Qwest shares dropped nearly 5 percent today after a Wall Street analyst downgraded the company, citing a slowdown in broadband subscriber growth.
UBS analyst John Hodulik also detailed in the note his expectations that Qwest will launch a broad video strategy in 2008.
In lowering his rating on the Denver-based company to “neutral” from “buy,” Hodulik said the risks to Qwest’s cash flow are increasing.
He said the softness in consumer spending “could exacerbate (phone) line loss” and “further stifle (broadband) growth.”
Hodulik expects Qwest to announce a dividend soon and said the company should launch its own Internet Protocol-TV offering on a broad scale by running fiber-to-the-neighborhood in 2008.
“Difficulties achieving topline growth may also provide additional incentive for new management to pursue” an IPTV strategy next year, Hodulik wrote.
He estimated the strategy could cost Qwest $1.8 billion over three years to upgrade its existing infrastructure and reach six million homes, roughly half the homes in its local phone-service territory.
Qwest shares were at $8.91, down 43 cents, or 4.6 percent, during late-day trading.
Andy Vuong: 303-954-1209 or avuong@denverpost.com
