In Qwest of profits, and failing

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It is ironic – Qwest comes on the cover of Forbes, and promptly reports a disastrous quarter. Revenues down four percent, and profits well not in sight. I have some thoughts on why the company is getting taken to the cleaners. UNE-P, VOIP, and wireless cord cutting are all taking customers away from Qwest. It is the same story at other bells, but they have wireless businesses to fall back on. (That is why SBC & BellSouth will not walk away from AT&T Wireless, despite increased defections from that company!)

Qwest has plans for a mobile virtual network operation, but it is yet to start and may not be enough for the company to stem its losses. More importantly, Qwest has fully embraced VoIP. Which is going to cannibalize the high margin local business, but I think in the long term it is a good strategy. Oh things are going to get tough, very tough at this weakest Bell. I expect a sale to Bell South quite soon.

bq. “If you don’t do it, next year or the one after that you won’t be playing in the game,” says Qwest Chief Executive Richard C. Notebaert, who shocked the industry last fall by announcing plans for Qwest to become the first regional Bell company to offer cheap Internet-based phone service. “The voice industry–whether long distance, local or wireless–finds itself in a commodity market with deflationary pricing,” he says bluntly. “Volumes will rise, but prices will fall even faster.”

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