Qwest Cuts Outlook, to Slash 7,000 Jobs
DENVER – Telecommunications company Qwest Communications International Inc. on Thursday cut its growth outlook through 2002, citing softer demand for voice and data services in the weak economy, and said it would reduce its work force by more than 11 percent.
Qwest, the dominant local telephone company in 14 states from Minnesota to Washington, had previously cautioned that 2002 would be a ``transitional year.'' The company has suffered from soft sales of basic telephone services to both businesses and consumers, and a from drop in sales of capacity on its high-speed fiber optic network.
Qwest said it will cut an additional 7,000 jobs, on top of earlier cuts of 4,000 jobs. Its work force will shrink to 55,000 employees by mid-2002, from 62,000 at the end of 2001. Qwest said it would take a charge against fourth-quarter earnings of $400 million to $600 million, primarily for severance costs and minor asset write-downs.
Denver, Colorado-based Qwest said its fourth-quarter revenues would be about $4.8 billion, and earnings before interest, taxes, depreciation and amortization (EBITDA) would be about $1.7 billion. Wall Street analysts expect the company's revenues to be $5.07 billion, according to research firm Thomson Financial/First Call.
For the full year 2001, Qwest expects reported revenues to be about $19.8 billion, with EBITDA of about $7.45 billion. Wall Street analysts expected Qwest's 2001 revenues to be $20.3 billion.
For 2002, Qwest expects reported revenue to be in the range of $19.4 billion to $19.8 billion, and EBITDA to be in the range of $7.1 billion to $7.3 billion. Analysts expect 2002 revenues to be $21.10 billion, according to First Call.
Qwest cut its capital spending budget for 2002 to a range of $4.2 billion and $4.3 billion. Qwest has cut its 2002 capital spending outlook twice, down from an estimate of $5.5 billion in September and its original forecast of $7.5 billion.
Qwest has been working to cut expenses and curtail its capital spending to offset weak sales. The company reiterated that despite the lower-than-expected revenues, it still expects to aimed to have positive free-cash flow in the second quarter of 2002.
Qwest's stock has dropped nearly 70 percent this year, compared with an 18 percent decline in the North American Telecommunications Index. Qwest, which acquired Baby Bell U S West Inc. last year, has a mix of businesses ranging from traditional local telephone service, to Web hosting and high-speed data transmission.
Other telecommunications companies, such as local service provider BellSouth Corp. and long-distance voice and data company WorldCom Inc., said they expect growth to slow in 2002. Baby Bell SBC Communications Inc. said competition and regulatory pressures would put ``significant pressure on its ability to generate meaningful growth in 2002.''
On a net basis, Qwest expects to post a 2001 loss in the range of $2.30 a share to $2.38 a share. It said normalized earnings would be in the range of 7 cents to 8 cents a share.
For 2002, Qwest expects reported earnings to be in the range of 17 cents a share to 24 cents a share, including new accounting rules that go into effect in January. Wall Street analysts, on average, expect Qwest to earn 14 cents a share in 2002, according to First Call.