Beyond Positive Earnings, Qwest Merger Lives On (Q, CTL, T, VZ, S)

Like competitors AT&T (NYSE: T) and Verizon Communications Inc. (NYSE: VZ), both Qwest and CenturyLink lost landline subscribers during the quarter. Qwest and CenturyLink need to make up the subscriber losses by adding broadband subscribers, high-speed internet customers, and wireless subscribers where possible. Qwest reported a 37.4% increase in wireless subscribers, bringing the company’s total wireless customer base up to just over 1 million. Sprint Nextel Corp. (NYSE: S) is the third-largest US wireless carrier with about 48 million subscribers, trailing far behind leaders AT&T and Verizon Wireless each of which has around 93 million subscribers. Qwest’s million seems awfully tiny compared with those numbers.

CenturyTel reported that it’s landline subscriber total fell by -7.8% in the third quarter, from about 7.2 million to 6.63 million. The company did add 29,000 high-speed internet customers.

Qwest posted a diluted EPS loss of -$0.05. Excluding $300 million in charges, the company posted EPS of $0.11, a penny better than estimates. Revenue totaled $2.935 billion, above estimates of $2.9 billion. CenturyLink posted EPS of $0.83, beating estimates of $0.81. Revenue totaled $1.75 billion, slightly better than estimates of $1.74 billion.

CenturyLink raised the lower end of its full-year 2010 EPS guidance from $3.30 to $3.36, but kept the top of the range steady at $3.40. The company had previously said that it expected revenues to decline in 2010 by 6.5%-7.5% compared with 2009. The company trimmed the estimate to 6.5%-7.0%. Analysts were expecting full-year EPS of $3.41.

Qwest says in now expects “to report a low-single digit annual rate of revenue decline in the fourth quarter,” an improvement from the low- to mid-single digit decline previously forecast. The company also forecast EBITDA of $4.4 billion for the full year, at the high end of its previous range of $4.3-$4.4 billion.

Shares of both Qwest and CenturyLink are up less than 1% following the earnings reports.  The important thing to note is that Qwest did manage a new 52-week high of $6.79 this morning and that appears to be a high not seen since the end of 2007.  The companies expect to complete the merger in the first six months of 2011.

Paul Ausick