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swung to a third-quarter profit, but revenue slipped from year-ago levels.

The Denver-based telco made $194 million, or 9 cents a share, reversing the year-ago loss of $144 million, or 8 cents a share. The current quarter includes a benefit of $92 million from a tax-sharing settlement and a severance charge of $43 million.

Revenue slipped to $3.49 billion from $3.5 billion a year earlier.

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Analysts surveyed by Thomson Financial were looking for a 7-cent profit on sales of $3.5 billion.

"We continue to deliver on our expectations for the year," said Oren G. Shaffer, Qwest vice chairman and CFO. "Our margins continue to expand toward our target of the mid-30% range, our free cash flow is squarely on track for the year, and we continue to pursue additional opportunities to expand top-line growth."

The company's bundle penetration increased to 56% in the quarter, compared to 50% a year ago. Sales of voice packages plus three or four products continue to drive significant growth. Customer demand for value-added services is driving higher consumer ARPU, which increased 7% to $50 from $47 a year ago.

Qwest's customer connections -- which include consumer and small-business primary and secondary access lines, high-speed Internet subscribers, wireless and video customers -- grew 121,000 sequentially and 344,000 from the year ago quarter, marking the fourth consecutive quarter of year-over-year increases.

Strong results in bundle subscriber additions and customer connections were partially offset by year-over-year total retail line losses of 5.1%, excluding 32,000 affiliate disconnects in the prior year.

The company added over 175,000 high-speed Internet lines in the third quarter.