Exhibit 99.1
QWEST COMMUNICATIONS AFFIRMS FINANCIAL GUIDANCE
Company Says Morgan Stanley Report Is Inaccurate and Its Conclusions are Wrong
(Note--There will be a noon MDT conference call today for the media and
investors to discuss this news release. Details about the call at the end of
this release.)
Denver, June 20, 2001 - Qwest Communications International Inc. (NYSE - Q) today
again confirmed its financial guidance for 2001 and the period 2000 to 2005 in
light of an inaccurate and misleading report issued by Morgan Stanley. During
the five-year period, Qwest expects to grow revenue at least 15% and EBITDA
(earnings before interest, taxes, depreciation and amortization) approximately
20%, each on an annually compounded basis. Qwest also confirmed that it does not
expect its capital expenditures to exceed $9.2 billion in 2001. It is also
looking at ways to further reduce capital expenditures to between $8.8 billion
and $9.0 billion for 2001, and to as low as $8.0 billion for 2002.
Qwest said that a Morgan Stanley report issued earlier today does not present
any information or analysis that has any bearing whatsoever on the
sustainability of its future earnings growth or capital needs. The Morgan
Stanley report addresses several technical issues relating to the manner in
which Qwest has accounted for its acquisition of U S WEST on June 30, 2000. The
report does not disclose any accounting treatment that Qwest has not previously
disclosed in its public filings nor does it suggest that any accounting
treatment by the company is improper. Qwest believes that Morgan Stanley's
analysis, from an accounting point of view, is incorrect and its conclusions
about Qwest's business and prospects are wrong.
Qwest said that its disclosure of the merger with U S WEST and the purchase
accounting is fully adequate. The staff of the Securities and Exchange
Commission reviewed Qwest's annual report on Form 10-K as of December 31, 1999
and 2000, and its quarterly report on Form 10-Q for the quarter ended September
30, 2000. The review resulted in various comments being raised by the staff
regarding Qwest's accounting for the merger and related disclosures. The company
has responded to those comments and the issues raised have been cleared to the
satisfaction of the SEC staff.
"Qwest has already fully disclosed all the issues raised by Morgan Stanley,"
said Robin Szeliga, Executive Vice President and Chief Financial Officer. "Their
report is just an academic commentary on the merits of purchase accounting and
an attempt to educate investors on the application of Generally Accepted
Accounting Principles (GAAP). As applied to Qwest, Morgan Stanley's accounting
analysis is incorrect. Their business conclusions are wrong. Nothing they say in
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their report has anything to do with our prospects for future performance.
Nothing they say, except by unsupportable innuendo, casts any doubt on any of
our accounting practices. We will respond to their report in detail in a filing
we will make with the Securities and Exchange Commission later today."
Szeliga continued, "The issues raised by Morgan Stanley relate to balance sheet
adjustments that we made based on independent third party appraisals performed
in connection with the merger. This is old news--and not even very important
news. The adjustments comply with GAAP, and we made them during the one-year
timeframe required by GAAP. These adjustments are completely proper, and Morgan
Stanley does not dispute this. In fact, Morgan Stanley confirms numerous times
in its report that Qwest's application of purchase and other accounting
principles is appropriate. In any case, these adjustments have nothing to do
with our ability to meet our revenue and EBITDA projections."
Szeliga continued, "These adjustments do not impact our 271 applications, our
out-of-region CLEC/DLEC buildout, the ability of our global sales forces to sell
into the top end of the business market or the health of the 14 state regional
economy in which we operate our local business. These key drivers are more
appropriate measures of our ability to hit future revenue and EBITDA targets
and, therefore, more appropriate areas of focus when considering the company's
buy rating with investors. Morgan Stanley only refers in general, and without
any specificity, to a deteriorating economy and industry environment and vague
innuendo of `uncertainty' in our accounting principles as the basis for their
business conclusions."
Szeliga concluded, "The primary areas of focus of the Morgan Stanley report
include purchase accounting, software, interest, and the valuation of the
KPNQwest investment. These items do not impact revenue or EBITDA and should not
be considered in discussing the attainment of our revenue or EBITDA targets. Of
course, as a matter of simple arithmetic, the items affect earnings per share
and cash EPS. But these items do not drive, or really even reflect, the growth
of our business and progress toward financial targets."
Qwest CFO Robin Szeliga will hold a conference call to discuss this news release
at noon (MDT) today. The call will be broadcast live at www.
videonewswire.com/qwest/062001.
About Qwest
Qwest Communications International Inc. (NYSE: Q) is a leader in reliable,
scalable and secure broadband Internet-based data, voice and image
communications for businesses and consumers. The Qwest Macro Capacity(R) Fiber
Network, designed with the newest optical networking equipment for speed and
efficiency, spans more than 113,000 miles globally. For more information, please
visit the Qwest web site at www.qwest.com.
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# # #
This release may contain projections and other forward-looking statements that
involve risks and uncertainties. These statements may differ materially from
actual future events or results. Readers are referred to the documents filed by
Qwest with the Securities and Exchange Commission, specifically the most recent
reports which identify important risk factors that could cause actual results to
differ from those contained in the forward-looking statements, including
potential fluctuations in quarterly results, volatility of Qwest's stock price,
intense competition in the communications services market, changes in demand for
Qwest's products and services, dependence on new product development and
acceleration of the deployment of advanced new services, such as broadband data,
wireless and video services, which could require substantial expenditure of
financial and other resources in excess of contemplated levels, higher than
anticipated employee levels, capital expenditures and operating expenses, rapid
and significant changes in technology and markets, adverse changes in the
regulatory or legislative environment affecting Qwest's business and delays in
Qwest's ability to provide interLATA services within its 14-state local service
territory, failure to maintain rights of way, and failure to achieve the
projected synergies and financial results expected to result from the
acquisition of U S WEST timely or at all and difficulties in combining the
operations of Qwest and U S WEST. This release is based upon the best
information available at this time, but does not necessarily include all
information that would be available at a quarterly earnings announcement. This
release may include analysts' estimates and other information prepared by third
parties for which Qwest assumes no responsibility. Qwest undertakes no
obligation to review or confirm analysts' expectations or estimates or to
release publicly any revisions to any forward-looking statements to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
The Qwest logo is a registered trademark of, and CyberCenter is a service mark
of, Qwest Communications International Inc. in the U.S. and certain other
countries.
Contacts: Media Contact: Investor Contact:
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Michael Tarpey Lee Wolfe
303-992-2277 800-567-7296
Michael.Tarpey@qwest.com IR@qwest.com
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