Qwest CEO says betting on a tough economy in 2002
Thursday November 8, 4:45 pm Eastern Time
By Siobhan Kennedy and Ben Klayman
NEW YORK/CHICAGO, Nov 8 (Reuters) - Qwest Communications International Inc. (NYSE:Q - news) Chairman Joseph Nacchio said on Thursday the voice and data services company is looking at 2002 as a transitional year and was ``going to bet on a tough economy.''
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``For us 2002 is a transitional year, which is why we haven't put out the (financial guidance) numbers yet,'' he said at a JP Morgan telecommunications conference in New York.
``We're going to manage through continued economic weakness. The way we're going to play it at Qwest is that we're very conservative on 2002,'' he added. ``We're not assuming economic recovery.''
Qwest's lack of 2002 guidance when it announced third-quarter results on Oct. 31 raised concerns among investors that it might further cut its recently reduced growth forecast. The Denver-based firm posted a third-quarter net loss of $142 million on flat revenues and warned fourth-quarter revenues would miss analysts' estimates.
The company, which in September slashed its growth outlook through 2002, said last month it would detail its growth forecasts at a Dec. 13 meeting in Denver with analysts.
When pressed last month for a ballpark estimate on 2002, Nacchio said revenue growth may be ``middle single digit'' range, ``but it's too early to call.'' Qwest in September said 2002 revenue growth would be in the ``high single digits.''
Qwest's stock rose 43 cents, or 3.7 percent, to close at $11.94 on the New York Stock Exchange on Thursday. Since the beginning of the year, it has underperformed its peers in the North American Telecommunications Index (^XTC - news) by 61 percent.
On Thursday, Nacchio vowed that Qwest, the dominant local telephone company in 14 states from Minnesota to Washington, was going to improve its margins on earnings before interest, taxes, depreciation and amortization (EBITDA) and was cutting costs and jobs to match its revenue base.
``That means if you're inside Qwest, it's not much fun these days, because we're going to bet on a tough economy,'' he said.
He said the company, which acquired Baby Bell regional phone company U S West Inc. in June 2000, was targeting ``profitable controlled growth'' and plans to be free cash-flow positive in the second quarter of 2002.
Nacchio said the company will accelerate the elimination of 4,000 jobs or 6 percent of its work force, but added it was too early to know whether more job cuts were necessary.
He said the company was taking aggressive cost-containment measures and that a good portion of its capital spending for 2002 was already done.
``We're going to take our capital budgets down,'' he told analysts, adding that Qwest had already completed the expansion of its global network, that it had invested and improved its customer service, and that it had finished its expansion into 25 out-of-region markets.
Nacchio said the aim was to reduce Qwest's capital expenditures to $5.5 billion or less for 2002 from $8.5 billion in 2001. |
