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Qwest Cuts a Path to Profits

Despite light sales, Qwest beats first-quarter profit estimates, largely because of deep cost cuts.

Updated from 9:35 a.m. EDT



beat first-quarter profit targets on light sales, thanks to steep cuts in spending and staff size.

The Denver-based telco posted a profit of $206 million, or 12 cents a share, up 37% from $150 million, or 8 cents a share, in the year-ago quarter. Analysts were looking for a pro forma profit of 8 cents in the first quarter, according to Yahoo! Finance.

Sales for the quarter ended last month were $3.17 billion, down from $3.4 billion a year ago, largely due to Qwest's exit from the wireless business. Analysts had expected sales of $3.24 billion.

Qwest was able to offset falling sales and a 10% drop in total phone lines through cost cutting. Qwest eliminated 3,681 employees, or 10% of its staff in the past year, the big phone shop also trimmed spending on network maintenance and upgrades by 19% from year-ago levels.

Qwest has budgeted $1.8 billion for capital spending but spent a mere 18% of that amount in the first quarter. The move was similar to cash conservation efforts by peers






, which also spent very little money on networking gear in the first quarter.

This spending slump by telcos continues to pinch suppliers like













Qwest has also reportedly put its national fiber-optic network business on the block. Toward that goal, the company hired Goldman Sachs and Deutsche Bank

to shop

the so-called long haul business around to prospective buyers, as


reported last week. Qwest probably will have to field questions on its plans for keeping or selling the expensive long haul operation on an earnings call Wednesday.

Analysts expect Qwest to try to use the proceeds from the sale to pay down some of its $13.3 billion in debt.

Qwest shares were up 19 cents, or 5.3%, to $3.76 in recent trading.