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Qwest Plans to Bundle Video With Cell Phone, Internet Service

Posted on: Thursday, 16 February 2006, 15:00 CST

By Beth Potter, The Denver Post

Feb. 16--Denver-based Qwest wants to improve revenues this year by bundling video, cell phone and high-speed Internet service, chief executive Richard Notebaert said Tuesday.

"Our 2006 strategy is a $500 million revenue opportunity -- the bundling and packaging of entertainment, wireless and DSL," Notebaert said.

The company plans to spend about $480 million of its more than $1.6 billion capital budget to increase bandwidth, which is needed to offer video service.

Qwest offers video over Internet to its customers in places like Highlands Ranch and Phoenix. Those video services are not available widely, however, across its 14-state Midwestern and Western territory.

"(Video) is not a silver bullet because there aren't any silver bullets, but we're already in the cable business bigger than Verizon is," Notebaert said.

Qwest's high-speed Internet service is available to 77 percent of customers in its service territory.

Notebaert talked about Qwest's strategy in an interview with The Denver Post on Tuesday after a fourth-quarter earnings call in which he announced better-than-expected quarterly results and hinted at a possible 2006 dividend for shareholders.

Revenues rose to $13.9 billion in 2005, capping the company's first year of revenue growth since 2001. The sales increases were offset by a loss of 28 cents per share, mostly due to a one-time charge.

National telecom analyst Jeff Kagan was bullish on the earnings report, saying Qwest has the staying power to battle cable TV companies on their own turf.

"As competition with the cable industry looms, Qwest still is holding its own," Kagan said in a statement. "This is the kind of performance Qwest needed to have." Cable companies have been picking off Qwest's phone customers, its traditional revenue generator, in Omaha, Phoenix and other big cities. Comcast Corp. rolled out its Digital Voice phone service in the Denver area late last year.

Qwest will have to hustle to meet its positive projections, said Donna Jaegers, an analyst at Greenwood Village-based Janco Partners.

"Is there time for Qwest to continue with the bundling strategy and drive its customers upwards?" Jaegers asked. "Is that $500 million (revenue) goal real?" Qwest also continues to examine merger and acquisition possibilities carefully, which may include bidding for a noncommunications company, Notebaert said. National competitor Verizon outbid Qwest last spring for MCI.

Qwest shares Tuesday closed up 10 cents at $6.

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Source: The Denver Post

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