Qwest 2nd-Quarter Loss at $1.1 Billion

Local phone company Qwest Communications International Inc. posted a $1.1-billion quarterly loss Thursday, but said it would soon announce a buyer for its phone directory business as it races to avoid running out of cash.

Despite a narrower loss from a year earlier, analysts said they were still leery about prospects for the Denver company, which has reported nine consecutive quarters of net losses. Qwest is also the target of accounting and criminal probes after acknowledging it improperly booked $1.16 billion in sales and other items from 1999 to 2001.

Qwest said it is in talks with bankers to renegotiate its credit facility, but analysts said the company’s inability to close the sale of its $9-billion QwestDex directory business and weak results leave it a step closer to bankruptcy.

“Qwest is clearly at the mercy of its banks,” said Davenport & Co. analyst Drake Johnstone. “If the bankers decide not to play ball, Qwest could be in bankruptcy later this year.”

Slack demand hurt sales of Qwest’s data services in the second quarter. Its net loss, including $926 million in charges, totaled $1.14 billion, or 68 cents a share, compared with a loss last year of $3.31 billion, or $1.99.

Qwest’s second-quarter charges included a write-down of $740 million for the rest of its investment in KPNQwest, its bankrupt joint venture with Dutch firm Royal KPN, and increased bad-debt reserves of $119 million related to the WorldCom Inc. bankruptcy.

Revenue in the quarter fell about 17%, to $4.32 billion. Excluding one-time charges, Qwest reported a loss of 13 cents a share. Wall Street analysts expected a loss of 7 cents, according to Thomson First Call.

Qwest repeated that it expects a charge--as much as $30 billion--for the impairment of goodwill at a later date.

“This is a company that’s teetering on the brink of being a going concern or filing for bankruptcy,” said Tim Ghriskey of Connecticut-based investment management firm Ghriskey Capital Partners, which does not own Qwest shares.

Chairman and Chief Executive Richard Notebaert took issue with analysts’ sour view, pointing to Qwest’s second-quarter positive cash flow and a new proposed $500-million credit facility for QwestDex. He said Qwest has sufficient resources to fund operations for at least the next 12 months.

“Someone’s not going to give you $500 million if they’re worried about bankruptcy,” Notebaert said. “We read it and have no idea where it’s coming from because I can tell you there’s no discussion like that taking place in my office.”

The company expects next week to begin getting approvals from its lenders on its new terms, and said it is in talks with Bank of America Corp. about restructuring its credit.

Qwest’s stock remained unchanged Thursday, closing at $1.20 on the New York Stock Exchange.