Qwest Cuts Targets Again

Updated from 4:36 p.m. EDT

Qwest

(Q)

slashed 2002 financial guidance and rolled out other cutbacks Thursday as the Denver telco's finances continue to weaken.

The company said it would trim 2,000 jobs, or 4% of the workforce, and slash capital spending to less than half of year-ago levels in a bid to turn cash-flow positive by midyear. Qwest set its latest 2002 capital spending target at $3.1 billion-$3.3 billion, down from the $3.7 billion forecast it made earlier this year and 63% below the year-ago $8.5 billion expenditure.

Qwest generally steered clear of making specific forecasts for the first quarter, whose results the company is due to report April 30. But the company indicated that investors wouldn't likely be pleased by the continuing erosion of its business. Investors agreed, sending the stock down 37 cents in after-hours trading to $7.20.

Qwest said the new guidance "reflects continuing weakness in both the telecommunications sector and the regional economy in Qwest's 14-state local service area, as well as increased competitive pressure." As fellow Bell

SBC

(SBC)

reported earlier Thursday, Qwest saw declines in its core local phone business as well as in data services, a critical growth segment for the company.

And like SBC, Qwest took the knife to spending yet again, looking for a way to preserve cash and hit the positive cash-flow target by the end of the second quarter. Qwest and many of its peers are searching for ways to cut expenses as revenue falls below expectations amid an industrywide slump; on Thursday Qwest cut its 2002 revenue guidance to $18 billion-$18.4 billion, down from $19 billion earlier, and its EBITDA guidance to $6.4 billion-$6.6 billion, from $6.8 billion.

CEO Joe Nacchio said he has hired former Merrill Lynch merger specialist Tom Middleton as a consultant to help Qwest sell assets. And as

TheStreet.com

reported Monday, industry experts suspect Middleton's role may also include the eventual sale of Qwest to another Bell, most likely

BellSouth

(BLS)

.

Nacchio appraised the total value of the assets Qwest can sell at about $10 billion, but he said it could take a year or more to complete these deals. Qwest is also said to be spending about $1 million per week on legal and lobbying efforts to gain long distance approval in its 14-state region.

Observers say once Qwest has secured long-distance approval, it will face less regulatory resistance if it wanted to merge with another telco, such as BellSouth.

Nacchio said he expects to have long-distance approval and substantial revenues from that business by next year, a bit further out than some had expected.