DENVER—Qwest Communications International Inc. on Tuesday reported a jump in third-quarter net income, although revenue dipped on fewer sales of traditional telephone lines as consumers opted for high-speed services.
Qwest Chief Executive Officer Edward Mueller, who was appointed in August, added to uncertainty among analysts and investors by declining to provide details about his plans for the telecommunications company until he completes a strategic review, expected by year end.
“I get that you’d like us, or me personally, to give you more answers, and I’m holding until the end of the year,” he told analysts during a conference call. “I think a complete holistic plan from a new CEO is the right thing to do.”
Shares of Denver-based Qwest closed down 13.7 percent at a 52-week low.
For the quarter ended Sept. 30, Qwest reported net income of $2.07 billion, or $1.08 per share, compared with $194 million, or 9 cents per share, in the third quarter of 2006.
The company’s tax benefit rose to $2.15 billion compared with $43 million in the previous year’s quarter. Qwest also recorded $353 million in charges during the most recent period stemming from settlements of shareholder lawsuits.
Excluding the special items, earnings would have been $269 million, or 14 cents a share, Chief Financial Officer John Richardson said.
Operating revenue declined 1.5 percent to $3.43 billion from $3.49 billion in the year-ago quarter.
Analysts polled by Thomson Financial had forecast, on average, net income of 15 cents per share on $3.49 billion in revenue for the period.
Total access lines fell 7.2 percent, reflecting a consumer trend away from traditional phones to Internet and higher-speed data lines. Qwest also saw a 19 percent drop in wholesale services.
Mueller attributed the wholesale revenue decline to consolidation in the industry and said the company is looking to replace those losses with high-speed products.
Analysts had hoped for details about plans for a shareholder dividend, but the company’s board of directors deferred a decision until Mueller’s review is complete. The board did approve spending up to $300 million additional next year to improve network connections to homes.
Qwest restated its 2007 forecast for adjusted earnings before interest, taxes, depreciation and amortization to an increase of $250 million for a total of $4.65 billion. Previously, the company had forecast up to an additional $400 million.
The company reiterated its forecast of $1.8 billion in adjusted free cash flow for 2007.
In the first nine months, Qwest reported net income of $2.6 billion, or $1.31 a share, compared with $399 million, or 20 cents a share, in the first nine months of 2006. Revenue totaled $10.3 billion compared with $10.4 billion in the 2006 nine-month period.
Mueller replaced Dick Notebaert, who helped turn the Denver-based telecom around after it was forced to restate about $2.2 billion in revenue in the wake of an accounting scandal.
“The new management team did what might have been expected with a reset of expectations,” analyst Jason Armstrong of Goldman Sachs wrote in a research note. “However, the results speak for themselves and reflect a stalling of both revenue stability and margin improvement.”
Qwest stock fell $1.12 to close at $7.06 a share Tuesday after dipping as low as $6.94 a share at one point during the day. In the past year, it has ranged from $7.41 a share to $10.45 a share.
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