August 4, 2010 / 11:41 AM / 10 years ago

Qwest revenue falls, CenturyLink helped by Embarq

NEW YORK (Reuters) - U.S. phone carrier Qwest Communications Q.N reported lower quarterly revenue on Wednesday as a tough economy prompted more customers to disconnect their landlines.

Those results, along with stronger results from CenturyLink Inc (CTL.N), which acquired Embarq and is now set to buy Qwest, underscored the push toward consolidation among rural phone companies struggling to compete with cable service providers.

While Qwest gained Internet service subscribers and business customers, its legacy business declined, and second-quarter revenue fell to $2.93 billion from $3.09 billion a year earlier. That was in line with the average forecast on Wall Street, according to Thomson Reuters I/B/E/S.

Its net profit fell to $158 million, or 9 cents per share, from $212 million, or 12 cents per share, a year earlier.

The latest quarter includes severance and other charges from its merger, while the year-earlier figure was boosted by tax benefits.

Qwest agreed in April to be bought by CenturyLink for about $10.6 billion in stock and said it expected the deal to close in early 2011.

The Denver, Colorado-based company had been struggling to clean up its balance sheet after ending up with a mountain of debt following the burst of the tech bubble earlier this decade.

It has also been losing customers, many of whom have been switching to mobile phones or cable service providers’ “all-in-one” packages of phone, Internet and video. Unlike bigger rivals such as AT&T Inc (T.N), Qwest does not own its own mobile phone business.

In the second quarter, Qwest trimmed its net debt to $11.3 billion from $12.3 billion a year earlier. It has announced plans to reduce debt by $3.5 billion through the first quarter of 2011, and to date, it has cut $2.0 billion of debt.

The company reiterated its full-year outlook, saying it still expects the year-over-year decline in revenue to moderate over the course of 2010.

It forecast full-year earnings before interest, taxes, depreciation and amortization (EBITA) in a range of $4.3 billion to $4.4 billion.

CenturyLink also announced its quarterly results, which were boosted by its acquisition of Embarq. It too, raised its outlook, and now expects full-year earnings per share of around $3.30 to $3.40, instead of a previous range of $3.20 to $3.30.

Analysts on average expected full-year earnings of $3.37.

The Monroe, Louisiana-based carrier said its quarterly revenue rose to $1.8 billion compared with $634.5 million a year earlier, although the increase was primarily due to the Embarq deal.

Access lines declined, it said, but net income rose to $239 million, or 79 cents per share, from $69 million, or 68 cents per share, a year earlier.

CenturyLink shares gained about 16 cents to $36.03 in early trading, while Qwest shares were unchanged from Tuesday’s close of $5.65.

Reporting by Ritsuko Ando; Editing by Dave Zimmerman and Maureen Bavdek

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