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Qwest Swings to a Loss

The first quarter highlights the Denver telco's vulnerabilities in wireless.
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Stung by declines in local and wireless revenue,



swung to a steeper-than-expected quarterly loss Tuesday.

The struggling Denver-based regional Bell company posted a first-quarter loss of $310 million, or 17 cents a share, on revenue of $3.48 billion. Analysts had forecast a 14-cent loss on revenue of $3.48 billion. A year ago, Qwest earned $152 million, or 9 cents a share, on revenue of $3.62 billion.

"Record gains in DSL and long-distance are evidence that we are giving customers what they want. We also continue to see positive momentum in the enterprise space with new and growing relationships with customers such as John Deere and the State of California," said CEO Richard C. Notebaert. "And, we will continue to assert our leadership in a rapidly evolving and highly competitive marketplace, as we have with VoIP and naked DSL."

Like its better-positioned local-phone rivals, such as


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, Qwest is counting on growth in fast Internet and long-distance service to offset a continuing decline in local phone revenue. But unlike those players, which have big, successful offerings in the fast-growing cell-phone business, Qwest is lagging behind on the wireless front.

The company continues to face major hurdles on other fronts as well. Notebaert took over the top job in June 2002 after the rapid rise and subsequent exit of former chief Joe Nacchio. Since then, the company has restated $2.5 billion in sales booked during the Nacchio era. Qwest is also the subject of an


investigation and at least two criminal investigations by the Justice Department.

After three years of employee cuts and business liquidations, like the sale of its lucrative yellow-pages division to pay off debts, Qwest is still fighting the undertow of a receding telecom industry.

Nonetheless, Qwest said it "expects revenue trends to improve in each quarter of 2004 with the opportunity to deliver full-year revenue growth."

Qwest shares closed Monday at $4.02.