DENVER (AP) -- Qwest Communications International Inc. insisted Tuesday that it would meet performance targets for the year, despite reporting a sharply wider first-quarter loss of $698 million.
Qwest CEO Joe Nacchio also criticized AT&T Corp. for its role in state reviews of confidential agreements Qwest had with some competitors. Minnesota regulators are examining whether the agreements should have been made public so other companies could opt in to similar deals with the Baby Bell.
The company said it lost 42 cents per share for the three months ended March 31, compared with a net loss of $46 million, or 3 cents per share, in the first quarter of 2001.
Excluding non-operating items totaling $536 million, relating mostly to a writedown of its investment in KPNQwest, the loss was 10 cents per share. That compares with Thomson Financial/First Call's analyst estimate of 4 cents a share.
RBC Capital Markets director David Bank said Qwest's local business, like other phone companies, is suffering from a weak economy and consumers who are substituting mobile phones for land lines and getting rid of second lines.
"They're not the worst performing Bell out there," Bank said. "They're all having a pretty hard time right now for those two reasons: the economy and substitution."
Revenue for the quarter declined 13 percent to $4.37 billion from $5.05 billion for the same period last year, largely due to the lack of optical capacity asset sales and certain Internet equipment sales.
Qwest expected another writedown in the second quarter to reflect KPNQwest share prices that were $6.10 at the end of 2001 and are now trading under $1.
Qwest continues to look at selling assets, including all or part of its yellow pages unit. First-round bids are due May 8.
Nacchio said he expected employee-related savings to contribute $250 million toward earnings growth for the year. The company has been cutting about 8,400 jobs and 2,500 contractors, chief financial officer Robin Szeliga said.
Several states, some of which received complaints from AT&T, are reviewing confidential agreements Qwest made with some competitors to determine whether they should have been made public. The states include Minnesota, Utah, Colorado, New Mexico, Arizona and Washington.
Qwest contends it was not required to disclose the agreements, some of which asked competitors not to oppose Qwest's efforts to offer long-distance in its 14-state region.
Nacchio said the reviews would not affect its efforts to meet the federal requirements it must satisfy before Qwest can offer long distance service.
"AT&T is pulling out all the stops to try and throw a wrench in the process because we are on the verge" of getting approval, Nacchio said. "Their 18 years of systemic overpricing of long distance customers in the West is about to end."
AT&T spokesman Russ Glover said the Minnesota Department of Commerce brought the secret deals to light, not AT&T.
"We welcome competition as always," Glover said. "The real issue is, do consumers have a choice? If Qwest gets into long distance, they will be able to remonopolize because they'll still control 90 to 95 percent of residential consumers in their territory."
...Qwest repeated pledges to have free cash flow in the second quarter and maintain its bank covenants. It also said it would meet its earnings and revenue projections for the year.
"It's much more important that the company addresses debt and asset sales this year and doesn't fall foul of debt-to-Ebitda ratios and its free cash flow promises," said analyst Simon Reeves of Pacific Crest Securities.
Shares rose 7 cents to $5.03 in trading Tuesday on the New York Stock Exchange