CenturyLink, Inc. (NYSE: CTL) and Qwest Communications today completed their merger, creating the nation’s third largest telecommunications company in the United States. The combined company’s increased scale and financial strength will enable it to deliver a broader range of communications services to consumers and small businesses throughout the company’s 37-state service area and to business, wholesale and government customers nationwide via its 190,000 route-mile fiber network.

“The combination of our two companies allows us to offer customers of all sizes an even more robust portfolio of communications solutions that will continue to be backed by honest and personal service,” said Glen F. Post, III, chief executive officer and president of CenturyLink.

The transaction was structured as a tax-free stock-for-stock exchange. Under the terms of the merger agreement, Qwest stockholders will receive 0.1664 shares of CenturyLink common stock for each share of Qwest common stock they owned at closing, plus cash paid in lieu of fractional shares. The company expects to continue its current annual dividend of $2.90 per share.

CenturyLink expects the combination to be immediately accretive to free cash flow per share, excluding integration costs, and it is expected to generate annual operating and capital synergies of approximately $625 million when fully recognized over the next three to five years. On a pro forma basis, the combined company had revenues of $18.6 billion, adjusted EBITDA of $8.1 billion and adjusted free cash flow of approximately $3.1 billion for the twelve months ended Dec. 31, 2010.

As previously announced, the combined company will use the name CenturyLink, although the Qwest brand will continue to be used in former Qwest markets for the next several months.

The company’s board of directors includes current CenturyLink board members and four members of Qwest’s board. Those joining the CenturyLink board are Edward A. Mueller, Charles L. Biggs, Michael J. Roberts and James A. Unruh.

The corporate headquarters of the company will remain in Monroe, La. The company will maintain the headquarters for its Business Markets Group in the Denver metro area, where Qwest’s headquarters were located. In addition, Denver will be the location of one of the company’s six regional headquarters. The other five regional headquarters will be located in Phoenix; Minneapolis; Seattle; Wake Forest, N.C.; and Apopka, Fla.

For more information about the merger, including state-by-state information and key facts, please visit www.centurylinkqwestmerger.com.

Qwest shareholders who need additional information or have questions about exchanging shares should visit www.computershare.com/CenturyLink/QwestFAQs.com.

About CenturyLink

CenturyLink is the third largest telecommunications company in the United States. The company provides broadband, voice and wireless services to consumers and businesses across the country. It also offers advanced entertainment services under the CenturyLink™ Prism™ TV and DIRECTV brands. In addition, the company provides data, voice and managed services to business, government and wholesale customers in local, national and select international markets through its high-quality advanced fiber optic network and multiple data centers. CenturyLink is recognized as a leader in the network services market by key technology industry analyst firms. CenturyLink’s customers range from Fortune 500 companies in some of the country’s largest cities to families living in rural America. Headquartered in Monroe, La., CenturyLink is an S&P 500 company and is included among the Fortune 500 list of America’s largest corporations. For more information, visit www.centurylink.com.

Forward Looking Statements

Except for the historical and factual information contained herein, the matters set forth in this communication, including statements regarding the expected benefits of the acquisition such as efficiencies, cost savings, enhanced revenues, growth potential, market profile and financial strength, and the competitive ability and position of the combined company, and other statements identified by words such as “estimates,” “expects,” “projects,” “plans,” and similar expressions are forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, many of which are beyond our control. Actual events and results may differ materially from those anticipated, estimated or projected if one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect. Factors that could affect actual results include but are not limited to: the possibility that the anticipated benefits from the acquisition cannot be fully realized or may take longer to realize than expected; the possibility that costs or difficulties related to the integration of Qwest’s operations into CenturyLink will be greater than expected; the ability of the combined company to retain and hire key personnel; the timing, success and overall effects of competition from a wide variety of competitive providers; the risks inherent in rapid technological change; the effects of ongoing changes in the regulation of the communications industry; the ability of the combined company to effectively adjust to changes in the communications industry and to successfully introduce new product or service offerings on a timely and cost-effective basis; any adverse developments in commercial disputes or legal proceedings; the ability of the combined company to utilize net operating losses in amounts projected; changes in our future cash requirements; and other risk factors and cautionary statements as detailed from time to time in each of CenturyLink’s and Qwest’s reports filed with the Securities and Exchange Commission. You should be aware that new factors may emerge from time to time and it is not possible for us to identify all such factors nor can we predict the impact of each such factor on the acquisition or the combined company. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this communication. Unless legally required, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

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The Federal Communications Commission (FCC) approved the pending merger between CenturyLink, Inc. (NYSE: CTL) and Qwest Communications (NYSE: Q).

During the review process by the FCC, the companies made several voluntary commitments that will significantly advance the commission’s goals of promoting infrastructure investment, and expanding broadband availability, while protecting consumers and fostering competition. CenturyLink committed to increase broadband service availability, encourage the adoption of broadband service in the combined service territory, preserve certain competitive rates, and transition wholesale operations systems in a timely and orderly manner.

“We are pleased to receive the commission’s approval and appreciate their hard work during the review of our proposed transaction,” said Glen F. Post, III, chief executive officer and president of CenturyLink. “The merger of CenturyLink and Qwest will bring greater broadband availability to customers and serves the public interest by allowing us to offer a wider variety of services than either company could offer alone.”

“The FCC’s approval solidifies our plan to complete the transaction on April 1, “said Edward A. Mueller, chairman and chief executive officer of Qwest. “The combination of CenturyLink and Qwest will create a new force in the telecommunications industry that will provide its customers with innovative solutions to meet the challenges of tomorrow.”

The companies expect to close the merger and combine operation on April 1, 2011, subject to receipt of the remaining necessary regulatory approval. As previously announced, the combined company will use the name CenturyLink and its stock will continue to trade on the New York Stock Exchange under CenturyLink’s current symbol, CTL. Qwest shares outstanding at the end of the business day immediately prior to the close date will convert to CeturyLink shares on the close date at an exchange rate of 0.1664 share of CenturyLink for each share of Qwest.

MERGER UPDATE

• The merger has been approved by 20 states and the District of Columbia.
• CenturyLink and Qwest already have reached agreements with Integra Telecom, Cox Communications and other competitive local exchange carriers, and the U.S. Department of Defense in Arizona, Colorado, Utah and Washington.
• In October, the Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW) agreed that the merger is in the public interest.
• Shareholders from both companies approved the merger in August.
• The Department of Justice and the Federal Trade Commission cleared the transaction in July after determining there were no antitrust concerns.
• As of Dec. 31, 2010, CenturyLink served approximately 2.4 million broadband customers, 6.5 million access lines and almost 628,000 satellite video subscribers. On the same date, Qwest served 2.9 million broadband customers, 8.9 million access lines, more than 1 million video subscribers and more than 1 million wireless customers. The combination will create a robust 180,000-route-mile national fiber network, which will increase the company’s scale and enable the delivery of a diverse mix of service and product offerings.

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With the launch of Qwest iQ® E-Line service, Qwest Communications (NYSE: Q) has responded to the enterprise customer’s need to increase business value and improve quality of bandwidth connectivity. The new Qwest Ethernet solution provides a highly scalable, highly reliable private line solution to increase businesses’ efficiency and operational productivity. Qwest customers like Hibernia Media are already using the solution to operate dedicated media networks that ensure the quality of their programming.

Eric Bozich, vice president of Qwest National Network Services:
“By leveraging the latest technology to reduce our costs, Qwest has rolled out a feature-rich service that drives applications and is simple to integrate with customers’ existing networks. It will be hard for other private line technologies to match the high performance and high reliability at E-Line’s price point. Customers like Hibernia Media will enjoy lower latency, along with better predictability and control over their applications.”

The solution leverages state-of-the-art Dense Wave Division Multiplexing and dedicated Multi-Protocol Label Switching network technologies to combine the benefits of intelligent routing with the advantages of full bandwidth utilization. The construct may be rapidly provisioned to customers like Hibernia Media that need low latency private line services as well as highly secure connections for their media applications.

Qwest iQ® E-Line is ideal for mission-critical or general data-intensive applications that require scalable connections to customers’ data centers, storage-area networking, multi-location enterprise applications or disaster recovery and business continuity facilities. Fully managed, the service offers highly granular bandwidth in increments from 5 Megabits per second (Mbps) up to 1 Gigabit per second (Gbps) to allow enterprises to scale their operations based on actual need and to aid in improving application performance and business efficiency.

When combined with multiplexing, the solution allows for hub-and-spoke multi-site connections within or between any of E-Line’s 16 markets currently for long-haul and metro applications: Atlanta, Boston, Chicago, Dallas, Denver, Houston, Indianapolis, Kansas City, Mo., Los Angeles, New York, Newark, N.J., Philadelphia, Phoenix, Sunnyvale, Calif., Tampa, Fla., and Washington, D.C.

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Qwest Communications (NYSE: Q) today announced a new program to broaden the pipeline of diverse students entering the law profession. The Qwest Pipeline to Diversity program debuts at Denver’s only comprehensive career and technical magnet school, the Career Education Center (CEC) Middle College of Denver.

The course will culminate in a mock hate crime trial presented by the Qwest law department and developed by the Colorado Lawyers Committee’s Hate Violence Task Force. Qwest attorneys will teach five sessions designed to bring the law to life. The last four sessions will profile different practice areas of the law through ties to relevant current events.

“The legal team at Qwest is committed to developing and supporting programs that create opportunity and offer value for people of diverse backgrounds. Whether it is through our award-winning pro bono program, or through new initiatives like the Pipeline to Diversity program, we are pleased to do our part to ensure that the profession continues to provide for and reflect the great diversity of our communities.”, according to Rich Baer, Qwest General Counsel and Chief Administrative Officer

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CenturyLink Inc. (NYSE: CTL) and Qwest Communications (NYSE: Q) have reached an agreement on wholesale conditions with Cox Communications that resolves concerns Cox raised about the companies’ pending merger in Arizona and Nebraska. As a result of the agreement, Cox acknowledges the merger is in the public interest and that it should be approved in state proceedings.

We are pleased that Cox will not oppose our merger and finds that it is in the public interest,” said Bill Cheek, president of CenturyLink wholesale operations. “Cox is a significant interconnecting network customer of Qwest, and we look forward to continuing an effective working relationship after the transaction is completed.”

In addition to Cox, the companies have reached agreements with other competitive local exchange carriers (CLECs), including Integra Telecom. They also have agreements with the staffs of the Colorado Public Utilities Commission and the Minnesota Department of Commerce. In Utah, agreements have been reached with the state public service commission staff, the state consumer advocate and the Salt Lake Community Action Program. Agreements also have been reached with the federal government in Arizona, Colorado and Utah.

Last month, the Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW) agreed that the merger is in the public interest and withdrew their previous opposition. The shareholders from both companies approved the merger in August, and the Department of Justice and the Federal Trade Commission cleared the transaction in July after determining there were no antitrust concerns.

CenturyLink and Qwest have received more than half of the state regulatory approvals needed to complete the transaction. Earlier this month, the Iowa Utilities Board took action resulting in approval of the merger, bringing the total number of approvals to 12 states and the District of Columbia. The companies also must receive approvals from nine additional states and the Federal Communications Commission. The transaction is expected to be completed during the first half of 2011.

About CenturyLink

CenturyLink is a leading provider of high-quality broadband, entertainment and voice services over its advanced communications networks to consumers and businesses in 33 states. CenturyLink, headquartered in Monroe, La., is an S&P 500 company and is included among the Fortune 500 list of America’s largest corporations. For more information on CenturyLink, visit www.centurylink.com.

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CenturyLink Inc. (NYSE: CTL) and Qwest Communications (NYSE: Q) have reached an agreement with the staff of the Colorado Public Utilities Commission (PUC) on the proposed merger of the two companies.

The staff finds that the merger is consistent with and “not contrary to” the public interest and that it should be approved by the PUC based on the terms and conditions in the agreement. The staff’s recommendation is subject to review by the commission members.

The companies and the PUC staff agreed to a resolution of retail and wholesale issues, which includes the companies providing the PUC and staff with regular integration updates and reports. Additionally, the combined company will invest a minimum of $70 million in broadband infrastructure in Colorado over five years.

“We appreciate the PUC staff for recommending that the commission approve our merger,” said Chuck Ward, Qwest Colorado president. “This agreement assures that Qwest’s strong commitment to its retail and wholesale customers in Colorado will continue after our companies combine their operations.”

“The commission staff has worked diligently to address the needs of Colorado consumers, and we appreciate their thoroughness in the review process,” said John Jones, vice president of state government affairs for CenturyLink. “This agreement is another example of the increasing support the merger is receiving from various parties in multiple states.”

CenturyLink and Qwest have received regulatory approval for their pending merger in 12 states and the District of Columbia. The companies must receive approvals from nine more states, including Colorado, and the Federal Communications Commission.

In addition to the Colorado PUC staff, CenturyLink and Qwest have reached a merger agreement with the Minnesota Department of Commerce. In Utah, the companies have agreements with the Utah Division of Public Utilities, the Utah Office of Consumer Services and the Salt Lake Community Action Program.

The companies also have resolved issues regarding wholesale services with Integra Telecom, a competitive local exchange carrier that is now withdrawing its opposition to the merger in Colorado, Minnesota, Idaho, Iowa, Montana, Nebraska, Oregon and Washington.

An agreement also was reached in Colorado, Arizona and Utah with the federal government that addresses the handling of merger-related costs. It also assures the companies will maintain high service quality and a sufficient number of employees with security clearances after the merger closes.

Last month, the Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW) agreed that the merger is in the public interest and have withdrawn their previous opposition. Shareholders from both companies approved the merger in August.

CenturyLink and Qwest announced previously that after the transaction is completed, which is expected during the first half of 2011, Denver will be one of six nationwide regional headquarters planned for the combined company and the base for its Business Markets Group.

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CenturyLink Inc. (NYSE: CTL) and Qwest Communications (NYSE: Q) have reached an agreement on wholesale conditions with Integra Telecom that resolves concerns Integra raised about the companies’ pending merger in some states where Qwest operates. As a result of the agreement, Integra says the CenturyLink-Qwest merger is in the public interest, and it will no longer oppose the transaction in state and federal proceedings.

“Since the CenturyLink and Qwest merger announcement, we have met with Integra as well as other competitive local exchange companies (CLECs) to address their concerns,” said Bill Cheek, president of CenturyLink Wholesale Operations. “We are pleased to have addressed Integra’s concerns and reached this agreement. As a significant interconnecting network customer of Qwest, it is important that both Integra and CenturyLink forge an effective working relationship that will carry forward post-merger closing. This agreement accomplishes that goal. CenturyLink has a proven track record of successfully integrating companies and providing high-quality, value-added services to customers. We have well-established integration processes that ensure all systems, employee skill sets and operational issues are executed seamlessly and efficiently for all customer segments—including CLECs.”

“After extensive negotiations over the last month, we are pleased to have arrived at an agreement that resolves all of our issues with the merger,” said Dudley Slater, chief executive officer of Integra Telecom. “This addresses the concerns we had regarding the potential risks the merger posed and from our perspective, the merger is in the public interest and should be approved.”

In addition to Integra, agreements have been reached with other competitive local exchange carriers (CLECs), as well as the consumer counsel in Iowa and the Department of Commerce in Minnesota. In Utah, settlement agreements have been reached with the public service commission staff, the consumer advocate and the Salt Lake Community Action Program.

Also, the Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW) have agreed that the merger is in the public interest and have withdrawn their previous opposition to the merger.

CenturyLink and Qwest have received more than half of the regulatory approvals needed to complete the transaction. On Nov. 3, the Iowa Utilities Board took action resulting in approval of the merger, bringing the total number of approvals to 12 states and the District of Columbia. The companies also must receive approvals from nine additional states and the Federal Communications Commission. The transaction is expected to be completed during the first half of 2011.

For more information about the merger, visit centurylinkqwestmerger.com.

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Qwest Communications (NYSE: Q) today unveiled an innovative approach for wireless service providers (WSPs) to adapt to the increasing demand for cell tower bandwidth while simultaneously decreasing their connectivity cost per megabyte. With the introduction of Qwest® Adaptive Broadband™, Qwest Wholesale customers now have a “bridge” from their legacy infrastructures, with their limited bandwidth and high unit costs, to emerging technologies, which offer more bandwidth and lower unit costs. Qwest® Adaptive Broadband™ provides a flexible and seamless migration path that lets WSPs upgrade at their own pace and as capacity needs require.

Roland Thornton, executive vice president, Qwest Wholesale added: “The explosion of smart phones, mobile devices, netbooks and other applications requires backhaul providers like Qwest to keep pace with consumer demand for next-generation services. As a wholesale network provider to many wireless companies, Qwest is ensuring there is ample bandwidth to support today’s network demands while anticipating the speed and capacity needs of tomorrow.”

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In the second quarter, net income was $158 million. Earnings per share were 9 cents compared to 12 cents in the second quarter 2009.  The current quarter’s earnings per share results include a 2 cent charge for severance, realignment and merger-related expenses, which was offset by a 1 cent gain related to the accounting treatment of the company’s convertible debt.  Results in the prior-year period include net one-time benefits from special items of 4 cents per share.

Second quarter consolidated net operating revenues declined 5 percent compared to the second quarter 2009 and declined 1 percent sequentially.  After normalizing for the effects of the company’s transition to a new wireless business model, second quarter consolidated net operating revenue declined 4 percent year over year. In the first quarter 2010, reported net operating revenues declined at an annual rate of 7 percent and excluding wireless, revenues declined 5 percent year over year.

Adjusted EBITDA of $1.09 billion for the quarter held steady compared to the prior year, and operating income increased 4 percent. Adjusted EBITDA margin of 37.3 percent increased 200 basis points year over year compared to an annual increase of 180 basis points in the first quarter.

Qwest continued to deliver on key growth initiatives in the second quarter.  The Business Markets segment reported strong growth of 25 percent year over year in IP services revenues. Mass Markets continued to expand its fiber-to-the-node (FTTN) footprint in the quarter, and services are now available to more than 4 million residential households.  In the quarter, 52,000 customers added high speed Internet services that utilize the fiber network, bringing total users to more than 500,000. This growth was offset by declines in DSL subscribers.  In the quarter, the Wholesale Markets segment made solid progress in deploying fiber-based backhaul services for wireless companies.

“We delivered strong financial performance under challenging market conditions during the second quarter,” said Edward A. Mueller, Qwest chairman and CEO.  “Our results reflect improving revenue trends, increased margins and added financial strength. We continue to maintain a disciplined focus on execution while perfecting the customer experience. Additionally, we are very pleased with the progress of our planned merger with CenturyLink. The integration planning is well under way, and we are achieving key approval milestones.”

CONSOLIDATED FINANCIAL RESULTS

Revenue

Qwest reported consolidated net operating revenue of $2.9 billion in the second quarter. Total strategic services revenue of $1.1 billion increased 6 percent year over year compared with a 5 percent increase in the first quarter.  The growth in strategic services was offset by a 12 percent decline in legacy services revenue. Legacy services were $1.6 billion in the period.

Expense

Consolidated operating expenses were $2.4 billion in the quarter, a decrease of 7 percent year over year.  Cost of sales declined 9 percent due to lower volumes, a reduced workforce and the completion of the wireless migration in the fourth quarter 2009. Selling expense declined 13 percent mainly driven by lower headcount, bad debt expense, and marketing and advertising spending. General, administrative and other operating expenses were up 1 percent in the quarter, primarily as a result of merger-related items and increased USF fees, which were partially offset by lower pension-related expenses.  Total employees at the end of the period were approximately 29,200, a decrease of 1 percent from the first quarter and 7 percent from the second quarter 2009.

Net Income

Net income for the second quarter was $158 million compared to $212 million in the prior year. The current quarter includes pre-tax charges of $8 million for severance and realignment and $27 million for merger-related expenses. The current quarter also includes a $21 million pre- and post-tax gain on the convertible debt. The prior-year period includes one-time income tax benefits totaling $83 million, which were offset by a $23 million pre-tax charge for severance and realignment expense.

SEGMENT FINANCIAL RESULTS

Business Markets

Business Markets produced stable top-line and bottom-line performance driven by strong growth in IP services and solid cost management.

Business Markets reported total revenues of $1.0 billion, which was flat with the year-ago period and the first quarter. Total recurring service revenue was down slightly from the first quarter and down 1 percent from a year ago. Strategic revenue growth of 9 percent year over year was driven by growth in IP services. Legacy services declined 9 percent year over year mainly due to lower local voice revenue and the migration from legacy data to IP-based services.

Segment operating expense increased 1 percent year over year and 2 percent sequentially. The expense increase is primarily due to a one-time legal settlement and higher data integration costs, partially offset by lower bad debt expense. As a result, Business Markets income contribution declined 2 percent year over year and 3 percent from the first quarter. Segment income margin of 38.8 percent declined 60 basis points from the year-ago period and 120 basis points sequentially.  Excluding the impact of the legal settlement, segment income and margin would have been in line with both the first quarter and the year-ago period results.

Mass Markets

In the quarter, Mass Markets achieved its third consecutive quarter of improved year-over-year revenue trends while delivering a strong margin for the quarter. This success was driven by customer adoption of higher broadband speeds, increasing customer ARPU and excellent cost management. Consumer ARPU was $62 in the quarter, a 7 percent increase compared to the second quarter 2009.  The rate of consumer access line loss in the quarter held steady with the first quarter.  The company is beginning to see encouraging signs in small business, where revenue and access line trends improved on both a year-over-year and sequential basis.

Mass Markets segment revenues of $1.2 billion declined 8 percent from the second quarter 2009 compared to an annual decline of 11 percent in the first quarter. Revenues in the second quarter declined 6 percent after adjusting for the wireless business model transition.  Strategic revenues grew 6 percent year over year due to growth in broadband services while legacy voice revenues decreased 11 percent. Sequentially, revenue declined 2 percent from the first quarter.

Segment expenses decreased 13 percent from the year-ago period and declined 3 percent sequentially. The year-over-year improvement mainly was due to lower headcount, bad debt expense, wireless costs, and sales and marketing expenses. Segment income for the quarter declined 4 percent compared to the year-ago period and declined 1 percent from the first quarter. Segment income margin of 53.5 percent improved 250 basis points compared to the year-ago quarter.

Total broadband customers were 3 million at the end of the quarter, including 2.9 million Mass Markets subscribers.  Within Mass Markets, net broadband subscriber additions were 7,000 in the quarter. Growth in FTTN subscribers was offset by a decline in the legacy DSL subscriber base due to customer migrations and competitive market conditions. The FTTN base at the end of the period was 529,000, or 19 percent of total Mass Markets subscribers.

At the end of the second quarter, Verizon Wireless customers sold by and/or billed by Qwest totaled 982,000, up 60,000 from the end of the first quarter.  Total DIRECTV video subscribers were flat for the quarter.

Wholesale Markets

Wholesale Markets reported a modest improvement in year-over-year revenue comparisons in the quarter and maintained solid profitability.  The business unit also made good progress in deploying fiber services to wireless carriers.

Segment revenue declined 10 percent year over year compared to an 11 percent annual decline reported in the first quarter.  Sequentially, revenue decreased 4 percent.  Wholesale Markets revenue continued to be impacted by lower long-distance volumes and a decline in access revenue.

Wholesale Markets segment income declined 1 percent from the second quarter 2009 and 3 percent from the first quarter.  Wholesale segment income margin of 67.5 percent improved 590 basis points year over year and 50 basis points sequentially, mainly due to an improved revenue mix and lower bad debt expense.

At the end of the quarter, Qwest had completed construction of fiber-based services to more than 600 wireless cell sites, and this number is expected to grow to approximately 2,000 sites by the end of the year.

Cash Flow and Capital Investment

In the second quarter, adjusted free cash flow was $609 million.  Capital investment in the quarter was focused on funding key strategic projects including broadband services for enterprise, wholesale, small business and consumer customers.  Capital expenditures for the quarter were $330 million, a decline of $18 million from the year-ago period.

Balance Sheet

In the quarter, the company continued to strengthen its balance sheet and improve financial flexibility. Net debt was $11.3 billion at the end of the quarter compared to $12.3 billion at the end of the second quarter 2009 and $11.7 billion in the first quarter. Cash and short-term investments were $1.8 billion.  The company’s net debt-to-adjusted EBITDA leverage ratio improved to 2.6 times, down from 2.7 times last quarter. This is the lowest leverage ratio for the company since 1999.

In February, the company announced plans to reduce debt by $3.5 billion through the first quarter of 2011, and, to date, the company has reduced total debt by $2.0 billion.  In July, the company announced a tender offer to purchase for cash its $1.265 billion outstanding 3.50 percent convertible senior notes due in 2025.  The offer is scheduled to expire on Aug. 12, 2010.

CenturyLink Merger Agreement

On April 22, 2010, Qwest and CenturyLink announced an agreement for CenturyLink to merge with Qwest in a tax-free, stock-for-stock transaction. Under the terms of the agreement, Qwest shareholders will receive 0.1664 CenturyLink shares for each share of Qwest common stock they own at closing.

The company announced it will hold a special shareholder meeting on Tuesday, Aug. 24, 2010. Shareholders will vote on a proposal to adopt the merger agreement with CenturyLink.  The record date for determining the shareholders entitled to vote at the meeting is July 13, 2010.

The transaction is expected to close in the first half of 2011, and is subject to certain governmental consents and approvals as well as approval by both companies’ shareholders. On July 15, the transaction was cleared by the Department of Justice. In addition, the companies have received approval from six of the 21 required state commissions.  The Federal Communications Commission also is required to approve the transaction.

Shareholder Returns

Qwest returned $139 million to shareholders in the second quarter through a dividend of 8 cents per share. Year-to-date, Qwest has paid common stock dividends totaling $277 million.

The merger agreement requires that CenturyLink and Qwest coordinate with each other to designate the record dates and payment dates for the two companies respective quarterly dividends. Thus, the timing of Qwest’s future dividends may deviate from historical dates due to this requirement.

Guidance

Qwest continues to expect to report improving revenue comparisons over the course of 2010 with the year-over-year reported decline improving to a low- to mid-single digit rate by the fourth quarter.  Qwest continues to expect to achieve full year 2010 adjusted EBITDA in a range of $4.3 to $4.4 billion.  In 2010, Qwest expects full year non-cash pension and post-retirement benefit expenses to be approximately $125 million, a decline of approximately $70 million from 2009 levels. The outlook for full year 2010 capital investments is $1.7 billion or lower. Similar to 2009, the company may continue to use lease financing in 2010 for some of its capital investments. Full year adjusted free cash flow is expected to be $1.5 to $1.6 billion.

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To stay ahead of the Internet’s explosive growth, Qwest Communications (NYSE: Q) today announced it is offering public and private Internet Protocol Version 6 (IPv6) addresses to its government and business customers. Now Qwest iQ® Networking service customers can take advantage of IPv6’s built-in security measures and options, as well as a near-endless supply of IP addresses.

Pieter Poll, Qwest chief technology officer comments: “Qwest has long supported the federal government’s focus on cyber security. We have worked actively with government and industry on issues associated with protecting networks and the information that flows through them. By offering the next-generation security that is baked into dedicated IPv6 addressing, Qwest is doing its part to provide government and business customers with the most advanced Internet security that is available.”

With native IPv6, Qwest business and government customers no longer need to use Network Address Translation (NAT), making configuration of complex networks simpler while providing simpler connectivity between peer-to-peer networks for highly secure end-to-end connectivity.

Qwest offers transition paths so customers can use the next generation of addressing protocol to run both IPv4 and/or IPv6 addresses via either:

• Dual Stack approach which offers the ability to run both IPv4 and IPv6 so customers may transition over time and with ease; or
• Native IPv6 which allows Qwest customers to adapt to the next-generation IP protocol as they build new locations and bring on new sites and devices.

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Qwest Communications (NYSE: Q) today reported financial results for the first quarter 2010. In the quarter, the company reported solid growth in business and consumer data services, improved margins and continued to make solid progress on key initiatives.

In the first quarter, net income was $38 million. Earnings per share were 2 cents compared to 12 cents in the first quarter 2009. The current quarter’s earnings per share results include an 8 cent non-cash charge for the disallowance of certain federal income tax deductions under the Medicare Part D program, a charge related to the early retirement of debt, and severance and realignment. Results in the prior-year period include a 1 cent per share charge for severance and realignment. In addition, the prior year includes a 1 cent per share benefit due to a lower effective tax rate.

First quarter consolidated net operating revenues declined 7 percent compared to the first quarter 2009. After excluding the effects of the company’s transition to a new wireless business model, revenue declined 5 percent year over year. Excluding wireless, revenues declined 7 percent year over year in the fourth quarter 2009. Reported net operating revenues declined 1 percent sequentially from the fourth quarter. Reported revenues declined 2 percent sequentially in the fourth quarter.

Adjusted EBITDA for the quarter was $1.12 billion compared to $1.15 billion in the prior year and $1.09 billion in the fourth quarter. Adjusted EBITDA improved 4 percent sequentially while adjusted EBITDA margin improved 170 basis points to 37.9 percent.

Qwest continued to make strong progress on key growth initiatives in the first quarter. The Business Markets segment reported strong growth of 33 percent year over year in IP services revenues. Qwest continued to expand its fiber to the node (FTTN) footprint in the quarter, and services are now available to more than 3.8 million residential households. In the quarter, 64,000 customers added high speed Internet services that utilize the fiber network. The company continued to make solid progress on retention efforts in the consumer market with the absolute number of access line losses improving 22 percent from the first quarter 2009. In the current quarter, Qwest continued to see strong demand to deliver fiber-based backhaul services for wireless companies, and initial cell sites were activated.

“We are off to a great start in 2010,” said Edward A. Mueller, Qwest chairman and CEO. “Our proposed merger with CenturyLink will combine two well run companies to create a stronger competitor. Together, we will enhance the ability to deliver differentiated services for our customers and expand the opportunity to provide substantial value for our shareholders. In the first quarter, we improved our revenue trends and increased margins. The quarter’s results illustrate our disciplined focus on our key strategies and perfecting the customer experience. We are optimistic about continuing this momentum throughout the year.”

CONSOLIDATED FINANCIAL RESULTS

Revenue

Qwest reported consolidated net operating revenue of $3.0 billion in the first quarter. Total strategic services revenue of $1.1 billion increased 5 percent year over year. Legacy services revenue of $1.6 billion decreased 13 percent year over year. The 1 percent sequential revenue decline was due to a 2 percent increase in strategic revenue that was offset by a 3 percent decline in legacy revenue.

Expense

Consolidated operating expenses were $2.4 billion in the quarter, a decrease of 9 percent year over year. Cost of sales declined 7 percent due to lower volumes, a reduced workforce and the completion of the wireless migration in the fourth quarter 2009. Selling expense declined 19 percent mainly driven by lower bad debt expense, a reduction in workforce, and reduced marketing and advertising expense. General, administrative and other operating expenses were down 5 percent in the quarter, primarily as a result of lower pension and OPEB, realignment and severance costs. Sequentially, operating expenses declined 6 percent largely due to lower volumes, employee-related expense and severance costs. Total employees at the end of the period were approximately 29,500, down 2 percent from the fourth quarter and 10 percent from the first quarter 2009.

Net Income

The current quarter includes a one-time, non-cash tax impact of $113 million related to the disallowance of certain federal tax deductions. In addition, the company recognized a pre-tax charge of $53 million due to the early retirement of debt, and severance and realignment. Net income for the first quarter was $38 million compared to $206 million in the prior year. The year-over-year decline was mainly due to the one-time charges in the current quarter. Net income declined $70 million sequentially primarily due to the $113 million tax charge, which was partially offset by increased adjusted EBITDA and lower depreciation expense.

SEGMENT FINANCIAL RESULTS

Business Markets

Business Markets produced stable top-line performance and delivered a solid profit contribution in the quarter. Qwest’s success in the enterprise space continues to be driven by a strong mix of data and IP services, a diverse customer mix and differentiated user support.

Business Markets reported total revenues of $1.0 billion, a 1 percent decline from the fourth quarter 2009 and flat compared to the year-ago period. Total recurring service revenue was up slightly from the fourth quarter and down 1 percent from a year ago. Strategic revenue growth of 8 percent year over year was driven by growth in IP services. Legacy services declined 9 percent year over year mainly due to lower local voice revenue and the migration from legacy data to IP-based services.

Segment operating expense declined 3 percent both year over year and sequentially. The Business Markets income contribution increased 5 percent year over year and 2 percent from the fourth quarter. Segment income margin of 40 percent improved 180 basis points from a year ago. The margin improvement mainly is due to improved customer acquisition efficiencies and lower facility costs.

Mass Markets

In the quarter, Mass Markets continued to achieve success from its move to a more localized go-to-market approach. This included continued success in selling higher broadband speeds, improving access line retention and additional cost efficiencies. Consumer ARPU was $62 in the quarter, a 7 percent increase compared to the first quarter 2009.

Mass Markets segment revenues of $1.2 billion declined 11 percent from the first quarter 2009. Revenues declined 7 percent after adjusting for the wireless business model transition. Strategic revenues grew 5 percent year over year while legacy revenues decreased 11 percent due to continued line losses. Sequentially, revenue declined 1 percent from the fourth quarter.

Segment expenses decreased 13 percent from the year-ago period and were flat sequentially. The year-over-year improvement mainly was due to lower sales and marketing expenses and lower wireless costs. Segment income for the quarter declined 9 percent compared to the year-ago period and declined 3 percent from the fourth quarter. Segment income margin percentage improved 110 basis points compared to the year-ago quarter.

Total broadband customers reached 3 million in the quarter, including 2.9 million Mass Markets subscribers. Total net mass markets broadband subscribers increased by 40,000 in the quarter. Once again, demand within the FTTN footprint fueled subscriber growth. The FTTN subscriber base reached approximately 480,000, or 17 percent of Qwest’s Mass Markets high-speed Internet customers.

Qwest continues to see success from its key business partnerships. Total Verizon Wireless subscribers at the end of the quarter were 922,000, up 84,000 from the end of the fourth quarter. Qwest added 11,000 net video subscribers in the quarter, bringing the total to 951,000.

Wholesale Markets

Wholesale Markets reported improved revenue comparisons in the quarter. Segment revenue declined 11 percent year over year compared with a 14 percent annual decline reported in the fourth quarter. Sequentially, revenue decreased $10 million, or 1 percent. Wholesale Markets revenue continued to be impacted by lower long-distance volumes and a decline in access revenue.

Wholesale segment income declined $11 million, or 2 percent, from the first quarter 2009 and improved 4 percent from the fourth quarter. Wholesale segment income margin percentage improved 590 basis points year over year, mainly due to continued benefits from profitability initiatives, lower facility costs and improved bad debt expense.

Cash Flow and Capital Investment

In the first quarter, adjusted free cash flow was $335 million. Cash flow from operating activities increased $65 million compared to the first quarter 2009 due to improved working capital partially offset by lower EBITDA. Capital expenditures for the quarter were $387 million.

Balance Sheet

In the quarter, the company continued to strengthen its balance sheet. Net debt was $11.7 billion at the end of the quarter compared to $12.8 billion at the end of the first quarter 2009 and $11.8 billion in the fourth quarter. Overall cash and cash equivalent and short-term investments increased to $1.9 billion from $547 million a year ago. The company’s net debt-to-adjusted EBITDA leverage ratio was 2.7 times, which is equal to the fourth quarter and an improvement from 2.8 times in the year-ago quarter.

In February 2010, Qwest called $525 million in notes early, and in March 2010, the company successfully completed a cash tender for $960 million in notes. As a result of the tender, the company expects to have annual interest expense savings of approximately $50 million. In February, the company announced plans to reduce debt by $3.5 billion through the first quarter of 2011, and, to date, the company has reduced debt by $1.5 billion.

Shareholder Returns

Qwest returned $138 million to shareholders in the first quarter through a dividend of 8 cents per share. On April 15, Qwest’s board of directors announced the payment of a second quarter dividend of 8 cents per share. The dividend will be paid on June 11, 2010, to shareholders of record as of May 21, 2010. This marks Qwest’s 10th consecutive quarterly dividend.

CenturyLink Merger Agreement

On April 22, 2010, Qwest and CenturyLink announced an agreement for CenturyLink to merge with Qwest in a tax-free, stock-for-stock transaction. Under the terms of the agreement, Qwest shareholders will receive 0.1664 CenturyLink shares for each share of Qwest common stock they own at closing.

The transaction is expected to close in the first half of 2011, and is subject to certain governmental consents and approvals as well as approval by both companies’ shareholders.

Guidance

Qwest continues to expect to report improving revenue comparisons over the course of 2010 with the year-over-year reported decline improving to a low- to mid-single digit rate by the fourth quarter. Qwest continues to expect to achieve full year 2010 adjusted EBITDA in a range of $4.3 to $4.4 billion. In 2010, Qwest expects full year non-cash pension and post-retirement benefit expenses to be approximately $130 million, a decline of approximately $70 million from 2009 levels. The outlook for full year 2010 capital investments is $1.7 billion or lower. Similar to 2009, the company may continue to use lease financing in 2010 for some of its capital investments. Full year adjusted free cash flow is expected to be $1.5 to $1.6 billion.

Conference Call Today (05-05-2010)

As previously announced, Qwest will host a conference call for investors and the media today at 9 a.m. EDT. A live webcast, including a simultaneous slide presentation, and replay of the call is available at investor.qwest.com. Additional quarterly historical financial information can be found at http://investor.qwest.com/overview.

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CenturyLink (CenturyTel, Inc., NYSE: CTL) and Qwest Communications (NYSE: Q) announced today that their boards of directors have approved a definitive agreement under which CenturyLink will acquire Qwest in a tax-free, stock-for-stock transaction.  Under the terms of the agreement, Qwest shareholders will receive 0.1664 CenturyLink shares for each share of Qwest common stock they own at closing.  Upon closing of the transaction, CenturyLink shareholders are expected to own approximately 50.5 percent and Qwest shareholders are expected to own approximately 49.5 percent of the combined company.

Based on the closing stock price of CenturyLink on April 21, 2010, the per share consideration to be received by Qwest shareholders would be equivalent to $6.02 of CenturyLink stock, which represents a premium to Qwest shareholders of approximately 15 percent over Qwest’s closing stock price on April 21, 2010.  Based on the closing stock price of CenturyLink on April 21, 2010, the transaction reflects an enterprise value of Qwest of approximately $22.4 billion, including the assumption of $11.8 billion of Qwest net debt outstanding as of December 31, 2009.

The parties expect the transaction to be accretive to CenturyLink’s free cash flow per share, excluding integration costs, immediately following the close of the transaction.  Leveraging CenturyLink’s proven integration experience, the transaction is expected to generate annual operating and capital synergies of approximately $625 million when fully recognized over a three- to five-year period following the close of the transaction.

This combination will result in a company whose enterprise business will be a significant contributor to its growth which, along with the consumer business, will allow it to offer innovative broadband products and services over its advanced networks.  As of December 31, 2009, CenturyLink and Qwest served local markets in 37 states with approximately 5 million broadband customers, 17 million access lines, 1,415,000 video subscribers and 850,000 wireless consumers.

Glen F. Post III, CenturyLink’s chief executive officer and president, said, “We believe the combination of CenturyLink’s and Qwest’s employees, assets and service areas will provide us greater scale, scope and expertise and will provide significant benefits for shareholders, customers and our communities.  This combination will enhance our ability to deploy innovative IP products and high-bandwidth services to business customers, expand broadband availability and speed to consumers, and offer superior, differentiated video products.

“The combined company’s highly recognized national network will significantly expand our ability to deliver strategic and customized product and service solutions to our business, wholesale and government customers throughout the country.  In addition, we will still maintain the focus on our local markets through our effective regional operating model and targeted marketing strategies.  We believe shareholders will benefit through their investment in a company that has greater financial resources and flexibility, including a more diversified revenue base and an enhanced competitive position.”

Edward A. Mueller, Qwest’s chairman and chief executive officer, said, “Over the last several years, Qwest has been focused on generating sustainable free cash flow and strengthening the balance sheet, as well as creating innovative approaches to drive efficiency and perfect the customer experience.  We are pleased with the progress we have made and believe that the combined company will be well positioned to win in an increasingly competitive marketplace.

“This transaction is compelling for our shareholders, who will benefit from an immediate premium for their shares, an increase of approximately 50 percent in the annual dividend, and the opportunity to participate in the upside potential of the combined company through their ownership of CenturyLink stock.  We look forward to becoming part of a larger company with a strong financial profile, an industry-leading local and national network, and a shared commitment to customers, employees, communities and shareholders.  We also look forward to maintaining a key presence in Denver.”

Key Benefits of the Transaction

• Increased Capabilities: The combination creates a robust, national 173,000-mile fiber network.  With a more diverse mix of offerings, increased scale and stronger product portfolio, the company will be able to reach more customers with a broad range of solutions.

• Expanded and Enhanced Competitive Offerings: The company will have the national breadth and local depth to provide a compelling array of broadband products and services including high speed Internet, video entertainment, data hosting and managed services, as well as fiber to cell tower connectivity and other high bandwidth services.  In addition, Qwest Business serves 95 percent of Fortune 500 companies and is one of the three universal service providers for Networx, the largest communications services contract in the world.

• Financial Strength and Flexibility: For the 12 months ended December 31, 2009, the combined company would have had pro forma revenues of $19.8 billion, pro forma EBITDA of approximately $8.2 billion, and pro forma free cash flow of approximately $3.4 billion, excluding synergies.  The combined company’s pro forma net leverage would have been 2.2 times EBITDA for the 12 months ended December 31, 2009, including synergies on a full run-rate basis and excluding integration costs.  No new financing or refinancing is required as a result of this transaction.  The combined company’s sound capital structure and significant free cash flow generation are expected to support its ability to take advantage of opportunities that may arise, while continuing to invest in its business, reduce indebtedness and return substantial capital to shareholders.

• Significant Synergy Opportunities: The transaction is expected to generate annual operating cost synergies of approximately $575 million, which are expected to be fully realized three to five years following closing.  Key drivers of these synergies include reduction of corporate overhead, elimination of duplicate functions and systems, and increased operational efficiencies. The transaction also is expected to generate annual capital expenditure synergies of approximately $50 million within the first two years after close.  Based on current expectations, CenturyLink estimates that it will incur approximately $650 to $800 million of operating costs and approximately $150 to $200 million of one-time capital costs to achieve these operational synergies.

Dividend Policy

Each company plans to continue its current dividend policy until the close of the transaction.  Post closing, CenturyLink expects to continue its current dividend for shareholders of the combined company, subject to Board approval.  CenturyLink currently pays an annual dividend of $2.90 per share, which, on an as-converted basis, represents an approximately 50 percent dividend increase for Qwest shareholders.

Management, Board of Directors and Headquarters

The combined company’s senior leadership team is expected to be comprised of executives from both CenturyLink and Qwest, of which the following are being announced today.

• William A. Owens will be chairman of the board
• Glen F. Post, III will be chief executive officer and president
• R. Stewart Ewing, Jr. will be chief financial officer
• Karen A. Puckett will be chief operating officer
• Christopher K. Ancell will be president of business markets group

Following the close of the transaction, the board of directors of CenturyLink will add four members from the current Qwest board, including Edward A. Mueller, Qwest’s chairman and chief executive officer.

The corporate headquarters of the company will remain in Monroe, La.  The company also will maintain a key operational presence in Denver, including a regional headquarters, the Qwest Business Markets Group, as well as other functions to be determined.

Approvals and Timing

The transaction is subject to regulatory approvals, including expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act as well as approvals from the Federal Communications Commission and certain state public service commissions, along with other customary closing conditions.  The transaction also is subject to the approval of CenturyLink and Qwest shareholders.  The companies anticipate closing this transaction in the first half of 2011.

Advisors

Barclays Capital, Evercore Partners, and J.P. Morgan Securities Inc. acted as financial advisors and Wachtell, Lipton, Rosen & Katz and Jones Walker Waechter Poitevent Carrere & Denegre L.L.P. acted as legal advisors to CenturyLink.  Lazard, Deutsche Bank, and Morgan Stanley & Co. Incorporated and Perella Weinberg Partners LP acted as financial advisors to Qwest while Skadden, Arps, Slate, Meagher & Flom LLP and Wilmer Cutler Pickering Hale & Dorr LLP acted as legal advisors.

Teleconference and Webcast

CenturyLink and Qwest will host a conference call with the financial community today, April 22, 2010, at 9:30 a.m. EDT / 8:30 a.m. CDT / 7:30 a.m. MDT to discuss this morning’s announcement.  The conference call will be webcast live over CenturyLink’s website at www.CenturyLink.com and over Qwest’s website at investor.qwest.com.  Interested parties also can join the call by dialing (866) 610-1072 (international: (973) 935-2840), and referencing code 69793352, 10 minutes prior to the start of the call.

A digital recording of the call will be available as promptly as practicable and ending May 5, 2010 at 12:00 a.m. EDT.  The replay can be accessed by dialing (800) 642-1687 (international: (706) 645-9291) and referencing code 69793352.  A replay of the call will also be available on the investor relations sections of both companies’ websites.

More information about the transaction is available on centurylinkqwestmerger.com.

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Qwest Communications (NYSE: Q) today introduced a new unified communications service platform that allows enterprise businesses, government agencies and educational institutions to merge traditional telephony networks with Internet Protocol (IP)-based data networks.

Qwest iQ Hosted Unified Communication Service (iQ HUCS) provides end users the benefits of integrating voice, e-mail and video services so they are accessible by landline phones, mobile phones, smart phones and computers. It also leverages Cisco multitenantcall management that allows enterprises to utilize existing network elements while laying the foundation for unified communications capabilities. The solution also features an integrated operations system that allows customers to easily manage day-to-day administrative functions and gain operational cost efficiencies.

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Qwest Communications (NYSE: Q) has filed an application for a federal stimulus grant to extend broadband at speeds of 12 to 40 Mbps to rural communities throughout its local service region.

“Much like the water and electric programs the government established to encourage rural development, federal grants are needed to enable the deployment of broadband to high-cost, unserved areas,” said Steve Davis, senior vice president of Qwest Public Policy and Government Relations.

In its application, Qwest proposes to build facilities to serve more than half a million homes, schools, businesses and hospitals that lack access to today’s high-speed Internet capabilities. It plans to introduce the service at download speeds of 12 to 40 Mbps. Customers will be able to choose from a full array of broadband services and features.

The total cost of the proposed deployment would be $467 million. Qwest is requesting a grant for $350 million from the Broadband Initiatives Program (BIP), which is administered by the Rural Utilities Service, an agency of the U.S. Department of Agriculture (USDA). When Congress enacted the American Recovery and Reinvestment Act last year, it directed the USDA to establish a program that would stimulate broadband deployment to hard-to-serve rural areas. The BIP provides 75 percent of the build-out costs. The remaining 25 percent, or $117 million, would be funded by Qwest.

The rural communities included in Qwest’s broadband application are located throughout its local service region, which is comprised of 14 Midwestern and Western states. The area features expansive terrain where the construction of broadband facilities is expensive and difficult, making the one-time federal funding necessary.

“Our plan to deploy service to customers in unserved rural areas supports the national initiative recently undertaken by the Federal Communications Commission to ensure that all Americans have access to broadband. As the FCC has found, access to the Internet is increasingly essential for competing and succeeding in the world’s expanding knowledge-based economy,” Davis said.

The RUS has indicated that it will consider BIP applications during the summer and award the grants by Sept. 30, 2010.

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Qwest Reports Fourth Quarter and Full Year 2009 Results Fourth Quarter and Full Year Highlights

• Full year adjusted free cash flow of $1.9 billion, up 34% from prior year(a)
• Full year adjusted EBITDA of $4.4 billion
• Adjusted EBITDA margin of 36.2% in the fourth quarter on strong contributions from each segment; margin improves 220 basis points for the full year
• Fourth quarter strategic revenue growth of 4% driven by demand for enterprise IP and mass markets broadband services
• Completed successful migration to wireless reseller model
• Strengthened balance sheet and improved financial flexibility

Qwest Communications (NYSE: Q) today reported financial results for the fourth quarter and full year 2009. In the quarter, the company reported solid growth in business and consumer data services, continued to produce strong cash flows and made significant progress on key initiatives.

In the fourth quarter, net income was $108 million. Earnings per share were 6 cents compared to 10 cents in the fourth quarter 2008.  The current quarter’s earnings per share results include a 2 cent charge for severance cost.  Results in the prior-year period include a 1 cent charge for severance.  Full year 2009 earnings per share were 38 cents compared to 37 cents in 2008. Full year 2008 earnings per share results include 3 cents of net one-time charges. One-time items had a net neutral impact on 2009 full year results.

Fourth quarter consolidated net operating revenues declined 10 percent compared to the fourth quarter 2008.  After excluding the effects of the company’s transition to a new wireless business model, revenue declined 7 percent year over year. Reported net operating revenues declined 2 percent sequentially from the third quarter and declined 1 percent sequentially after adjusting for the change in the wireless business model.  Full year 2009 revenues declined 9 percent on a reported basis and decreased 6 percent after adjusting for the change in the wireless business model.

Adjusted EBITDA for the quarter was $1.09 billion compared to $1.18 billion in the fourth quarter 2008. The current quarter’s results include $44 million of incremental non-cash pension and OPEB expenses compared to the fourth quarter 2008.  Full year adjusted EBITDA was $4.4 billion compared to $4.5 billion in 2008. After eliminating the impacts of an incremental $210 million in non-cash pension and OPEB expense in 2009, adjusted EBITDA increased 2 percent compared to full year 2008.

The adjusted EBITDA margin was 36.2 percent in the quarter, an improvement of 60 basis points compared to the fourth quarter 2008 and a 40 basis point sequential improvement. Full year 2009 adjusted EBITDA margin of 35.9 percent is a 220 basis point improvement from 2008. Excluding the impacts of incremental non-cash pension related expenses, full year consolidated margin improved 390 basis points.

In the fourth quarter, adjusted free cash flow was $506 million.  Full year adjusted free cash flow totaled $1.93 billion compared to $1.44 billion in 2008.  The increase in adjusted free cash flow in 2009 was due to both higher cash from operating activities and lower capital expenditures. Full year adjusted free cash flow performance in 2009 was at its highest level since Qwest’s merger with U S WEST in 2000.

Qwest continued to make strong progress on key initiatives in the fourth quarter.  The Business Markets segment again reported strong growth in IP services revenues. The company completed a successful migration of its wireless services from the Sprint network to the Verizon Wireless platform, finishing the quarter with nearly 850,000 wireless users. Qwest continued to aggressively deploy fiber to the node (FTTN) capabilities in the quarter, and services are now available to more than 3.5 million residential households.  In the quarter, 80,000 customers added high speed Internet services that utilize the fiber network.  The company made good progress on retention efforts in the consumer market in the quarter with the absolute number of access line losses at their lowest level in two years. In the fourth quarter, Qwest also signed contracts to deliver fiber-based backhaul services for wireless companies. In total, the company has nearly 2,000 cell sites under contract with most of these expected to be built out in 2010.

“In the quarter, we continued to create innovative approaches to drive efficiency and perfect the customer experience” said Edward A. Mueller, Qwest chairman and CEO.  “Throughout 2009, the Qwest team stood up to the challenges of a tough economy and highly competitive markets to deliver value for our shareholders.  In particular, we did an excellent job of generating cash flows and strengthening the balance sheet. In 2010, our goal is to continue to excel in these areas while adding improved revenue performance to our list of achievements. We continue to be optimistic about our prospects in the coming year.”

CONSOLIDATED FINANCIAL RESULTS

Revenue

Qwest reported consolidated net operating revenue of $3.0 billion in the fourth quarter. Total strategic services revenue of $1.1 billion increased 4 percent year over year, driven by 7 percent growth in Business Markets and a 4 percent increase in Mass Markets.  Legacy services revenue of $1.7 billion decreased 13 percent annually. The decline in legacy services is due to lower demand for voice services, efforts to improve wholesale profitability and customer transitions to newer generation data services.

Expense

Consolidated operating expenses in the quarter were $2.5 billion, a decrease of 8 percent year over year.  Cost of sales declined 10 percent due to lower volumes, a reduced workforce and the wireless migration. Selling expense declined 17 percent mainly because of reduced marketing spend, a reduction in   workforce and lower bad debt expense. Reported general, administrative and other operating expenses were flat in the quarter.  However, these expenses improved 14 percent after adjusting for the impacts of higher severance charges and increased pension and OPEB expense. Sequentially, operating expenses declined 1 percent as lower channel expenses were offset by increased severance costs. Total employees at the end of the period were approximately 30,100, down 4 percent from the third quarter and 8 percent from the end of 2008.

Net Income

Net income for the fourth quarter was $108 million, a 39 percent decline from the year-ago period. The decline is due to lower operating income, driven by lower revenues and increased interest expense, which were partially offset by lower expenses. Approximately two-thirds of the decline is related to increased non-cash pension expense and higher severance charges. Net income declined $28 million sequentially in the fourth quarter primarily due to increased severance.

SEGMENT FINANCIAL RESULTS

Business Markets

Business Markets produced top-line performance that again led its major peers and delivered a solid profit contribution in the quarter. Qwest’s success in the enterprise space continues to be driven by a strong mix of data and IP services, a diverse customer mix and differentiated user support.

Business Markets reported total revenues of $1.03 billion, a 2 percent drop from the fourth quarter 2008 and a 1 percent sequential decline. Total recurring service revenue decreased 1 percent from the year-ago period and was flat with the third quarter. Strategic revenue growth of 7 percent was driven by 24 percent growth in IP services. Legacy services declined 8 percent year over year.

The segment income contribution from Business Markets increased 3 percent year over year but declined 1 percent from the third quarter. Segment income margin of 39.5 percent improved 200 basis points from a year ago.  The margin improvement is mainly due to improved channel expense efficiencies.

Mass Markets

In the quarter, Qwest achieved some early success from its move to a more localized go-to-market approach. This included continued success in selling bundled service offerings, improving access line retention and additional cost efficiencies. However, wireless substitution, increased unemployment, low business formation and soft housing trends in Qwest’s 14-state region continued to impact voice revenues.

Mass Markets segment revenues of $1.20 billion declined 13 percent from the fourth quarter 2008 on a reported basis. Revenues declined 7 percent after normalizing for the wireless business model transition.  Strategic revenues grew 4 percent year over year while legacy revenues decreased 11 percent due to continued line losses. Sequentially, revenue declined 2 percent on a reported basis and declined 1 percent after adjusting for wireless.

Segment income for the quarter declined 7 percent compared to the year-ago period but improved 2 percent from the third quarter. Expenses were down 20 percent from the year-ago period and 7 percent sequentially. The year-over-year improvement was mainly due to lower sales and marketing expenses and lower wireless costs. The sequential improvement is primarily related to lower sales and marketing costs.  Segment income margin percentage improved 360 basis points compared to the year-ago quarter.

Total net broadband subscribers increased by 23,000 in the quarter, bringing total subscribers to nearly 3 million. Once again, demand within the FTTN footprint fueled subscriber growth. Total FTTN subscribers reached 420,000, or 14 percent of Qwest’s total high-speed Internet customers.

Total wireless subscribers at the end of the quarter were 850,000, up 64,000 from the end of the third quarter. Qwest concluded MVNO services on Oct. 31, 2009.

Qwest added 23,000 DIRECTV subscribers in the quarter. This was offset by the elimination of 5,000 Qwest legacy video customers.  At the end of the period, approximately 15 percent of Qwest’s primary access line customers were subscribing to DIRECTV services.

Wholesale Markets

Wholesale Markets top-line continued to be impacted by industry facility consolidation efforts and access line trends that are pressuring demand.  In the quarter, Wholesale achieved segment margin improvement and reported a sequential gain in strategic revenues.

Segment revenue of $679 million declined 14 percent compared to the prior year mainly due to lower long-distance revenue.  Sequentially, revenue decreased $21 million, or 3 percent.

Wholesale segment income declined $40 million, or 8 percent, from the fourth quarter 2008 and declined 3 percent from the third quarter. Reduced facility costs and lower channel expenses partially offset the lower revenues. Wholesale segment income margin percentage improved 410 basis points year over year, mainly due to an improved revenue mix.

Cash Flow and Capital Investment

Adjusted free cash flow was $506 million for the quarter and $1.93 billion for the full year 2009.   Improved cash from operating activities and lower capital expenditures contributed to the strong free cash flow results.

Capital expenditures for the quarter were $386 million bringing the total for 2009 to $1.4 billion. In addition, the company leased capital equipment in 2009 with a value of approximately $107 million.  Lower network volumes, reduced customer demand and unit purchasing costs, and fewer housing starts contributed to lower capital spending throughout the year.

Balance Sheet

In the quarter, the company continued to strengthen its balance sheet. In total, Qwest reduced its net debt by $1.2 billion in 2009. Net debt was $11.8 billion at the end of the quarter compared to $12.1 billion at the end of the third quarter and $13.0 billion at the end of 2008.  Overall cash and cash equivalent balances increased to $2.4 billion from $2.1 billion at the end of the third quarter.  The company’s net debt-to-adjusted EBITDA leverage ratio was 2.7 times, which is equal to the third quarter but an improvement from 2.9 times at the end of 2008.

In early January 2010, the company successfully issued $800 million of debt at the parent company at a coupon rate of 7.125 percent. The company currently plans to redeem all debt maturing over the next twelve months and may call the Convertible Senior Notes due 2025. In addition, the company has called for the early redemption of $525 million of notes that were scheduled to mature in February 2011.

Shareholder Returns

Qwest returned $138 million to shareholders in the fourth quarter through a dividend of 8 cents per share.   On Dec. 16, Qwest’s board of directors approved the payment of a first quarter dividend of 8 cents per share.  The dividend will be paid on March 12, 2010, to shareholders of record as of Feb. 19, 2010. This marks Qwest’s ninth consecutive quarterly dividend.

Guidance

Qwest expects to report improving revenue comparisons over the course of 2010 with the year-over-year decline improving to a low- to mid-single digit rate by the fourth quarter.  Qwest expects to achieve full year 2010 adjusted EBITDA in a range of $4.3 to $4.4 billion.  In 2010, Qwest expects full year pension and post-retirement benefit expenses to be approximately $130 million, a decline of approximately $70 million from 2009 levels. The outlook for full year 2010 capital investments is $1.7 billion or lower. The company may continue to use lease financing in 2010 for some of its capital investments. Full year adjusted free cash flow is expected to be $1.5 to $1.6 billion.

Conference Call Today

As previously announced, Qwest will host a conference call for investors and the media today at 9 a.m. EST. A live webcast, including a simultaneous slide presentation, and replay of the call is available at www.qwest.com/about/investor/events. Additional quarterly historical financial information can be found at www.qwest.com/about/investors/financial/index.

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• qwest 2009
• qwest communications 2009 revenue
• qwest communications financial statements 2009
• QWEST REVENUES
• total profit qwest 2009

Qwest Communications (NYSE:Q) today announced that they have opened their 17th data center nationwide, which is also Qwest’s third data center in Washington DC. The new 129k square foot datacenter will be supporting a single federal government customer.

Chris Ancell, executive vice president of Qwest Business Markets Group commented: “By leveraging the power of cloud computing, Qwest continues to demonstrate its ongoing success in serving enterprise and government customers nationwide. Our managed CyberCenters offer customers a compelling alternative to taking on the considerable risk and expense of building, maintaining and staffing their own facilities.”

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Employees of Qwest Communications (NYSE: Q) and the Qwest Foundation so far have raised a total of more than $80,000 to assist victims of the earthquake in Haiti.

As of today, Qwest employees have pledged more than $40,000 to several aid organizations including the Red Cross, Doctors Without Borders, Yele Haiti and the United Way Worldwide Disaster Fund. The Qwest Foundation is matching the employee donations with a gift of $40,000 to support relief efforts.

The devastation in Haiti is unimaginable, and our hearts go out to those affected by the earthquake,” said Rich Baer, Qwest’s chief administrative officer and president of the Qwest Foundation. “The overwhelming response to the tragedy in Haiti is just another example of how Qwest employees go above and beyond for those in need.”

About the Qwest Foundation

The Qwest Foundation’s core principle is that investing in people and communities provides lasting value for the future. The Qwest Foundation awards grants to community-based programs that generate high-impact and measurable results, focusing on pre-K through grade 12 education.

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Telarus, Inc., premier telecom master agent and patent holder of real-time carrier quotes, today announced that it has accepted an invitation from Qwest channel chief, Blake Wetzel, to participate in the 2010 Qwest Business Partner Program Advisory Council. Beginning in January, Telarus will have the opportunity to provide Qwest (NYSE:Q) with ideas on issues and challenges affecting Business Partners nationwide.

“We are grateful for the opportunity to sit on the Qwest Business Partner Program Advisory Council” commented Adam Edwards, president of Telarus. “Telarus has always been a leader in technology, innovation, and ideas. As a Qwest Advisory Council member, we plan to share our knowledge about best practices to help Qwest enhance their agent channel as well as learn from other members of the Council. Qwest has helped us grow our channel revenue by providing essential enterprise carrier services that have become a key component to our agent business.”

“We are thrilled that Telarus has accepted our invitation to participate in our QBPP Advisory Council for 2010″ added Blake Wetzel, VP of Sales for the Qwest Business Partner Program. “Telarus is a unique and exciting agency and we hope to glean a lot of interesting insight by working together with them during the coming year.”

Qwest also recently announced its sponsorship of the annual Telarus Agent Conference in Las Vegas on February 27, 2010, where Qwest will train agents on the technical aspects of the award-winning Qwest network.

“Qwest is not only providing the products that our agents need to compete in the new era of data networking and applications, but they are going the extra mile by providing our subagents with the hands-on training that is required for them to build a knowledge-base of case studies that will help them move further upstream; into consulting and high-level engineering,” added Lance Akins, VP of Sales for Telarus. “Although our relationship with Qwest has always been strong, this new opportunity has strengthened it even more.”

About Telarus

Telarus is the number one master agency as voted by the members of the Telecom Association in both 2008 and 2009. It is our goal to make agents and VARs more successful than they can be on their own or with any other master agent. Telarus provides agents the tools, automation, and superior support they need to gain a competitive advantage in telecom sales.

One example of the tools Telarus provides its agents is real-time voice and data price quoting through its patented GeoQuote technology. GeoQuote makes it possible for business shoppers and agents to access instant pricing and availability information from over 30 broadband data and voice service providers which include AboveNet, Accel Networks, ACC Business, AireSpring, AT&T, Cavalier, Covad, Level 3, MegaPath, Nitel, NewEdge Networks, NuVox, PAETEC, One Communications, PowerNet Global, Qwest, Smoothstone, TelePacific, Telnes, tw telecom, UCN, Vocal IP Networx, and XO Communications.

About Qwest

Customers coast-to-coast turn to Qwest’s industry-leading national fiber-optic network and world-class customer service to meet their communications and entertainment needs. Qwest is also the choice of 95 percent of Fortune 500 companies, offering a full suite of network, data and voice services for small businesses, large businesses, government agencies and wholesale customers. Additionally, Qwest participates in Networx, the largest communications services contract in the world, and is recognized as a leader in the network services market by a leading technology industry analyst firm. Qwest’s broadband network, designed with the latest advances in network technology for speed and efficiency, spans more than 173,000 route miles globally, enabling new products and services that benefit businesses and consumers worldwide.

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• Qwest Advisory counsel

Qwest Communications International Inc. (NYSE:Q), today announced that it is offering $500 million aggregate principal amount of debt securities in a private placement to be conducted pursuant to Rule 144A under the Securities Act of 1933, as amended. The net proceeds of the offering will be used for general corporate purposes, including repayment of indebtedness, and funding and refinancing investments in the company’s and its subsidiaries’ telecommunications assets.

This announcement does not constitute an offer to sell, or the solicitation of an offer to buy, securities. Any offers of the securities will be made only by means of a private offering memorandum. The securities have not been registered under the Securities Act of 1933, as amended, or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

In addition, Qwest Communications International Inc. (QCII) will redeem its 7.25 percent senior notes due Feb. 15, 2011, at a price of 100 percent. The $525 million outstanding principal amount and accrued interest payment will be payable on Feb. 16, 2010.

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In 2009, despite the continued economic downturn, Qwest Communications (NYSE: Q), its employees and the Qwest Foundation increased their commitment to community service by collectively donating more than $10.5 million, in addition to volunteer time and in-kind resources and equipment, to local education and community programs.

“Qwest is able to deepen its partnerships with local education and community programs thanks to the remarkable generosity of its employees and the Qwest Foundation. In an especially challenging year, Qwest employees continue to answer the call to service, through donations of time and money, and are making a true difference in their communities.”, according to Rich Baer, executive vice president, general counsel & chief administrative officer and Qwest Foundation president.

KEY FACTS ABOUT QWEST AND EMPLOYEE COMMUNITY OUTREACH IN 2009

• More than half of Qwest’s employees participated in this year’s employee-giving campaign, which is conducted in partnership with the United Way. This year’s participation level represents an increase of nearly 20 percent over last year. In light of the challenging economy, this is a true reflection of the generosity of Qwest employees.
• The Qwest Foundation provided a 75 percent match to employees’ contributions resulting in a total gift of $5.1 million to communities across the country. It is the largest gift the foundation and Qwest employees have made through the campaign in the past decade.
• Current and former Qwest employees volunteered more than 1 million hours in the community, the equivalent of more than $20 million of in-kind resources to non-profits.
• Qwest donated more than 3,000 desktop and laptop computers to community organizations.
• Qwest’s sponsorships of sports teams and venues included community-giving programs such as the “Qwest Leadership Challenge” with the Seattle Seahawks and Denver-based Kroenke Sports Teams; and “Share the Win” with the Arizona Diamondbacks, Minnesota Twins and the Iowa Cubs. More than $100,000 was donated through these sponsorship programs.

KEY FACTS ABOUT THE QWEST FOUNDATION IN 2009

• The Qwest Foundation donated nearly $4 million to pre-K through 12^th grade education and other community programs this year, in addition to the employee-giving campaign match. Some of the Qwest Foundation highlights in 2009 were:
  • Awarded $900,000 through the foundation’s “Qwest Teachers and Technology Grants” program to educators who have developed creative ways to use technology to improve student learning.
  • Sponsored NetSmartz411.com, the “Internet Safety Helpdesk” operated by the National Center for Missing & Exploited Children®, with a grant of $350,000; NetSmartz411.com provides visitors with information about keeping young people safe while they surf the Web.
  • Awarded more than $350,000 through the foundation’s matching-time program to nonprofit organizations and schools where Qwest employees volunteered.
  • Donated more than $160,000 to programs that provided food backpacks to students who have lost their homes to ensure their families had meals over the weekends.

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