TELECOM Digest OnLine - Sorted: Qwest to Expand Bandwidth 'Just in Time'

Qwest to Expand Bandwidth 'Just in Time'

Reuters News Wire (reuters@telecom-digest.org)
Mon, 8 May 2006 20:48:03 -0500

By Ritsuko Ando

Qwest Communications International Inc., the fourth largest U.S. local
telephone company, said on Monday that it would expand high-speed
network capacity as much as customers want, but not too much more.

Qwest's Chief Executive Richard Notebaert told Reuters in an interview
that he aimed for "just in time" bandwidth expansion, referring to a
popular inventory strategy to optimize the return on investment.

"We have to be very thoughtful about our return on investor
capital. To do something where assets would not be fully utilized for
a number of years, I think, would be suspect on our part," he said.

His comments highlight the company's focus on improving its financial
health, the weakest of the four so-called "Baby Bells" and its pursuit
of a different strategy to its bigger rivals such as Verizon
Communications which have been investing heavily in broadband.

Qwest, he said, has so far kept up with customers' demand for
high-speed Internet connections, now providing many with speeds of
around 3 to 5 megabits per second, and some even 7 megabits, compared
to 1.5 megabits a few years ago.

It will spend around the same or slightly higher in 2006 than last
year to bolster bandwidth, he said.

Analysts have generally commended Notebaert for bringing discipline
and focus to Qwest.

Based in Denver, Colorado and servicing 14 western states, Qwest last
week posted a 54 percent rise in quarterly profit, helped by cost cuts
and growth in high-speed Internet subscribers.

It ended the first quarter with 1.7 million high-speed subscribers, up
13 percent from the 2005 fourth quarter and up 50 percent from a year
earlier.

It also ended the quarter with total debt of $15.4 billion, down $1.9
billion from a year earlier.

Qwest's improving cash position has helped Qwest's share price nearly
double over the past 52 weeks. But the stock, which closed Monday up
one percent at $6.82 on the New York Stock Exchange, is still far
short of its 2000 peak of more than $60.

Analysts expect the improving cash position to prompt a share buyback
or dividend payment soon, and Qwest has said it would make a decision
on the matter later this year.

Notebaert remained coy on the decision, saying only he would listen to
shareholders.

"Because they see what's happening, they have not been reticent in
sharing their opinions," he said, adding that any move may depend on
external factors such as interest rates.

Notebaert said he expected healthy growth in the wholesale business to
continue, and that it should eventually be seen as more of a
communications company than a regional telecoms company.

He also forecast an expected rise in demand for use of its optical
fiber networks.

Qwest and other long distance telephone network operators during the
dot-com boom expanded high speed fiber optic networks only to later
find that they had overestimated demand, leading to a glut of unused
optical infrastructure called "dark fiber.

"I think that eventually people will have to activate some of that
dark fiber. With streaming video and all those things, traffic has to
increase," he said.

Copyright 2006 Reuters Limited.

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