Rebounding Qwest pondering expansion

DENVER — Richard C. Notebaert, the chief executive of Qwest Communications, is not one for conventional wisdom. Just a year ago, many on Wall Street thought Qwest, the nation's fourth-largest phone company, was so weak that it was bound to be broken up or sold.

But Notebaert has quietly and consistently proved them wrong. He has cut costs, stabilized revenue and built up so much cash that Qwest is actually in a position to buy another industry player — perhaps a wireless carrier or a provider of corporate telecommunications services.

Such a move would go a long way toward arming Qwest with the tools it needs to fend off cable companies, Internet phone providers like Vonage and cell phone carriers like Cingular that are luring away hundreds of thousands of its customers. It would also help Qwest contend with Verizon Communications and AT&T, which account for half of all sales of communications services to companies.

"You can never relax or say 'I made it,"' Notebaert said recently, sitting in a conference room atop the company's headquarters with the Rocky Mountains in the distance. "This is a very competitive sector. You need some angst."

The perpetually upbeat Notebaert, an avid jogger with a firm handshake, may not seem angst-ridden, but he still has reason to be. Though Qwest is no longer on life support, the company competes with fewer arrows in its quiver than the larger Bell companies, which are spending billions of dollars to build and run cellular and fiber networks.

Given the expense of those networks and Qwest's considerable debt load, Notebaert has focused instead on keeping costs down, increasing profit and letting other companies do the heavy lifting.

Qwest now resells Sprint's cell phone service, under its own brand, at a modest profit. Though the business is nowhere near as lucrative as that of Verizon Wireless or Cingular, it is far less expensive to run than Qwest's old money-losing wireless business, which Notebaert unloaded two years ago.

Qwest also resells DirecTV; the alternative was to build its own fiber optic network for carrying television to homes, as Verizon and AT&T are doing. Those costly projects have unnerved many Wall Street analysts.

By forgoing those ventures, Qwest has increased its profitability and its share price, which is up 136 percent in the last year. The stock gains have reduced Qwest's attractiveness as a takeover target.