Qwest 1Q profit tumbles on tax charges
Qwest Communications International Inc., which recently agreed to be acquired by a smaller phone company, on Wednesday said its first-quarter earnings tumbled 82 percent due to one-time tax charges.
Its revenue fell 6.5 percent as customers continued to cancel land lines.
Qwest, the country’s third-largest local phone company, said it earned $38 million, or 2 cents per share, in the quarter, after taking tax charges totaling $166 million.
Most of the charges were related to the recent health care reform package, which ended a federal tax break for certain benefits. Other companies have also booked large charges for the same reason. Excluding the charges, earnings would have been 10 cents a share, beating the 9-cents-per-share average estimate of analysts polled by Thomson Reuters.
Earnings fell from $206 million, or 12 cents per share, in the same quarter a year earlier.
Revenue fell to $2.97 billion from $3.17 billion in the quarter. Analysts had expected $2.94 billion in revenue.
In addition to land lines cancellations, the end of a deal to resell Sprint Nextel Corp.’s wireless service reduced revenue. Qwest now markets Verizon Wireless’ service, but doesn’t book the subscriber fees as revenue.
Two weeks ago, Qwest announced a deal to be acquired by CenturyTel Inc. for about $10 billion in stock. CenturyTel’s stock has declined since the merger announcement, and Qwest shares haven’t seen any boost from the deal.
Qwest CEO Ed Mueller defended the deal Wednesday.
“Our proposed merger with CenturyLink will combine two well run companies to create a stronger competitor,” he said. CenturyTel operates under the name CenturyLink.