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Competition Clocks Qwest

Qwest (Q) saw a drop in new orders late last year as cable rivals robbed customers and the housing market continued to cool.

In a theme becoming familiar among phone, Internet and video-service providers, Qwest said Tuesday that it saw "softness" in December as its core consumer phone business continues to erode. The company says it now expects 2008 revenue to be flat to slightly down from last year's levels.

The projection came as the Denver phone giant posted in-line fourth-quarter numbers. The company's profit, adjusted to exclude a tax gain, rose to $260 million, or 14 cents a share, from $194 million, or 10 cents a share, a year earlier.

But sales of $3.4 billion for the quarter and $13.8 billion for the year were flat with the year-earlier quarter and down slightly from the 2006 level.

Qwest has been hurt as cable giants Comcast (CMCSA), Cox and Time Warner Cable (TWC) have aggressively jumped into the phone business as part of the so-called triple-play service bundle.

The competition has gotten even hotter as satellite shops EchoStar (DISH) and DirecTV (DTV) have aimed high-definition video programming offers at the growing numbers of big-screen TV owners.

The cutthroat competition has combined with a widespread slowdown in new-home construction and rising foreclosures. This is particularly painful for Qwest, which serves Western boomtowns like Phoenix and Denver where rapid growth has vanished.

On an earnings call with analysts, Qwest says it hopes to offset the decline in its residential sales -- the number of total phone lines fell an alarming 7.3% in the fourth quarter -- with higher business services orders.

Qwest shares rose 27 cents, or 5%, to $5.40 Tuesday.

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