Qwest Communications is making significant progress toward sustainable profitability and should be profitable in 2006, Chairman and CEO Richard Notebaert told the investment community today.

His comments came after the company reported a wider loss for the fourth quarter of 2005, due primarily to the payoff of high-interest debt. The company lost $528 million or 28 cents per share, for the fourth quarter, up from $139 million or eight cents per share in 2004. That included a $430 million loss from the payoff of $3 billion in debt, which will reduce interest expense by $300 million, and $400 million paid to resolve shareholder lawsuits.

Notebaert also said Qwest is “carefully watching” the deployment of IPTV by other telephone companies and is content to be a follower in this space. The other three major telcos have announced IPTV and local loop fiber initiatives. Qwest continues to operate video services in the Phoenix area, in a Denver suburb and in Omaha, Nebraska, but isn’t planning to make a major investment in IPTV yet, he said.

For the full year, Qwest revenue was $13.9 billion compared to $13.8 billion for 2004, marking its first year of improved revenue since 2001. Operating expenses for the year were $13 billion, down $1 billion or 7.4%.

“We have delivered on our performance goals for revenue, EBITDA, EBITDA margins and cost control,” Notebaert said. “Going forward, we expect modest organic revenue growth, improved EBIDTA margins and improved free cash flow. We will invest on a disciplined basis and any investment must make sense strategically, operatically and financially.”

Notebaert reiterated past statements that Qwest has a $500 million revenue opportunity based simply on coming up to industry benchmarks for service penetration and revenues within its local franchise territory.

“We have a valuable, unique and increasingly profitable combination of local and long haul assets,” he said. “And we are positioned for growth as we increase service penetration. We have made steady and demonstrable progress over the last two years and our goal is to continue doing that.”

Signs of progress include top line growth, based on increased penetration of advanced services, including broadband data, improved Average Revenue Per User (ARPU) based on increased broadband penetration and addition of higher value long-distance customers; cost reductions that increased revenue per employee by 16%; an improvement of EBITDA margin to 29% and the near-term potential for sustainable profitability, Notebaert said.

Qwest added nearly 200,000 new connections since it launched its bundled service strategy in May, Notebaert said, and also now has 100,000 customers under its resale agreement with DirecTV.