DENVER—Qwest Communications International Inc. reported an 89 percent increase in fourth quarter earnings Tuesday on strong sales of Internet and data products, despite aggressive competition and the looming threat of a slowing economy.
The telecommunications company also reported a 6 percent drop in operating expenses excluding $393 million in litigation charges.
During a call with analysts, Qwest Chief Financial Officer John Richardson said the industry has felt the effects of the nation’s housing woes. “We continue to note a marked decrease in the number of calls received for new and relocating customers in 2007,” he said.
In the fourth quarter, Qwest saw softness in its retail sector but Richardson said Quest executives are not sure if it stemmed from the economy, competition or other factors.
“One month does not make a trend, and we are obviously watching it very closely as we jump off in 2008,” he said.
For the quarter ending Dec. 31, Qwest reported net income of $366 million, or 20 cents a share, up from $194 million, or 10 cents a share, in the fourth quarter of 2006. Revenue fell 1.5 percent to $3.4 billion from $3.5 billion and operating costs dropped 6 percent.
Analysts surveyed by Thomson Financial predicted, on average, 14 cents per share.
Although overall access lines fell 7.3 percent, data, Internet and video services rose 8.7 percent. “The bottom line for Qwest is we drove revenue growth in strategic products, holding overall revenue roughly flat,” Chief Executive Officer Ed Mueller said.
Richardson acknowledged that Qwest competes head to head for customers against cable TV providers Comcast Corp. and Cox Communications Inc., which he said were strong particularly in Nebraska and Arizona.
Janco Partners Inc. analyst Donna Jaegers said the results were in line with expectations but she had hoped to hear more from executives about their strategy for 2008.
For the year, Qwest reported net income of $2.9 billion, or $1.52 per share, compared with $593 million, or 30 cents a share, in 2006. Revenue dipped 1 percent to $13.8 billion from $13.9 billion.
Operating expenses for 2007 totaled $12 billion including which included $393 million in litigation charges.
Based in Denver, Qwest is the primary telephone service provider in 14 mostly Western states and operates a fiber optic network.
Qwest’s stock rose 15 cents, or 2.9 percent, to $5.28 a share on Tuesday.
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