Qwest continues to report strong growth

While many competitive local exchange carriers and telecommunications equipment providers are struggling to grow their businesses in a bearish market, the four Baby Bells seem to be doing just fine.

Denver-based Qwest Communications was the latest Baby Bell to weigh in with positive news, when CEO Joseph Nacchio said in late February that the service provider is on track to hit its 2001 targets of between $8.5 billion and $8.7 billion in earnings before interest, taxes, depreciation and amortization. Nacchio also said Qwest should grow its first-quarter 2001 revenue by between 11.5% and 12.5% over its first-quarter results for 2000.

The key to Qwest’s growth has been its data offerings. Nacchio cites strong January sales in Qwest’s CyberCenter Web hosting; DSL services; Direct Internet Access product, which gives business customers a high-speed connection to Qwest’s global fiber-optic backbone; and optical networking wholesale services.

A week prior to affirming its first-quarter 2001 estimates, Qwest launched DSL services as a data local exchange provider (DLEC) in the Washington and Baltimore markets, which are Verizon territory. Qwest estimates that it can reach 70% of the small-business customers in the two markets with its DSL services. With the Washington and Baltimore additions, Qwest now has DLEC status in 13 markets and is aiming for 25 markets by the end of the year.

Qwest also recently announced it is able to provide its largest customers with national OC-192 service using Juniper’s M160 routers.

Another potential growth area for Qwest later this year is the long-distance market. In approving Qwest’s purchase of U.S. West eight months ago, federal regulators prevented Qwest from offering long-distance services in the 14 states where U.S. West offers local service. The regulators said Qwest could begin offering long-distance in those states once the provider proves that there is competition for local services in the former U.S. West territory.

Nacchio says Qwest believes there is growing competition based on recent wholesale agreements signed with McLeodUSA and Eschelon Telecom, Inc. He also points out that Qwest has signed permanent line-sharing agreements, so competitors can offer DSL services over Qwest phone lines, even if customers buy their phone service from Qwest.

Also Nacchio notes, Qwest has dropped almost 40 lawsuits against state commissions that had been filed before Qwest took over U.S. West. And the provider has worked closely with several commissions on 10 of the 14 items that Qwest needs to fulfill to get long-distance approval.

Qwest plans to file for long-distance approval in one of the 14 U.S. West states this summer. It will file for approval in the other 13 states later this year and early next year.

All of the recent rosy news comes just after a strong fourth-quarter 2000 for Qwest. Earnings per share grew by just over 45% to 16 cents -- 2 cents higher than most analyst estimates.

The report marked the 15th-straight quarter than Qwest has met or exceeded analyst expectations.

Qwest’s strong quarters haven’t done much to boost the company’s stock price, though. As of midday on Feb. 27, Qwest was trading at a shade above $38 on the Nasdaq -- about $6 more than the company’s 52-week low, but well off the 52-weeek high of $66. Of 27 analyst firms surveyed, 15 rated Qwest a strong buy, six a buy and six a hold.

This story, "Qwest continues to report strong growth " was originally published by Network World.

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