Qwest Communications

By now, Qwest Communications surely has digested its biggest meal-the June 2000 takeover of US West-but the lion is still hungry.

By now, Qwest Communications surely has digested its biggest meal—the June 2000 takeover of US West—but the lion is still hungry.

It is champing at the bit to offer long-distance service to 14 Western states and expects to seek FCC approval for at least one of those states by summers end.

The Denver-based telecommunications giant continually rolls out wireless service to additional U.S. cities, including Albuquerque, N.M.; Boise, Idaho; Bozeman, Mont.; Los Alamos, N.M.; Santa Fe, N.M.; and Spokane, Wash. It keeps adding customers to its Qwest Cyber.Solutions ASP division (a joint venture with KPMG Consulting), it is forever expanding its fiber network both in North America and Europe, and it plans to add dozens of its "CyberCenter" centers in Western Europe and Canada to complement the 19 operational in the United States.

During an economic crunch that has withered many other service providers (particularly DSL specialists), Qwest made money. Its EBITDA grew more than 17 percent to $7.4 billion in 2000. While revenue increased 14.2 percent last year, topping out at $18.95 billion, the company expects to pull in at least $21.3 billion in revenue by the end of 2001.

By then, Qwest predicts its joint venture with Dutch telecom company KPN, known as KPNQwest, will have installed 12,500 miles of fiber-optic cable in Europe, adding to Qwests network of more than 100,000 miles of fiber capacity.

Qwest is putting that fiber to good use. The company says its Q4 2000 Internet and data services revenue grew by almost 40 percent over the 1999 figure, while its wireless revenue jumped 90 percent. For the year, Qwests DSL customer base expanded more than 130 percent and now includes more than 255,000 subscribers.

Business remained strong as this story went to press. Net income fell 9 percent during Q1 because of costly wireless initiatives, but overall sales were up 12 percent and Internet/data services grew 44 percent.

A new broadband initiative with Microsoft should further pad Qwests bottom line. The five-year strategic alliance calls for Qwest to offer MSN Internet access and related Microsoft content over its broadband network to 12 million homes spanning 14 states. The deal is a direct response to America Onlines merger with cable and media giant Time Warner.

Granted, Qwests success of late came with some pain: The company eliminated 4,500 jobs over the course of the year, and disgruntled Qwest employees are easy to find in Denver-area taverns. Also, if observations made at the first Qwest Business Partner summit are any indication, the company is changing programs so quickly its partners might have trouble learning the ropes.

Nicholas Nesbitt, VP of the Qwest Business Partner Program, agrees the company has "multiple, different channel types," but insists that its partnering efforts are the best in the business.

"First off, Qwest prides itself as being a company thats the best to partner with," says Nesbitt. "Yes, were not 100 percent there yet, but that is where we are going. Everything were doing is to make sure were the best partner, and were really approaching the market from a partnering standpoint."

He says his goal is "to have every single partner rate their experience with Qwest as an A-level experience." Soon, the company will launch an education and certification program and will require its partners to get the schooling, says Nesbitt.

Still, Qwest has critics in the analyst community. "If you want low prices, theyre great," says Giga Information Group analyst Brownlee Thomas. "But if you want high-quality customer service, theyre doubtful. My clients run away from them … They tell me they never call you back. Im talking about Global 1000 customers. When you lose a customer like that, theyre gone forever."

Nevertheless, Thomas praises the KPNQwest venture, Qwest Cyber.Solutions, the companys hosting services, and its ability to provide "straight, commodity" bandwidth.

Qwest is aware of its customer-service problems but insists they have waned. The company says it has reduced delayed local service orders to the lowest level in six years; met nearly 98 percent of the more than 18 million installation commitments it made; and contends about 95 percent of its total repair commitments were "met on time as promised—the best results since 1996." Additionally, Qwest insists that more than 80 percent of reported outages were repaired in less than 24 hours. That figure was only 63 percent a year ago.

Given the finicky nature of the stock market these days—when even good news is not enough to keep investors happy—Qwest needs to be as aggressive with pleasing its customers and partners as it is in gaining new ones.

"To be a strong performer a year from now, they have to address the customer-service shortfalls and be very focused and very on track about providing strong service-level agreements," says Thomas. "If they do that, they will be a smart partner. If they fail, it will be a catastrophe. They will be roadkill."