Qwest Hints MCI Bear Hug Still a Possibility
In his first analyst call since Qwest’s failed attempt to acquire MCI over rival Verizon, CEO Richard Notebaert said Tues. his company remains on the look-out for other opportunities and hasn’t closed the door on taking another run at MCI. Notebaert also told analysts that after 3 years of revenue declines, Qwest has the “opportunity” to up revenue in 2005.
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“I think we are in a position where we have to look at our options, keep every door open and see how this unfolds,” Notebaert said of MCI. “The proposals we put forward were strong… It appears that just over a billion in cash was left on the table. One billion is a lot of shareholder value to be left on the table.”
Notebaert also noted that Qwest’s strong bid for MCI seemed to catch Verizon off guard. “We took a pretty good swing at the ball and will continue to look at opportunities and take some strong swings at the ball,” he said. “According to the media, [Verizon and MCI] were kind of shocked that we took the kind of swing we did, multiple proposals. The one thing that comes out of this is we may be small, but by gosh we've got a little feistiness to us and we're willing to take a run at something.”
Qwest CFO Oren Shaffer downplayed the significance of an MCI acquisition during the analyst call. “If in fact a combination or a transaction had occurred, the real improvement… would have come from improved operations,” he said. “In our case we continue to improve operations [including] the significant amount of costs we've taken out of our IXC already.”
In its earnings report Qwest said its 4th-quarter losses had narrowed to $139 million - about 1/3 the $407 million lost in the year-earlier quarter. Sales fell 1.7% to $3.44 billion for the quarter, the smallest decline in 2 years. Qwest had to take a $36 million charge because of a tax penalty adjustment but cited additions of DSL and long distance customers.
Notebaert said Qwest surpassed growth targets for DSL and in-region long-distance, “deepened our bundle penetration, improved our access line trends, significantly reduced our costs and improved our key customer service metrics.” Qwest said it added 81,000 clients for its DSL service to more than 1 million and 144,000 long distance customers in the quarter to reach 4.6 million.