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Qwest (Q) remains confident, but the company's to-do list hasn't gotten any shorter. Accordingly, investors remain anxious.

On Wednesday the company posted

a second-quarter loss that showed it making modest progress on a number of fronts. But Qwest's halting steps forward only drew renewed attention to what yet needs to be done, which is to say plenty. Most of all, Qwest needs to find a way to keep the cash rolling in.

The company's shares slipped in midday trading as Wall Street considered management's to-do list:

  • Get audit done and financials filed by the end of the month to keep bankers happy.
  • Get the $4 billion due for the rest of the directory business sale.
  • Get any or all of the three federal investigations resolved.
  • Get a million wireless customers to upgrade their phones.
  • Get that $2 billion obligation to Calpoint and KMC Telecom reduced.
  • And, oh yeah, get investors to believe in us so we can fund our more humble cash-burning broadband and local business strategy.

Toward that first objective, the Denver-based local phone giant said it was getting closer to completing its financial restatements for 2000 and 2001. And though Qwest's bankers have given the company a Sept. 30 deadline, the company was confident that the creditors would be understanding if the process drags on a bit.

Qwest and its auditors have so far found $2.2 billion in overstated revenue dating back to the aggressive sales and accounting era of the previous administration. The company is working with the

Securities and Exchange Commission

as well as the Justice Department and the Denver district office of the Justice Department on several civil and criminal investigations.

As is usual with Qwest, separating its scandalous past from its challenging future has been a daunting task for both the company's new executive team and its investors.

Obviously, the legal issues seem to revolve primarily around several individuals no longer with the company, but Qwest still needs to be cleared of any wrongdoing by the SEC and the Justice Department if it hopes to have access again to the capital markets. And Qwest needs funding.

A good deal of the financing pressure will be relieved once Qwest can close the $4 billion sale of its directory business, but as Gimme Credit analyst Kim Noland pointed out in a recent report, "Qwest's ability to meet debt maturities of over $16 billion in 2008 and beyond will depend on continued access to the capital markets," because it can't generate enough cash from its operations.

Qwest posted a second-quarter net loss Wednesday of $91 million, or 5 cents a share, on $3.6 billion in sales. Though revenue was roughly in line with expectations, the latest quarter's top line represents a slight sequential decline from the first quarter and a 16% drop from year-ago levels.

The number of local lines continues to shrink as competitors such as

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chip away at Qwest's core business. Still, those losses were partially offset by gains in long-distance sales. Company executives declined to give any financial projections but said their outlook for the year remained unchanged. More than two months into the third quarter, investors would be surprised if management didn't have a good view of how the second half was progressing.

Every promise Qwest keeps, wins points with Wall Street. But even the slightest disappointment undermines investor faith.

It seems word quickly got around this summer that Qwest had told at least one analyst that it was encouraged by progress it was making in resolving a sticky business deal that former CEO Joe Nacchio's team had created.

Toward the end of the heady Net boom, Qwest

devised a plan to resell network equipment to two smaller telcos: Calpoint and KMC. In exchange, Qwest promised to buy a fixed amount of services from these companies.

The telecom business didn't take off as expected, leaving Qwest with an ongoing purchase obligation that analysts value at around $2 billion. Last month, Qwest offered Calpoint investors a one-time payment if they would accept smaller monthly payments, according to a report in the

Denver Post

and a Calpoint press release.

When Qwest CEO Dick Notebaert and CFO Oren Shaffer backed away from optimistic expectations on an earnings call with analysts Wednesday regarding the Calpoint matter, some of the disappointment was evident. Qwest shares, which had been relatively unchanged in recent weeks, fell 12 cents, or nearly 3%, to $4.52 in midday trading Wednesday.

One more item for the to-do list: Don't promise stuff.