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Friday, October 06, 2006

Industry Contrasts:Qwest, Verizon, AT&T, And Sprint

Stocks: (S)(T)(BLS)(Q)(VZ)(CMCSA)(TWX)

Recently, Qwest was written up in the NYT as a company that had dodged the bullet of being smaller than rivals like AT&T, flush with cash and looking for acquistions. The market is not quite so sanquine about the company. At least, not recently.

A look at Qwest's market performance over the last three months show that Qwest's shares are flat while shares in Verizon are up about 12% and AT&T has added over 15%. The perceived dog of the group is Sprint. Its shares are off 10% over the period.

AT&T is viewed as not only dominant, but cautious about capital spending on new technology. Once it is merged with BellSouth, the company will be a dominant force in fixed line, cellular, and broadband markets.

Wall St. is still wary about the Verizon plan to spend in excess of $20 billion for fiber-to-the-home. The cable companies like Comcast and Time Warner Cable have a lead of several year for delivering voice, broadband and TV to consumers. Verizon will have to take huge share from them to justify its expenditure.

Sprint is perceived as a company that had a chance to build critical mass in wireless after its merger with NexTel. But, looking at financial results, so far the merger has been botched, costing the COO his job. The company has turned to WiMax for its next generation broadband distribution, but the market is not willing to look far enough ahead to give the move any weight.

Qwest, despite the positive press in the NYT, is a dinosaur of the old telecom world that does not have the capital or cashflow to make the transition to the future. It has no wireless operation of its own. It lacks the capital to build out a fiber system if it appears that Verizon is having some success, and it relies on alliances with satellite TV to deliver programming to is customers. Eventually, if the fiber strategy works, the satellite TV vendors must become the enemies of the phone companies, just as they are with cable now.

Qwest's future is not bright. Not if it stands alone.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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