Qwest works on new wireless partnership

NEW YORK (Reuters) - Qwest Communications International Inc said on Monday it is working on a new kind of wireless partnership as its current arrangement to resell Sprint Nextel Corp services is inadequate.

Shares of Qwest, which is headquartered in Denver, Colorado, jumped 7 percent after the news was announced by Chief Executive Ed Mueller at an analyst meeting in New York.

"We need a wireless partnership that is different than the one we have today," Mueller said. "We have a hole in wireless."

Qwest suffers from a decline in sales of traditional phone lines and does not have a wireless unit to compensate, unlike the phone industry's top players AT&T Inc and Verizon Communications Inc.

Its partnership to resell Sprint's services limits Qwest's ability to grow margins. Some analysts have said Qwest may be negotiating changes with Sprint, while others say it may be looking at other tie-ups.

Mueller was vague on what the changes might be. The company also said it planned to deepen partnerships to offer consumers better video and high-speed Internet services.

Qwest has a marketing partnership with satellite television service provider DirecTV Group Inc, and has shied away from expensive investments in Internet-based video services of its own like those AT&T and Verizon.

Earlier in February, Qwest reported an 89 percent rise in quarterly profit thanks to a tax benefit and an increase in high-speed Internet subscribers. But revenue fell and it lost 243,000 home phone subscribers in the quarter ended December 31.

In addition to its lack of a wireless unit, Qwest is also seen as particularly vulnerable to growing competition from cable operators as its territory, which includes Arizona, Colorado and Wyoming, is seen as particularly difficult for deploying new broadband services.

On Monday, the company also forecast 2008 capital spending of around $1.8 billion and reiterated expectations for revenue to be flat or slightly down.

Qwest shares were up 29 cents or 5.5 percent at $5.56 in afternoon trading on the New York Stock Exchange, after hitting an earlier high of $5.68. The stock remains below its 12-month high of $10.45 on May 31, 2007.

Shares of Sprint, the third-largest U.S. mobile service provider, edged down 6 cents to $8.85.

(Reporting by Ritsuko Ando, editing by Gerald E. McCormick)