[LCI Posts Strong Earnings Growth Ahead Of Merger With Qwest]
NEW YORK -(Dow Jones)- Long-distance telephone company LCI International Inc., which last month said it agreed to be acquired by Qwest Communications International Inc. in a $4.4 billion stock deal, Tuesday announced a better-than-expected 32% increase in first-quarter earnings.
The McLean, Va., company said net income came to $29 million, or 29 cents a share on a fully diluted basis, compared with $22 million, or 22 cents a diluted share, in the year-earlier period. The mean estimate of 15 analysts surveyed by First Call was for net income of around 27 cents per share.
LCI (LCI) said revenue increased 22% to $448 million, while telecom traffic increased 21% to 3.5 billion minutes of usage.
LCI, the company that pioneered flat-rate pricing for long-distance phone service, will become a key part of Denver-based Qwest, which is building an expensive fiber-optic network that it is eager to fill with long-distance traffic. LCI has lacked international and local facilities, and needed to combine or face the threat of being steamrolled by larger carriers such as the planned combination of MCI Communications Corp. and WorldCom Inc.
LCI Chairman H. Brian Thompson was reluctant to sell the company but LCI's board advocated the marriage, convinced that the second-tier carrier needed to participate in the wave of mergers sweeping the industry.
Qwest has been one of the hottest companies on Wall Street, grabbing headlines with its bold strategy of building robust fiber-optic pipelines. Founded by railroad baron Philip Anschutz, the company started out as a "carrier's carrier," selling capacity to phone companies such as Frontier Corp. and GTE Corp. Last year, Qwest pushed into the retail business in earnest with a splashy, 7.5 cents-a-minute, long-distance offering that sends voice calls using Internet technology.
The question now is whether Qwest-LCI can develop new applications and products to fill up the carrier's vast pipes. The combined companies, with their 2.3 million customers and $2.3 billion in combined 1997 revenue, control only a small fraction of the $90 billion-a-year long-distance market. The top three long-distance companies are AT&T Corp., the combined MCI-WorldCom Inc. and Sprint Corp.
Some market watchers think Qwest-LCI could ultimately be bought by a Baby Bell company to energize its own long-distance business. Many analysts and telecom executives believe that the industry will come to be dominated by four or five global players, and that smaller companies will either have to be a part of these bigger entities or be crushed. |
