DENVER — Qwest Communications International Inc. reported Tuesday its first-quarter net income fell 35 percent as tax expenses jumped and more customers halted service amid the languishing economy and stiff competition.
The Denver-based telecommunication company also took a $45 million charge related to severance costs as 700 employees who primarily worked in support jobs for traditional telephone service took voluntary buyouts.
Its stock fell 6 percent, or 32 cents, to $5.04.
Released before the market opened Tuesday, the results came amid Qwest’s drive to focus more on bundling Internet, video and voice services to offset a decline in traditional phone service.
Qwest earned $157 million, or 9 cents per share, in the three months that ended March 31, down from $240 million, or 12 cents per share, in the year-ago quarter.
Overall revenue fell 1.5 percent to $3.40 billion from $3.45 billion in 2007, which the company said was due to increased competition in the long-distance business and to industry consolidation.
Analysts surveyed by Thomson Financial estimated, on average, profit of 10 cents per share on sales of $3.41 billion.
Tax expenses rose to $99 million from $2 million a year earlier as Qwest began recording income tax expense at normal effective rates.
Revenue for data, Internet and video products increased 9 percent and represented nearly 40 percent of overall sales, Chief Executive Officer Ed Mueller told analysts during a conference call.
“These growth products are an increasingly significant portion of our business and will help drive our growth as the industry shifts from legacy to next-generation products and services,” he said.
Total access lines fell 7.8 percent overall, which included a 9.2 percent drop in primary residential traditional phone lines. Broadband customers increased 17.2 percent.
Chief Financial Officer John Richardson said the slowing economy is affecting business via the sluggish housing market.
Janco Partners analyst Donna Jaegers said Qwest is facing competition in its 14-state Western region from cable companies such as Comcast Corp.
“I thought they came in with pretty anemic numbers,” she said. “They are sort of hoping they can get more momentum out of enterprise, but they’ve got to show us that.”
Qwest operates a nationwide fiber-optic network and is the primary telephone service provider in 14 mostly Western states.The company, which does not operate its own wireless service, announced Monday that Verizon Wireless — instead of Sprint Nextel — will provide its wireless service come summer. Financial terms of the deal were not disclosed.
Qwest resells satellite television service from DirecTV and is looking into convergence technology that would link, for example, a broadband network and mobile phone within a home.
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