Fourth Quarter Results Compared to Previous Year:
- EBITDA grew nearly 20 percent to $2 billion
- EBITDA margins increased 330 basis points
- Revenue grew 10% to more than $5 billion
- Internet and data services revenue grew by almost 40 percent, representing more than 23 percent of total revenue
- Wireless revenue grew more than 90 percent
- EPS increased to $0.16 from $0.11
Full-Year Pro Forma 2000 Compared to Pro Forma 1999:
- EBITDA grew more than 17 percent to $7.4 billion
- Revenue grew more than 14 percent to $19 billion
- Commercial services revenue grew nearly 28 percent
- Wireless customers grew more than 73 percent to more than 805,000
- DSL customers grew more than 130 percent to 255,000
- EPS increased over 50 percent to $0.59 from $0.39
- Exceeded year-end growth targets for DSL and wireless customers
- Achieved net reduction target of 4,500 jobs for the year
- Won more than $600 million in new contracted sales in business markets in the quarter
- Reduced delayed local service orders to 850 at year-end, the lowest level in six years
Denver, January 24, 2001 — Qwest Communications International Inc. (NYSE: Q), the broadband Internet communications company, today announced record revenue and earnings before interest, taxes, depreciation and amortization (EBITDA) for the fourth quarter and full-year 2000. Qwest has met or exceeded the consensus of analysts' estimates for the 15th consecutive quarter.
"Results for the quarter demonstrate Qwest's strong position in the industry and our ability to execute the business plan," said Joseph P. Nacchio, Qwest chairman and CEO. "With the initial integration of the merger successfully completed, we are on track to meet our expected growth rates."
Fourth quarter revenue of $5.02 billion was a 9.9 percent increase over pro forma normalized fourth quarter 1999. The revenue growth was driven by strong demand for Internet and data services, which increased by almost 40 percent in the quarter. Wireless services revenue grew 90 percent in the quarter to almost $150 million with more than 805,000 customers at year-end. Commercial services revenue increased more than 19 percent, while consumer and small business services generated revenue growth of more than five percent. Total 2000 pro forma normalized revenue increased 14.2 percent to $18.95 billion from pro forma normalized 1999 revenue of $16.59 billion. Internet and data services, a high-growth segment for Qwest, grew more than 60 percent in 2000.
Fourth quarter EBITDA grew 19.7 percent to $1.99 billion as EBITDA margins improved 330 basis points to 39.6 percent in the fourth quarter of 2000 from 36.3 percent in fourth quarter of 1999. The increase in EBITDA margins resulted from an improved product mix, cost controls, network efficiencies and merger synergies. Pro forma normalized 2000 EBITDA increased more than 17.3 percent to $7.37 billion as EBITDA margins improved to 38.9 percent in 2000 from 37.9 percent in 1999. The EBITDA improvement was achieved despite significant investments in growth areas such as hosting, local broadband access, Internet and data services, and service improvements.
"We are extremely pleased with our strong operating and financial results for the fourth quarter and full-year 2000," said Robert S. Woodruff, Qwest executive vice president and CFO. "We achieved significant revenue and EBITDA growth while integrating a large acquisition and investing for growth. We remain confident that we will achieve our financial commitments for 2001 of $21.3 to $21.7 billion in revenue and $8.5 to $8.7 billion in EBITDA."
On a pro forma normalized basis and excluding non-recurring items, Qwest's fourth quarter net earnings of $270 million grew by 43.6 percent over fourth quarter 1999. Earnings per share (EPS) grew by 45.5 percent to $0.16 per diluted share. For the year, net income of $1.00 billion increased 53.6 percent over 1999, while 2000 EPS of $0.59 per diluted share grew 51.3 percent over 1999 EPS of $0.39 per diluted share. The non-recurring items are composed of merger-related charges and gains and losses related to certain minority investments and assets.
COMMERCIAL, CONSUMER AND SMALL BUSINESS MARKETS
Qwest continued to penetrate business accounts with its portfolio of broadband Internet applications and services. Global business markets won more than $600 million in new contracted sales during the quarter. Approximately 60 percent of the sales were for Internet and data services, and nearly 45 percent of the $600 million were from large national and global customers. Some of the large contract wins were with major financial, government and technology organizations, including Citibank and Fleet Securities, and major hosting sales to the bureaus of the U.S. Department of Treasury, including the IRS, U.S. Customs, and the U.S. Mint.
Qwest signed ground-breaking wholesale agreements with McLeodUSA and Eschelon Telecom for voice and data services totalling nearly $750 million, significantly expanding competition within the 14-states where Qwest provides local service. In addition, Cable & Wireless signed a multi-year agreement valued at more than $100 million for high-speed network capacity.
By year-end, 25 percent of Qwest's local residential customers had subscribed to a bundle of communications services. Qwest added 730,000 customers to its CustomChoiceSM package, featuring a home phone line with a choice of 19 calling features, and now has more than 2 million customers using the service. In addition, more than 121,000 customers now subscribe to Qwest's Total PackageSM, a bundle of wireless, wireline and Internet services.
Qwest wireless customers totaled more than 805,000 compared with a target of 800,000 customers by the end of 2000. In addition, 28 percent of all wireless sales are now sold as part of a bundle.
INTERNET AND DATA SERVICES
Internet and data revenues for the fourth quarter 2000 grew approximately 40 percent over the fourth quarter of 1999. The company saw strong demand for Internet access, hosting, digital subscriber line (DSL), virtual private network, frame relay, ATM and professional services. Internet and data services revenue represented 70 percent of Qwest's total revenue growth in the quarter.
Qwest introduced e-SolutionsSM, a suite of business services that may be customized to provide companies of all sizes the tools and expertise to use the Internet to streamline their business operations and conduct e-commerce.
Qwest ended 2000 with more than 255,000 DSL customers, more than double the previous year and exceeding the company's year-end target of 250,000. Qwest expects to double the number of DSL customers to 500,000 by the end of 2001. Qwest leads the industry with 846 DSL customers per central office with DSL-equipped facilities. About 85 percent of DSL customers install the service themselves without requiring a technician.
Qwest activated CyberCentersSM in Seattle, Sterling, VA and Sacramento in the fourth quarter, meeting its target of 14 centers in 2000. The company plans to open an additional 10 centers by the end of 2001.
Qwest has completed local fiber networks in 11 markets and has introduced end-to-end broadband services to business customers, including Internet access, application hosting, integration of local area networks and long distance services. Qwest is on track to complete the remaining 14 local networks by the end of 2001.
Qwest Interactive, a professional services division, has developed more than 1,500 advanced Internet applications for customers such as Procter & Gamble, GlaxoSmithKline (GSK.com), MySmart.com, VisualPlex (funded by Bausch & Lomb) and Swissôtel.
SERVICE AND COMPETITION
During the quarter, Qwest continued to see positive results from initiatives to improve service and promote competition to meet state regulatory requirements and to re-enter the long distance business in its 14-state local service area. In Qwest's local service area, service improvements for 2000 include:
- Reduced delayed local service orders to 850, the lowest level in six years;
- Nearly 98 percent of the more than 18 million installation commitments were met when promised to the customer – the best results in the last five years;
- About 95 percent of total repair commitments were met on time as promised – the best results since 1996;
- More than 80 percent of service outages were repaired in less than 24 hours – up from 63 percent a year ago – the best customer service results since 1995.
Qwest took new steps to open its markets to competition, including announcing the industry's first permanent agreements for sharing its phone lines with four companies to broaden the availability of high-speed Internet and broadband services in its local service area. The line-sharing agreements with Contact Communications, MULTIBAND Communications Inc., New Edge Networks and NorthPoint Communications Inc. replace interim agreements Qwest signed with the four companies last April. The terms of these four permanent line-sharing agreements are available to all competitors. In addition, wholesale agreements with competitors McLeodUSA and Eschelon Telecom furthered Qwest's efforts to promote competition in its 14-state local service area.
Qwest believes that with these actions and significant improvements in its operational readiness it will be able to apply to the Federal Communications Commission (FCC) for approval to re-enter the long distance business in one of the states in its local service area by this summer. The company expects to submit applications to the FCC for several other states by the end of 2001.
In the quarter, Qwest announced the opening of its Asia Pacific headquarters in Hong Kong under the direction of Ross Lau, president of Qwest's international business. In addition, Qwest named Kimiaki Ueno president of Qwest Japan.
Qwest Communications International Inc. (NYSE: Q) is a leader in reliable, scalable and secure broadband Internet-based data, voice and image communications for businesses and consumers. The Qwest Macro Capacity® Fiber Network, designed with the newest optical networking equipment for speed and efficiency, spans more than 104,000 miles globally. For more information, please visit the Qwest web site at www.qwest.com.
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This release may contain projections and other forward-looking statements that involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers are referred to the documents filed by Qwest with the Securities and Exchange Commission, specifically the most recent reports which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements, including potential fluctuations in quarterly results, volatility of Qwest's stock price, intense competition in the communications services market, changes in demand for Qwest's products and services, dependence on new product development and acceleration of the deployment of advanced new services, such as broadband data, wireless and video services, which could require substantial expenditure of financial and other resources in excess of contemplated levels, higher than anticipated employee levels, capital expenditures and operating expenses, rapid and significant changes in technology and markets, adverse changes in the regulatory or legislative environment affecting Qwest's business and delays in Qwest's ability to provide interLATA services within its 14-state local service territory, failure to maintain rights of way, and failure to achieve the projected synergies and financial results expected to result from the acquisition of U S WEST timely or at all and difficulties in combining the operations of Qwest and U S WEST. This release may include analysts' estimates and other information prepared by third parties for which Qwest assumes no responsibility. Qwest undertakes no obligation to review or confirm analysts' expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
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