The Wall Street Journal-20080213-Earnings Digest- Qwest-s Earnings Soar 89- Amid Slowing Subscriber Growth

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Earnings Digest: Qwest's Earnings Soar 89% Amid Slowing Subscriber Growth

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Qwest Communications International Inc. posted an 89% increase in fourth-quarter profit, though it showed signs of staggering toward the end of the year.

The Denver Baby Bell blamed softness in the consumer market for a drop in subscriber growth toward the end of the quarter.

"There was so much concern about how Qwest was going to perform in this environment," said Todd Rosenbluth, an analyst at Standard & Poor's. "What we heard from that [conference] call was stability."

Qwest saw a drop-off in calls from consumers looking to sign up for Internet service and slower net-subscriber additions in December, Chief Financial Officer John Richardson said on a conference call. The slowing housing market was one of the primary factors, although competitive pressures from cable providers also had an impact, he said. The weakness was felt throughout the carrier's 14-state territory.

While Qwest sounded a note of caution similar to AT&T Inc.'s comments last month that the softening economy was leading to more service cancellations for customers who had stopped paying their bills, Chief Executive Ed Mueller was quick to point out that Qwest wasn't seeing an increase in those kinds of terminations.

Certain industries such as housing are in a recession, Mr. Mueller said, while others, such as electronics and gaming, remain robust. It is unclear where the telecommunications industry sits, he said.

For the fourth quarter, Qwest said total access lines declined 7.3% to 12.8 million, following a 7.2% decrease in the third quarter.

High-speed Internet -- Qwest's core focus -- saw its new subscriber tally drop to 95,000 from 165,000 a year ago.

Qwest expects revenue to be flat to slightly lower than 2007 revenue of $13.78 billion.

Qwest in December unveiled plans for a dividend and capital improvements. The dividend will be the first in more than six years when it is paid out Feb. 21, while the capital spending will total $1.8 billion to bulk up the number of serviceable neighborhoods with high-speed fiber-optic lines.

"We think it's going to be harder for them, as all carriers, to increase DSL penetration," Mr. Rosenbluth said. "We think it's a good thing they're investing in upgrading their broadband speeds."

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John Flowers contributed to this article.