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Qwest Swings to Profit

It cites rising bundle penetration.

Qwest (Q) swung to a fourth-quarter profit as revenue inched up 0.2%.

The Denver-based telco made $194 million, or a dime a share, for the quarter ended Dec. 31, reversing the year-ago loss of $528 million, or 28 cents a share. Revenue rose to $3.49 billion from $3.48 billion a year earlier.

Analysts surveyed by Thomson Financial were looking for an 8-cent profit on revenue of $3.49 billion.

High-speed Internet, data, wireless and long distance services contributed more than 55% of revenue in the fourth quarter of 2006 and revenue increased 8% over the prior-year quarter.

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Mass market revenue in the quarter grew 1.5% compared to the year ago quarter, even with $8 million in nonrecurring revenue reduction associated with settlement-related customer credits in New Mexico and Oregon, as well as the impact of further reductions in universal service rates.

Business quarterly revenues held essentially flat compared to the prior year and sequentially as growth in key data products and services continue to offset migration of customers off our legacy products. Enterprise growth products continue to gain traction and now represent over 21% of business revenue, growing at more than 30% on an annualized basis.

The company generated solid free cash flow of $594 million in the quarter resulting from continued improvement in operating results and lower debt levels.

Fourth-quarter capital expenditures totaled $406 million, compared to $503 million in the year-ago quarter, consistent with its discussed intention to deploy 2006 capital earlier in the year to accelerate sales returns.

The company's bundle penetration increased to 57% in the quarter, compared to 51% a year ago. Sales of voice packages with three or more products continue to reduce churn and drive significant growth. Customer demand for value-added services drove higher consumer ARPU, which increased 6% to $51 from $48 a year ago.