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Qwest’s wrong numbers…

images-1.jpegSometimes, it almost seems too easy to pick on Qwest (Q). The company has long had a special place in my heart, dating back to my book when I dissected their Ks and Qs from the earlier part of this decade. So I couldn’t resist when I caught the 10-K that Qwest filed late yesterday. Call me sentimental. Or maybe, given that Valentine’s Day is tomorrow, a hopeless romantic for a company that used to be. Thankfully, 10KWizard’s nifty Compare Wizard feature makes plowing through the filing a heck of a lot easier than it was back when I first tackled this.

One of the first things that popped out to me was the rapid decline in access lines — Qwest’s bread and butter — especially when you start looking at the numbers over the past five years: 17 million in the 2003 K and 13 million in yesterday’s filing. Here’s how the company describes the decline in the filing: “Many consumers are substituting cable, wireless and VoIP for traditional telecommunications services, which has increased the number and type of competitors within our industry and has decreased our market share. As a result of this product substitution, we face greater competition in providing wireline services from wireless providers (including ourselves) and from broadband service providers, including cable companies and VoIP providers.”

There was also this new warning about Qwest’s market in Montana, one of 14 states that Qwest serves: “In several proceedings, ithe Montana Public Service Commission is considering whether to order a reduction in the prices that our wholly owned subsidiary, Qwest Corporation, or QC, is allowed to charge its retail residential and small business customers for intrastate telecommunications services in Montana. The proceedings are at an early stage, and QC has asserted legal defenses in these matters, but the complainants have asked the commission to order QC to reduce its prices for telecommunications services in Montana.” According to this article in the Billings Gazette, Qwest has about 300,000 customers in Montana, whose rates could fall as much as 23 percent. Now this might seem pretty basic, but when you’re losing customers already, it’s never a good idea to let the ones you still have think they’re way over-paying.

There was also this new warning about Qwest’s debt, of which $3.6 billion is due in the next three years: “Due to recent turmoil in the credit markets, we may not be able to refinance maturing debt at terms that are as favorable as those from which we previously benefited or at terms that are acceptable to us.”

But the real truffle was this new warning about the $400 million securities settlement: “In addition, the outcome of the pending appeal of the decision approving the settlement of the consolidated securities action is uncertain and could result in the payment of additional monies by us in connection with indemnification claims by Messrs. Nacchio and Woodruff.” That would be former CEO Joseph Nacchio and former CFO Robert Woodruff, two guys who were responsible for those earlier filings.