Qwest Communications International - Profits Disappear Following The Merger, 2000-2001

Following the acquisition of US West, Qwest remained focused on higher-growth markets, including Web hosting, wireless, DSL, and broadband services. For the fourth quarter of 2000 revenue from Internet and data services increased by 40 percent over the previous year, while wireless revenue grew by 90 percent. The company's DSL customer base expanded by more than 130 percent to more than 255,000 subscribers. In September 2000 the company began a national rollout of its DSL service, moving into markets controlled by other RBOCs. At the end of the year president Afshin Mohebbi reiterated the company's mission to become the premier broadband Internet communications company in the world. During the year CEO Joseph Nacchio added the title of chairman, succeeding Philip Anschultz.

Qwest's financial picture for 2000 and 2001 was clouded by one-time charges and non-operating expenses. For the year 2000 Qwest reported revenue of $16.6 billion, well short of the $19 billion the company projected. Operating income was positive at $1.8 billion, but various expenses resulted in the company reporting a net loss of $81 million for the year.

For the first two quarters of 2001, Qwest had quarterly income of approximately $5 billion each quarter and positive operating income of $637 million in the first quarter and $135 million in the second. Non-operating and other expenses resulted in net losses of $46 million in the first quarter and a staggering $3.3 billion in the second. After the first two quarters Qwest claimed it was on track to reach its 2001 revenue target of $21 billion and $8.5 billion in earnings before interest, taxes, depreciation, and amortization (EBITDA). Deteriorating economic conditions in the

third quarter forced Qwest to reduce its 2001 revenue estimate to $20.5 billion while announcing it would cut 4,000 jobs from its workforce of 66,000.