missed Wall Street's estimates Monday with its first-quarter results, blaming the miss on savage competition and economic pressures, particularly in Western states most affected by the housing slump.
The Denver phone- and data-services provider said it had a first-quarter profit of $157 million, or 9 cents a share, falling from $240 million, or 12 cents a share, in the year-ago period. Qwest said it began recording its income tax expense at normal effective rates in the first quarter, which resulted in $99 million of income tax expense compared to $2 million in the same quarter a year earlier.
Revenue slipped 1.5% to $3.40 billion from $3.45 billion a year earlier, which Qwest said reflects the impact of industry consolidation and long-distance pricing pressure.
Analysts were looking for earnings of 10 cents a share on revenue of $3.42 billion, according to Thomson Reuters. Qwest was falling 26 cents, or 4.9%, to $5.10.
"Since the beginning of the year, we have demonstrated notable progress on our strategies for success, including announcing a new wireless model and executing on our fiber-to-the-node build-out, which is ahead of plan for the year," said CEO Ed Mueller in a release. "In addition, we continue to effectively compete for customers in a challenging economic climate."
Qwest said that mass markets revenue slipped 0.7% to $1.48 billion in the quarter, as a 20.7% rise in data, Internet and video revenue was offset by declines in both voice and wireless services. Sequential revenue was essentially flat.
Broadband subscribers increased 17.2% in the quarter to 2.7 million. The company said it also added 50,000 net
subscribers for a total of 699,000 video subscribers, an increase of 42%.
Qwest has been hurt as cable giants
, Cox and
Time Warner Cable
have aggressively jumped into the phone business as part of their service bundles.
Competition has gotten even hotter as satellite names
and DirecTV have aimed high-definition video programming offers at the growing numbers of big-screen TV owners.
Qwest's first-quarter results come a day after
to market and sell Verizon Wireless service beginning this summer, supplanting ailing
as its wireless services vendor. Verizon Wireless is the joint venture between
In a post-earnings call with
, Mueller said the choice to switch to Verizon Wireless was a necessity as Qwest needed a national retail presence not branded under its own name.
"We wanted a very good retail partner, one that could also provide next-generation data like 4G," he said. "We have access to all the latest and greatest handsets now."
Mueller said even though revenue in the quarter took a hit from the consolidation among telco names,
shouldn't impair Qwest. "If there were a Sprint consolidation, something like that wouldn't affect us," he said.
When asked about expectations for the company's May 22 shareholder meeting, considering there is a
, Mueller said he wouldn't comment on any proxy votes ahead of the meeting.