Qwest ( Q) reported a gain-related profit in the first quarter on a 9.4% decline in revenue, and said revenue would continue to slip throughout the year because of competition from leased-line competitors and the Internet.

Qwest earned $150 million, or 9 cents a share, on revenue of $3.63 billion, in the latest quarter, compared with a loss of $23.9 billion, or $14.32 a share, on revenue of $7.01 billion in the year-ago quarter. The latest quarter included a $206 million gain related to a new accounting rule relating to accrued depreciation. The year-ago quarter included a huge goodwill writedown.

The company warned that the first-quarter numbers might not be final, as its auditors continue to work on revenue and profit restatements stemming from accounting investigations. Among other things, Qwest is being probed for its use of capacity swaps with other telecommunications companies during the late 1990s and early 2000s.

Qwest said it lost about 130,000 retail consumer access lines in the fourth quarter, noting that the rate of decrease is slowing, and predicted that the percentage rate of annual revenue decline will be in the mid-single digits.

"We continue to see signs of improvement in our core businesses," the company said. "Our focus on improving the service we provide to customers and the great value we offer is paying off not only in retaining our local customers, but also in growth opportunities such as long-distance service."

Qwest also noted that the SEC's investigation into its past accounting has been expanded to include "further adjustments and restatements the company has made as well as additional transactions." The company also outlined the most recent discoveries in its "audit and re-audit" process, including an additional decrease in deferred tax assets in 2002 of $1.4 billion. Qwest said the remaining deferred tax asset will be used this year.

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