Qwest: Verizon Wireless Migration Going Well

|
Includes: CTL, MSFT, S, T, VZ
by: Eric Savitz

Qwest (NYSE:Q) CEO Ed Miller says the company’s migration of its wireless service offering to Verizon (NYSE:VZ) is going smoothly. Qwest is switching from selling a Qwest-branded wireless service in which it resold service from Sprint (NYSE:S) to a co-branded offering from Verizon; the company started rolling out its new Verizon by Qwest wireless service 2 weeks ago. “I could not be happier with the relationship,” he said. Mueller said in an interview with Tech Trader Daily this morning that he modeled the arrangement on its deal to resell satellite television service from DirecTV (DTV), and its co-marketed DSL service with Microsoft’s (NASDAQ:MSFT) MSN.

(The company did note earlier in reporting Q2 results that the switch to offering service from Verizon would result in a reduction in wireless revenues.)(See earnings call transcript.)

On the issued of continued erosion of its residential wireline subscriber base, Mueller says “we don’t know where the bottom is.” As noted earlier, access lines fell 8.8% in Q2 from a year earlier, with primary residential lines down 9.6%. To combat that, Qwest is focusing on building its base of high-speed Internet customers. He notes that the company has 2.7 million broadband lines in place, up 13.6% on a year over year basis in Q2. He notes that about 24% of homes passed are now subscribing to its broadband offering; he says their current share of the broadband markets in the areas they serve is about 35%. Mueller thinks they can get to 45%-50%.

On the other hand, he notes that net adds for broadband in the quarter fell to 31,000, from 90,000 in Q2. About half of the reduction is seasonal, he says, but the rest relates to competitive pressures and the softer economy. Mueller says that net broadband adds until the latest quarter had been split about 50/50 with their cable rivals recently, but that cable gained the upper hand in Q2. “They did a little better than us this quarter,” he says. “We were dark on promotions,” as they changed ad agencies. He says the company is “back on track,” and getting good results with a new introductory offer of $14.99 for 1.5MB service.

John Richardson, Qwest’s CFO, says the company’s broad footprint makes it a microcosm of the nation in terms of the impact of the slowing economy on its business. He notes that the company is affected by the mortgage crisis, rising default rates on household debt, rising fuel and food prices and a weakening job market. Of the territory they serve, he says, Arizona has been the hardest hit; Idaho and Minnesota the least. He notes that the company has been able to hold income from its mass market segment flat despite the macro issues, in part by keeping costs in line with demand.

Qwest today is down 4 cents, or 1.1%, to $3.55.

About this article:

Expand
Tagged: , Earnings
Want to share your opinion on this article? Add a comment.
Disagree with this article? .
To report a factual error in this article, click here