employees dipped 4 percent, to a total of 37,585, due partly to a consolidation of customer call centers.
Qwest took a $22 million charge related to early debt retirement of debt.
Although Qwest historically reports softer results in the second quarter, Notebaert said May was “just not a pleasant month.” “Everybody’s second quarter was a little lighter than the first quarter,” he said.
As more consumers shifted to digital and high-speed services, Qwest said its bundle penetration increased to 60 percent in the second quarter, up from 54 percent in the year-ago quarter.
In a research note, Bank of America securities analyst David Barden said industry consolidation led to lower revenue and weaker demand for wholesale long distance service.
Qwest also has completed half of its planned $2 billion share buyback and eliminated $356 million in debt.
Qwest expects to see mid-to-high single digit growth in revenue for the rest of the year.
During the first six months, Qwest reported net income of $486 million, or 25 cents a share, compared with $205 million, or 11 cents a share, in the comparable period of 2006. Revenue totaled $6.9 billion down from $6.95 billion.
Qwest shares fell 13 cents, or 1.5 percent, to $8.40 Wednesday, which compared with a range $7.41 a share to $10.45 a share in the past year.
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