Qwest plots Olympian push

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While the tech and telecom sectors continue their descent, Qwest Communications is preparing an ambitious play that will showcase the capabilities of its fiber optic network in delivering broadband voice, data and video to and from the Winter Olympic Games. Qwest is the official infrastructure provider to the Games, which run from Feb. 8-24, 2002, and it hopes to show potential business customers its broadband muscle. Qwest's network will connect all the Salt Lake venues and enable high-speed relay of Olympic news and information to the world. Microsoft Corp.'s MSN, Qwest's DSL consumer service partner, will manage Olympic Web sites.

"Nothing gets from the Olympics to the world without us," said George Burnett, chief marketing officer at Qwest. He declined to put a dollar figure on the sponsorship and stopped short of confirming a doubling of the company's marketing budget. "We clearly will make a real marketing commitment to our new products and what we do in the Olympic Games," he said, adding that Chairman-CEO Joe Nacchio is all for making a big splash, but is also "a big fan of return on investment."

Qwest spent $157 million in measured media in 2000, according to Taylor Nelson Sofres' CMR.

During the Olympics, Qwest will ensure that an estimated 3 billion viewers can tune in and log on to the action, and $1.2 billion of business transactions get processed. The company said it's capable of providing nearly 500,000 phone and fax lines, 49 video links and 3,500 audio links.

Qwest agencies are already at work crafting messaging and new creative to make the most of the company's 17 days in the media spotlight. WPP Group's J. Walter Thompson Co., New York, handles brand and business services advertising while Omnicom Group's DDB Worldwide, Chicago, is responsible for the consumer and wireless businesses, which includes the MSN DSL product offered in Qwest's 14-state service territory. Each agency does its own media planning; Omnicom's OMD does the buying. Both agencies have been asked to work up ideas.

"We've got a pretty good handle on our messaging," Mr. Burnett added. The main message, regardless of what direction the creative eventually takes, will be that Qwest makes "the seemingly impossible possible," he said. Essentially, Qwest will have the opportunity to show how its network can do for medium and large companies what it's doing for the Games-bringing them to life. Qwest is expected to do plenty of spot TV advertising in its markets as well as national media, and a heavy Web and outdoor presence.

As Qwest prepares for the bold marketing outlay, Wall Street analysts recently criticized the company for reporting 12% revenue growth in its calendar second quarter that was based largely on long-term leases of telecom capacity to other providers. Excluding these one-time sales, several analysts said Qwest's revenue growth was actually 7.5%.

"One of the things we've had concern about is [Qwest's] level of capital expenditure relative to revenue," said Jeffrey Camp, managing director, Morgan Stanley.

Drake Johnstone, telecom analyst with Davenport & Co., Richmond, Va., lowered his rating on the stock from "Buy" to "Underperform," after Qwest reported second-quarter earnings. "They didn't account for it [revenue growth] in the proper fashion," he said, explaining that the company's revenue growth ought to have focused on continued operations, not on one-time line-items. "If Qwest does a big media spend in early 2002, it certainly could impact their cash flow growth. ... [However], they clearly have a state of the art network and, in my view, Qwest could demonstrate to competitors and the world that it does have industry-leading growth."

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