Qwest to Cut 4,000 Jobs

Sep 10 2001

DENVER - Qwest Communications International said it will reduce its work force by 4,000 jobs and scaled back its outlook for the second half of this year and fiscal 2002, citing deteriorating economic conditions both nationally and within its local-phone service region.

The 6% work-force reduction will lower the number of Qwest employees to 62,000 from 66,000 by the end of the first quarter. The company also will eliminate 1,000 staff positions while adding 1,000 quota-bearing sales executives in its global business markets unit to increase the focus on national accounts.

Qwest said it expects to achieve the cuts through attrition and "business- process improvements."

Qwest expects 2001 revenue of about $20.5 billion and earnings before interest, taxes, depreciation and amortization, or Ebitda, of about $8 billion. For 2002, the company expects revenue growth in the "high single digits" and Ebitda growth to be slightly better than revenue growth.

Qwest said it planned to further reduce its capital expenditures for 2001 to about $8.5 billion from about $8.8 million.

For 2002, Qwest trimmed its capital budget to $5.5 billion from $7.5 billion. As a result, Qwest said it expects to be free cash-flow positive in the second quarter of 2002, two quarters sooner than previously announced.

In an April conference call, Qwest Chairman and Chief Executive Joseph Nacchio said he lowered capital-spending guidance by $300 million to $9.2 billion from 2001, and he estimated capital spending for 2002 of $8.5 billion. The company cut these views in the July conference call to $8.8 billion and $7.5 billion, respectively.

At that time. executives said they didn't expect lower capital spending to hurt growth, even though the new guidance eliminated an additional $1 billion from 2002 spending and $400 million from 2001 spending.

The lower capital spending was possible because much of the spending already has been completed on service improvements and on entering long distance within Qwest's 14-state local-service region, mr. Nacchio said in July.

A Qwest spokesman wasn't immediately available Monday to discuss what the most recent capital spending revision means for the company.

Last week, two telecommunications analysts lowered their 2002 capital spending outlooks for the sector. UBS Warburg's Nikos Theodosopoulos lowered his U.S. telecommunications capital spending projections for 2002 to a decline of 14% from earlier estimates of a drop of between 5% and 10%. Meanwhile, Lehman Brothers' Blake Bath expects 2002 capital spending to decline 19.4% from 2001.

New York Stock Exchange-listed shares of Qwest closed Friday at $18.14, down $ 1.12, or 5.8%; during the day, the stock hit a 52-week low of $17.89. In premarket activity Monday on Instinet, Qwest was trading at $16.65.