Good morning. My name is, Kevin and I will be your conference operator today. At this time, I would like to welcome everyone to the Qwest conference call. All lines have been placed on mute to prevent background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). Mr. Fawkes, you may begin your conference call now.

Thank you, Kevin. Good morning, everyone. Welcome to the call this morning. The format this morning will be as follows: Ed Mueller, our CEO and Chairman, is going to summarize our key takeaways and our strategic accomplishments in the quarter. He will be followed by Tom Richards, our COO. Tom will provide segment details on our second quarter results. Then Joe Euteneuer, our CFO is going to cover the details of the balance sheet and overall financial results, and give you an update on our guidance. Following our comments, we will take some questions that you might have. As we begin our call, let me point to slide three and remind everyone that today's discussion contains forward-looking statements based on the environment as we currently see it, and contains significant risk and uncertainties. We discuss our risk and uncertainties in detail in our filings with the SEC, and I strongly encourage you to review them. Additionally, we do not adopt analyst estimates nor do we necessarily commit to updating forward-looking statements that we are making this morning. So, let me mention also that in order to supplement the reporting of our consolidated financial information, we will discuss certain non-GAAP financial measures, including adjusted EBITDA, adjusted free cash flow, and net debt. Full reconciliation of these measures is available on our website. Moving on to slide four, earnings per share for the quarter was $0.12. That a 20% increase from the prior year. EPS performance in the quarter includes a couple of things of note. First, severance costs of $23 million; that's $0.01 per share dilution. We also had a big tax benefit this quarter, and we reported an effective tax rate of 2.3% in the quarter. Finally, I would note the incremental non-cash pension and OPEB expense affected the comparisons year-over-year. We also had a bit of a lower share count this year versus last year, which played into the EPS comparison. Before I turn it over to Ed, I would like to point out that we are introducing new segment revenue classifications that will be effective with our third quarter reporting. To assist you with this transition, we have provided historical pro forma reporting on these new classifications in the second quarter. The move to strategic and legacy revenues will allow investors to more closely follow the progress we are making in delivering products designed to meet evolving customer needs, regardless of the technology platform or service delivery. We, of course, are always looking for your feedback, and we welcome your input on how we can continue to enhance transparency and your understanding of our business. With that, I will turn it over to Ed.

Thanks, Kurt. Good morning, everyone. I appreciate you joining us this morning. I will start out with a few highlights from the quarter, and a brief discussion of the progress we are making on our strategic initiatives. I will then turn it over to Tom and Joe, who will walk you through more details on our results. In light of market conditions, I believe our results were solid across all segments. We reported adjusted EBITDA of $1.1 billion, which was in line with the year ago period, after factoring in the incremental impact of the non-cash pension and OPEB charges. I think it is noteworthy that we achieved this result even in the face of a 6% decline in revenue, excluding wireless. We have maintained profitability in the face of challenging top line conditions through diligent cost management, and we will continue to improve productivity and attack the cost drivers of the business. While competitive pressures were a factor in our results, once again, a substantial portion of the revenue decline in the quarter was driven by decisions we have made to improve overall profitability. Additionally, we continue to see tough macroeconomic conditions impacting our customer base. Regionally, unemployment and personal and business bankruptcies continue to climb at rates in line with national trends, although these varied across our markets. In addition, the housing market is showing very limited signs of recovery, although still well below previous levels. Adjusted free cash flow for the quarter was $657 million, nearly a $200 million improvement from prior year levels. The biggest contributor to these results were lower capital spending where we remain disciplined, especially in an environment where chasing after the next dollar of revenue can be tempting. However, that doesn't mean that we are sitting on the sidelines waiting for the…

Thanks Ed. Good morning everyone. I am pleased to provide details of our operational performance this quarter. As Ed mentioned, we executed well against our plans. I will start my discussion with the results of the Business Markets group on slide 10. Our Business Market segment posted another quarter of revenue gains, maintained solid cost controls, and improved segment margins. Taking a closer look at revenue, results continued to reflect industry trends with growth in strategic revenue, offsetting erosion of legacy services. In the quarter, segment revenue was $1 billion, up 1% year-over-year, and flat with the first quarter. Strategic revenue of $394 million in the quarter increased 14% annually and 2% sequentially. Strategic revenue was 39% of segment revenue, compared to 34% a year ago. Legacy revenue was $493 million in the quarter, a decline of 8% from 2008, and a 2% sequential decline. You also will note that we are now reporting our CPE or data integration revenue on a standalone basis. This revenue was $132 million in the quarter, similar to prior period levels. Business Market segment income improved to $408 million, up 7% annually and 3% sequentially. This was aided by our success in managing the cost structure. Direct expenses declined due to lower employee related costs, assigned costs declined on a lower network expense, and further savings from facility cost optimization. The segment income margin improved to 40% in the quarter. While our strategic review of the long haul asset presented an opportunity for distraction in the quarter, I believe our results indicate that we kept our focus on executing against our goal of perfecting the customer experience. In addition, we made good progress in adding to our foundation for future growth. First, we signed a long-term partnership agreement with IBM that gives us access…

Thanks, Tom. Good morning, everyone. I would like to start by reviewing a few key items on the income statement, and then I will walk through the balance sheet and free cash flow before closing with a discussion of our outlook for the remainder of the year. Looking at the income statement on slide 16, in the second quarter Qwest experienced a continuation of recent revenue trends. The enterprise space had steady performance, while Wholesale, consumer, and voice legacy services remained under pressure. Tom noted the numerous initiatives we have underway to improve the top line in each of our business segments. While we are in the early stages on many of these efforts, we do believe collectively they will create significant value over time. As Ed noted, non-cash pension and OPEB charges impacted our reported results this quarter. Full year 2009 incremental expense estimates, increased by $20 million to $220 million. This impacted second quarter year-over-year comparisons by $60 million, and sequential comparisons by $10 million. Adjusted EBITDA was approximately $1.1 billion in the quarter, and was flat to 2008, excluding the incremental non-cash pension and OPEB charges. In light of revenue pressures, our EBITDA performance is a strong testament to the progress we have made on driving an operating margin focus into the business. Compared to the first quarter, adjusted EBITDA declined by $53 million, which was mainly due to lower contributions from legacy voice revenues, and the wireless MVNO business, partially offset by improved contributions from IP services. The wireless MVNO contributed less than $10 million during the quarter. Again, this business will be closed in the fourth quarter. Tom walked you through the business units' efforts to manage cost. Excluding severance charges, our total operating expenses improved by 9% compared to the second quarter of 2008,…

(Operator Instructions). Our first question comes from Simon Flannery with Morgan Stanley.

Thank you very much. Good morning. If I could talk about the FTTN deployment, during the quarter you upped the speeds as you mentioned to 40 Mbps in certain markets. It's now almost 10% of your high-speed, so my question is where are you today in terms of covered footprint, and what is your expectation of where you can take that in terms of the economics you are seeing? Is this something you can roll out to a substantial portion of your book over the next couple of years? And is there an argument to actually take the CapEx and accelerate it rather than take it down $100 million as you have done? Then, secondly, I think Ed in the past you've talked about some innovative service offerings around things like video. Over that platform, where do we stand on that? Thanks.

Good morning, Simon. This is Tom. I will take the first half. If you look at our FTTN deployment, it sits at about 2.6 million. As we have said a number of times publicly, our plan is to get to about 3 million by the end of the year. As you heard Joe articulate that, we are on pace to do that, and we are pleased with our penetration. We have if you've heard about 265,000 customers now, so that's continuing to increase. As I also indicated, we had our highest sales of FTTN in this past quarter. So with the introduction of 40 megabit capability, we are looking at, can we accelerate our FTTN deployment, but still within the broad guidelines that Joe gave for total capital spending? I will let Ed answer your question to him on video.

Good Morning, Simon. On the video, we are probably more bullish than less on what is going on here. We still believe there is an over-the-top video strategy on the Internet. However, our research would say that it's getting better, more people are trying to play in it, and it's starting to sort out in kind of three buckets. One would be the traditional linear programming we do with DIRECTV. There is another group that may be a combination of a smaller linear program with broadband capability, more either AVOD or pay-per-view, but gives your customer much more choice, and not have so many channels coming down. The third would be just a pure over-the-top video play. All those are proceeding, and we think we are going to be in a great position for that. The 40 megabit service that Tom referenced is just icing on the cake. We still believe 20 does it, and you if have a combination of over-the-top video coming through the regular broadcast channels as well as linked to broadband, which by the way we all believe, at least in Qwest, that broadband is the key in any of those three scenarios. So, if nothing else, I am even more enthused that this is coming, and our looking into the marketplace would also validate that.

Is that a 2009 potential deployment?

Simon, there are some trials going on right now that may start the AVOD. You can go to Roku boxes or you could go to just Hulu or the stuff that is going over YouTube, but that's not what we are talking about. We are talking maybe HOV lanes that have high-definition, where we would provide everything to our customers, but more and more is coming. I think the linchpin in the marketplace is what the studios do and the content providers. I think you are starting to see them worry that just one linear programming path isn't the way to go. So, once one decides to go a different direction, I think you will see many more. However, some of the stuff that's out there, just like in Netflix and Amazon, is pretty impressive what you can get and the quality of the picture. I think the consumer will play in all three of these, but more and more will come toward what you want when you want it.

Our next question comes from Tim Horan with Oppenheimer.

Good morning, guys. Thanks. Two questions. On the video front, just a clarification. Wouldn't the HOV lanes be a lot like a U-verse type strategy, and is there a cost effective way for you to do that now? Then while we are on the topic, maybe, can you talk about your appetite for more broad kind of strategic look at the company? I know you had been looking to do something with the long-distance network. How open are you to continuing down that path in the next couple of years, and maybe doing something with the rural launch from a broad strategic perspective? Thanks.

Good morning, Tim. This is Ed; I will handle that. The HOV lane that I am talking about really isn't U-verse. Now, it has the same architecture, but it doesn't have the switches that a U-verse would have, and as per our understanding, U-verse is a linear programming play. Now, it would have broadband capability, of course, but our HOV lane would be content delivery networks that could provide high-def over our facility. So, we see it as a little different term. What we don't want to get into is being the broker of content the way a linear programmer would be. So that's the difference for us, but we think that the architecture certainly sits, just like the fiber to the node; U-verse is the same as opposed to a FiOS. On the strategic part of our business, as you know, we have already put out that we were approached on the IXC. We are open to anything that improves our shareholder value. The consolidation that is now going on, rural versus metro, we are interested in, but we will only do what we need to do to pursue what helps our shareholders. We still stand with accretive, and we don't want a dilutive transaction as well as, we would always look for a de-levering transaction if it met that need.

Our next question comes from the David Barden with Banc of America.

Hi, guys. I guess two questions if I could. First, just kind of following up on that question guys. I think you guys have said in the past that you would be interested in being a buyer or a seller, depending on what is right for the shareholder. I would maybe argue that irrespective of which of those paths you choose, you would obviously want to be maximizing the value of your currency. You are taking up your free cash flow expectations here. Obviously, we will want to see how the year transpires. So, could you talk about cash deployment and your thoughts on dividends and dividend tax preference sunset in 2011, stock buybacks, and how do you plan to use this cash flow maybe in a direct way to improve your currency to improve your position, be it as a buyer or a seller? Then, next on the critical path to making that decision, have you guys made headway? Or is there a timetable yet for definitively dealing with the convert on an exchange offer or a good sense solicitation, which would probably be a cheaper way of doing it than trying to hit the high yield markets to refinance it? Thanks.

Sure, David. This is Joe Euteneuer. In regards to your last question, we are underway with talks with everybody and looking at all of the alternatives of how to adjust the towers that are coming due at the end of 2010, and beginning of 2011. It's our goal to try to resolve any of those things hopefully by year end, so we are actively working on it very, very diligently. In regards to the use of cash, I think you have seen us with a very balanced approach on our cash as far as maintaining a consistent dividend. You hear our cautious optimism for the year. We do have opportunities that we look at with FTTN, and the increased speeds that we might want to invest there. So, I think we are looking at how to use our cash the most effectively. Right now, to the extent that we had excess cash and would want to buy back debt, I think that would still get us a better return than buying back shares, but obviously, we are open to all possibilities that drive the best use of the excess dollars that we will produce.

Our next question comes from John Hodulik with UBS.

Thanks, good morning. Sorry if you guys have covered this already, but on the Business Market, it looks like you guys are still growing the top line there. Obviously, you are careful about the economy, but your main competitors are seeing fairly dramatic declines on a year-over-year basis. Is there anything significantly different in what makes up their top line versus your top line for the trend that you are seeing to suggest that, you won't sort of head in that direction over the next couple quarters given the weak economy?

This is Tom Richards. I don't know the real makeup of their top line. I can kind of speak about what is going on inside of BMG. I think the continued good performance of the BMG team is really a function of where they have focused, what market segments they have gone after, and where we think our sweet spot is on one hand. On the other hand, we have been focused on kind of base protection now for two or three years. So, I think what you are seeing is, some of the top line growth that we are getting is a result of those previous years' investments in protecting a base, and making sure we are staying focused on that customer segment. The other thing is, when you compare us with others on a national basis, we are still a relatively small share player. So, we don't have quite a big as base to protect, and therefore gives us the opportunity to take share, and we've still continued to do that effectively in the marketplace. That's not to say that Teresa Taylor and her team aren't confronted with the same kind of pressures that everybody talks about in this economy, as businesses think about managing their business more prudently going forward.

Our next question comes from Jason Armstrong with Goldman Sachs.

Thanks, good morning. Maybe first question just on the access line trends, you talked about some optimism, I think more associated with lower disconnects. Just wondering, if we step back here, what kind of trend rate differential are you experiencing in areas where you have gone through the broadband plan upgrades, versus those where you haven't? Can you give us some granularity there just in terms of whether that has been effective really in protecting the base? Then secondly, just getting back real quickly to that strategic review, you guys obviously had a pole position in many of the industry discussions going on. The determination to keep the business in-house, now that that's behind us, I am just wondering if you can give us a framework for what you learned as part of those discussions. Why wasn't this sold? Is it lack of interest? Was it sort of differing concepts of valuation and what the value of the asset was? Was it debate over ownership structures? Just any sort of concept there. Thanks.

Hi, Jason. This is Tom. I will take the first one and let Ed take the second one. On the access line trends, I think we've been in past calls purely vocal about the fact that when we see HSI deployment, whether it's FTTN, fiber HSI, or ATM, pretty significant impact positively on access line disconnects or net access line losses. That trend continues to be true, which is why we are so focused on accelerating HSI/Broadband into every part of our footprint. It just has a precipitous impact on access line disconnects. So, we are going to continue to stay focused on that because it's too big to ignore.

Tom, is there any sort of metrics you could put behind that? A basis point spread between the sort of haves and have-nots in terms of FTTN penetration?

Jason, I will give you a perspective. If you look at where HSI is deployed, depending on the product bundle, which is the reason I am a bit hesitant, because it depends on how complex the product bundle is. However, in general, you can get anywhere from 30% to 40%, up to 50% change in access line net disconnect loss when HSI is deployed. Now, that's not ubiquitous, and it depends on the competitive landscape, but it gives you kind of a range of why we are so maniacal about that.

Good morning, Jason. This is Ed. I will do the IXC. As you know, we don't run the IXC as a separate unit. We have it integrated in our business units, whether it's Wholesale or BMG, and frankly some of the IXC carries ILD for our consumers. So, in the valuations, and looking at this, we had to dig deep into the asset base, and those that were interested in the assets weren't necessarily interested, obviously, in the way we run the business. So, the valuations could range anywhere from somebody that approached us, what they want or don't want, and we concluded that, at the end of the day it was better for our shareholders to keep it in-house. As you know, in that evaluation there is price and there is who gets it, and risk of getting it done, and all those factors play in. However, just the interest in our assets says that asset's valuable. So, as we proceeded, we were very diligent in making sure that if there was a transaction that it was first doable. Frankly, we've got enough money for it, the valuations. Then afterwards, what did that do to the rest of our business, what would be left over. So, we won't go any further than that, because it would reveal some competitive stuff we've learned. So, if you ask, what did we learn? We learned about what the competitive landscape was. We learned, obviously, any time you dig deep into an asset on our future plans, we will probably able to maximize that, both in capital and operations, even better than we have in the past.

Our next question comes from Michael Rollins with Citi Investment.

Hi, good morning. I was wondering if you could talk a little bit more about the business trends in the quarter, the business revenue trends. If you could talk a little bit about what you are doing with your sales force in terms of maybe the investment that you've made there, and the types of booking activity that you are seeing from your customers? Thanks.

Hi, Michael. This is Tom. As far as kind of sales performance, it still remains relatively light if you are just talking about funnels, and opportunities in the market place. We are seeing customers being a little bit more prudent and cautious about the size of the deal or the length of the contract. In a little strange twist in this quarter, we saw a little bit of uptick from a sales perspective on the CPE end, which you could probably suggest that maybe businesses have been holding off and holding off and now they feel like they need to make some technical upgrades. However, I don't know that it's enough yet to call it a trend. We think the investments we've made in our sales organization are in part contributing to the performance that you are seeing. Those investments just aren't in headcount so much as they are in skill set, in the way we go and the way we sell to customers, the process that we have adopted as kind of a sales mentality. So all of those things I think have contributed to us withstanding the economic overhang that all the enterprise sales organizations are meeting. Then the last thing I would tell you, I am going to reinforce this notion of, we've invested a fair amount of time, training, programs, compensation on retention, believing that, if we could continue to manage churn in the business it takes pressure off the top line, and I think the performance you are seeing is a function of that focus.

Our next question comes from Mike McCormack with JPMorgan.

Tom, I guess this is for you. Any thoughts on the consumer side with respect to how far cable competition has gone? Are you expecting any incremental launches there? Then, secondly, when you look at your footprint in your households, just give us a sense if you can or your thoughts on, how far wireless substitution has gone, and also, any thoughts on lead Metro and Boost prepaid offerings impacting your landline business? Thanks.

Okay. Let me take the last one, Mike or the last part of it first. Wireless substitution, when we look at access line loss has remained fairly stable. It bumped up a little bit in this last quarter as a percent of loss. Now, in the three or four quarters that I've been doing this, it does move around. We saw some pretty aggressive competitive offers at the end of the second quarter, and that tends to have an impact and change it. However, for the most part, I think I have said on previous calls that wireless substitution is somewhere between 25% and low 30% as far as a percent. That has maintained and continues to maintain. We haven't seen any specific dramatic changes based on some of the things you mentioned. Does that help, Mike?

Our next question comes from Peter Rhamey with BMO Capital Markets.

A follow-on to the last question, one clarification in one other. 25% to 30%, Tom, you mentioned, is that 25% to 30% of your line losses that's attributable to that or is that the wireless substitution percentage?

That's the percent of line losses tied to wireless substitution.

Perfect, excellent. A question on the enterprise segment, are we seeing any signs of improvement, stability out there that we could point to that would suggest that looking into 2010, we are in for an improvement? In the networks contracts you have mentioned that performance has been a little bit disappointing. Is there some potential to improve there or is there something more systemic about Qwest and its positioning of those contracts that's leading to the underperformance? Thanks.

Okay. Let me take the general enterprise marketplace, and then we'll do network second, if I've got all the questions. I don't know that I feel comfortable at this point predicting or suggesting what might happen over the next quarter. If you look at the macroeconomic trends, while they would suggest that we might be at the bottom end of the recession, I think there is a fairly widespread opinion on what happens, and how long, and what the recovery looks like. I can tell you that we are seeing customers, as I mentioned earlier, begin to do some spending, although I don't know that I feel comfortable saying that it's consistent enough to project a significant change. So, I think as we said in our comments, that we expect enterprise revenue in the second half of the year be similar to the first half. So I think that's probably the best indicator. In the case of networks, it's kind of a split answer. The first part is, we are pleased with the percent of contracts we've been winning. It's consistent with what we had hoped for when we did the original business case on networks. The part that is trailing is the awarding of some of the business and the actual implementation. That has obviously slowed the revenue stream. We are hearing rumblings that there is going to be some increasing pressure to get some of the agencies to move from their old contract to the new contract. We obviously would be happy if that would happen. It would get the ball rolling at this point. Again, we only hear that at this point, I don't have anything that I can tell you is official.

Great. Thank you very much.

Our next question comes from Frank Louthan with Raymond James.

Great. Thank you. As you are doing the fiber to the node build out, are you running fiber to other business opportunities like to towers or other tuck-ins, and to different buildings? Can you also give us an update on sort of the lower end of the enterprise, the SME side of the business? What are the trends there? Are you seeing any lag effect with smaller businesses or are you still seeing some strength there, kind of like you are seeing more broadly? Thanks.

Hi, Frank. This is Tom. The answer to your first question is, yes. We are taking advantage of the fiber to the node deployment and looking at situations like fiber to the cell as extensions off of that deployment. So, that's one of the reasons in my comments I talked about the wireless segment as being an opportunity for Roland Thornton's Wholesale team. On the second part, when you look at what I will call the low-end of the Business Market segment, it's a little bit bifurcated at the very low end of that segment, which is small business. They are impacted by the bankruptcies and general trends, and so it's a tough putt for them. They got to continue to fight customers going out of business. At the next level or the little higher end customer, what we call mid-markets, Teresa Taylor and her BMG team have done a really good job of kind of stemming the loss in that business. We are starting to see signs that the losses we had been experiencing are abating, and feel encouraged that we have that market headed in the right direction.

Okay. That concludes our call today, folks. I appreciate your interest again. Give us a call to Investor Relations if you have any follow-up questions. Have a good day.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect.