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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 1-3040
U S WEST Communications, Inc.
A Colorado Corporation IRS Employer No. 84-0273800
1801 California Street, Denver, Colorado 80202
Telephone Number (303) 896-3099
THE REGISTRANT, A WHOLLY OWNED SUBSIDIARY OF U S WEST, INC., MEETS THE
CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) and (b) OF FORM 10-Q AND IS
THEREFORE FILING THIS FORM WITH REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL
INSTRUCTION H(2).
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __
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<PAGE>
Form 10-Q - Part I U S WEST Communications, Inc.
<TABLE>
<CAPTION>
Form 10-Q
TABLE OF CONTENTS
Item Page
PART I - FINANCIAL INFORMATION
<S> <C> <C>
1. U S WEST Communications, Inc. Financial Information
Consolidated Statements of Income -
Three Months Ended March 31, 1998 and 1997 3
Consolidated Balance Sheets -
March 31, 1998 and December 31, 1997 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1998 and 1997 6
Notes to Consolidated Financial Statements 7
2. U S WEST Communications, Inc. Management's Analysis of the
Results of Operations - (Reduced disclosure
format pursuant to 9
General Instruction H(2))
PART II - OTHER INFORMATION
1. Legal Proceedings 14
6. Exhibits and Reports on Form 8-K 14
</TABLE>
<PAGE>
Form 10-Q - Part I
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS U S WEST COMMUNICATIONS, INC.
OF INCOME (Unaudited)
- - -------------------------------------------------------------------------------
Three Months Ended
March 31,
Dollars in Millions 1998 1997
- - ------------------------------------------------ ---------------- -------------
<S> <C> <C>
Operating revenues:
Local service $1,350 $1,231
Interstate access service 698 687
Intrastate access service 206 200
Long-distance network services 201 250
Other services 214 179
---------------- -------------
Total operating revenues 2,669 2,547
Operating expenses:
Employee-related expenses 822 806
Other operating expenses 511 450
Taxes other than income taxes 93 105
Depreciation and amortization 518 522
---------------- -------------
Total operating expenses 1,944 1,883
---------------- -------------
Operating income 725 664
Interest expense 91 96
Gain on sale of rural telephone exchanges - 18
Other expense - net 27 22
---------------- -------------
Income before income taxes 607 564
Provision for income taxes 233 215
---------------- -------------
NET INCOME $374 $349
================================================ ================ =============
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
Form 10-Q - Part I
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS U S WEST COMMUNICATIONS, INC.
(Unaudited)
- - ------------------------------------------ ---------------- ------------------
March 31, December 31,
Dollars in Millions 1998 1997
- - ------------------------------------------ ---------------- ------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 289 $ 26
Accounts and notes receivable - net 1,533 1,608
Inventories and supplies 144 124
Deferred tax asset 196 226
Prepaid and other 67 68
---------------- ------------------
Total current assets 2,229 2,052
Gross property, plant and equipment 33,447 33,182
Accumulated depreciation 19,362 19,041
---------------- ------------------
Property, plant and equipment - net 14,085 14,141
Other assets 810 815
---------------- ------------------
Total assets $17,124 $17,008
========================================== ================ ==================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
Form 10-Q - Part I
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS U S WEST COMMUNICATIONS, INC.
(Unaudited), continued
- - -------------------------------------- ------------------ ---------------------
March 31, December 31,
Dollars in Millions 1998 1997
- - -------------------------------------- ------------------ ---------------------
<S> <C> <C>
LIABILITIES AND SHAREOWNER'S EQUITY
Current liabilities:
Short-term debt $ 589 $ 497
Accounts payable 1,230 1,439
Employee compensation 247 321
Dividends payable 374 192
Advanced billings and customer 306 292
deposits
Other 1,135 982
---------------- ---------------------
Total current liabilities 3,881 3,723
Long-term debt 4,931 5,019
Postretirement and other
postemployment benefit obligations 2,352 2,365
Deferred income taxes 925 891
Deferred credits and other 635 610
Contingencies
Shareowner's equity
Common shares - one share without
par value, owned by parent 8,017 8,017
Cumulative deficit (3,617) (3,617)
---------------- ---------------------
Total shareowner's equity 4,400 4,400
---------------- ---------------------
Total liabilities and shareowner's $17,124 $17,008
equity
======================================== ================ =====================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
Form 10-Q - Part I
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF U S WEST COMMUNICATIONS, INC.
CASH FLOWS (Unaudited)
- - ----------------------------------------------- --------------- ---------------
Three Months Ended March 31, 1998 1997
- - ----------------------------------------------- --------------- ---------------
Dollars in Millions
<S> <C> <C>
OPERATING ACTIVITIES
Net income $374 $ 349
Adjustments to net income:
Depreciation and amortization 518 522
Gain on sale of rural telephone - (18)
exchanges
Deferred income taxes and amortization
of investment tax credits 62 22
Changes in operating assets and
liabilities:
Postretirement medical and life (24) (11)
costs, net of cash fundings
Accounts receivable 76 60
Inventories, supplies and other (26) (3)
current assets
Accounts payable and accrued 97 193
liabilities
Other - net 12 (12)
--------------- ---------------
Cash provided by operating activities 1,089 1,102
--------------- ---------------
INVESTING ACTIVITIES
Expenditures for property, plant and (550) (395)
equipment
Purchase of PCS licenses (18) -
Proceeds from (payments on) disposals of
property, plant and equipment 19 (7)
Proceeds from sale of rural telephone - 7
exchanges
--------------- ---------------
Cash used for investing activities (549) (395)
--------------- ---------------
FINANCING ACTIVITIES
Net repayments of short-term debt (62) (429)
Repayments of long-term debt (23) (54)
Dividends paid on common stock (192) (307)
Equity infusions from U S WEST - 73
Communications Group
--------------- ---------------
Cash used for financing activities (277) (717)
--------------- ---------------
CASH AND CASH EQUIVALENTS
Increase (decrease) 263 (10)
Beginning balance 26 92
--------------- ---------------
Ending balance $289 $ 82
============================================== =============== ===============
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
Form 10-Q - Part I
U S WEST COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 1998
(Dollars in millions)
(Unaudited)
A. Summary of Significant Accounting Policies
Basis of Presentation. U S WEST Communications, Inc. (the "Company") is
incorporated under the laws of the State of Colorado and is an indirect, wholly
owned subsidiary of U S WEST, Inc. ("U S WEST") and a major component of U S
WEST Communications Group ("Communications Group").
The Consolidated Financial Statements have been prepared by the Company,
pursuant to the interim reporting rules and regulations of the Securities an
Exchange Commission ("SEC"). Certain information and footnote disclosures
normally accompanying financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
SEC rules and regulations. In the opinion of the Company's management, the
Consolidated Financial Statements include all adjustments, consisting of only
normal recurring adjustments, necessary to present fairly the financial
information set forth therein. It is suggested that these Consolidated Financial
Statements be read in conjunction with the financial statements and notes
thereto included in the Company's Form 10-K/A for the year ended December 31,
1997.
B. U S WEST Separation
On October 25, 1997, the Board of Directors of U S WEST adopted a proposal to
separate U S WEST into two independent companies (the "Separation"). As a result
of the Separation, the Communications Group will become an independent public
company and will be renamed "U S WEST, Inc." ("New U S WEST"). In addition,
Media Group's directory business known as U S WEST Dex, Inc. ("Dex") will be
aligned with New U S WEST (the "Dex Alignment"). Following the Separation, U S
WEST will continue as an independent public company comprised of the current
businesses of Media Group other than Dex and will be renamed "MediaOne Group,
Inc." ("MediaOne").
The Separation will be implemented pursuant to the terms of a separation
agreement between U S WEST and New U S WEST (the "Separation Agreement"). In
connection with the Dex Alignment, (i) U S WEST will distribute, as a dividend,
an aggregate of $850 in value of New U S WEST common stock to holders of Media
Group common stock and (ii) $3.9 billion of U S WEST debt, currently allocated
to Media Group, will be refinanced by New U S WEST.
Further information about the Separation is contained in U S WEST's proxy
statement mailed to all shareowners on April 20, 1998. U S WEST shareowners have
been asked to consider and approve the Separation at its annual meeting to be
held on June 4, 1998. Subject to shareowner approval, the transaction is
expected to be completed by mid-June 1998.
<PAGE>
Form 10-Q - Part I
U S WEST COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions)
(Unaudited)
C. Contingencies
There are pending regulatory actions in local regulatory jurisdictions that call
for price decreases, refunds or both.
Oregon. On May 1, 1996, the Oregon Public Utilities Commission ("OPUC") approved
a stipulation terminating prematurely the Company's alternative form of
regulation ("AFOR") plan, and it then undertook a review of the Company's
earnings. In May 1997, the OPUC ordered the Company to reduce its annual
revenues by $97, effective May 1, 1997, and to issue a one-time refund,
including interest, of approximately $102 to reflect the revenue reduction for
the period May 1, 1996 through April 30, 1997. The one-time refund is for
interim rates which became subject to refund when the Company's AFOR plan was
terminated on May 1, 1996.
The Company filed an appeal of the order and asked for an immediate stay of the
refund with the Oregon Circuit Court which granted the Company's request for a
stay, pending a full review of the OPUC's order. On February 19, 1998, the
Oregon Circuit Court entered a judgment in the Company's favor on most of the
appealed issues. The OPUC appealed on March 19, 1998. The potential exposure,
including interest, at March 31, 1998, is not expected to exceed $210.
Utah. In another proceeding, the Utah Supreme Court has remanded a Utah Public
Service Commission ("UPSC") order to the UPSC for hearing, thereby establishing
two exceptions to the rule against retroactive ratemaking: 1) unforeseen and
extraordinary events, and 2) misconduct. The UPSC's initial order denied a
refund request from interexchange carriers ("IXCs") and other parties related to
the Tax Reform Act of 1986. The potential exposure, including interest, at March
31, 1998, is not expected to exceed $160.
State Regulatory Accruals. The Company has accrued $148 at March 31, 1998, which
represents its estimated liability for all state regulatory proceedings,
predominately the items discussed above. It is possible that the ultimate
liability could exceed the recorded liability by an amount up to approximately
$220. The Company will continue to monitor and evaluate the risks associated
with its local regulatory jurisdictions, and will adjust estimates as new
information becomes available.
In addition to its estimated liability for state regulatory proceedings, the
Company has an accrued liability of approximately $230 at March 31, 1998 related
to refunds in the state of Washington. The Company expects that the majority of
these refunds will be issued to ratepayers, IXCs and independent local exchange
carriers ("LECs") during the second- and third-quarters of 1998.
<PAGE>
Form 10-Q - Part I
Item 2. Management's Analysis of the Results of Operations
(Dollars in millions)
Some of the information presented in or in connection with this report
constitutes "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Although the Company believes that its
expectations are based on reasonable assumptions within the bounds of its
knowledge of its business and operations, there can be no assurance that actual
results will not differ materially from its expectations. Factors that could
cause actual results to differ from expectations include: (i) greater than
anticipated competition from new entrants into the local exchange, intraLATA
toll and wireless markets, (ii) changes in demand for the Company's products and
services, including optional custom calling features, (iii) higher than
anticipated employee levels, capital expenditures, and operating expenses (such
as costs associated with year 2000 remediation), (iv) the loss of significant
customers, (v) pending regulatory actions in state jurisdictions, (vi)
regulatory changes affecting the telecommunications industry, including changes
that could have an impact on the competitive environment in the local exchange
market, (vii) a change in economic conditions in the various markets served by
the Company's operations that could adversely affect the level of demand for
telephone, wireless, or other services offered by the Company, (viii) greater
than anticipated competitive activity requiring new pricing for services, (ix)
higher than anticipated start-up costs associated with new business
opportunities, (x) delays in the development of anticipated technologies, or the
failure of such technologies to perform according to expectations.
Results of Operations - First Quarter 1998 Compared with First Quarter 1997
Following are details of the Company's reported net income, normalized to
exclude the effects of certain nonoperating items.
<TABLE>
<CAPTION>
- - ------------------------------------------------------------ ----------------------------- --------------------------
Three Months Ended
March 31, Increase
----------------------------- --------------------------
1998 1997 $ %
- - ------------------------------------------------------------ ---------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Reported net income $374 $349 $25 7.2
Adjustment to reported net income:
Gain on sale of rural telephone exchanges(1) - (11) 11 -
---------------- ------------- ------------ ------------
Normalized income $374 $338 $36 10.7
============================================================ ================ ============= ============ ============
<FN>
(1) In first-quarter 1997, the Company sold certain rural telephone exchanges in
Nebraska for a pretax gain of $18 and an after-tax gain of $11.
</FN>
</TABLE>
During 1998, the Company's normalized income increased $36, or 10.7 percent, to
$374. The increase in normalized income is primarily due to higher demand for
services partially offset by interstate access rate reductions, higher expenses
related to interconnection and start-up costs associated with growth
initiatives, including wireless personal communications services ("PCS").
<PAGE>
Form 10-Q - Part I
Item 2. Management's Analysis of the Results of Operations (Dollars in
millions), continued
Operating Revenues
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------
Three Months Ended Increase
March 31, (Decrease)
-------------------------------------------------------------------
1998 1997 $ %
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Local service $1,350 $1,231 $119 9.7
Interstate access service 698 687 11 1.6
Intrastate access service 206 200 6 3.0
Long-distance network services 201 250 (49) (19.6)
Other services 214 179 35 19.6
---------------------------------------------------------------
Total $2,669 $2,547 $122 4.8
==================================================================================================================
</TABLE>
Local Service Revenues. During 1998, local service revenues increased $119, or
9.7 percent, to $1,350, primarily as a result of access line growth and
increased demand for new product and service offerings, and existing central
office features. Total reported access lines increased 568,000, or 3.6 percent,
during the past 12 months, of which 284,000 was attributable to second lines.
Second line installations increased 25.2 percent. Access lines grew 634,000, or
4.1 percent, when adjusted for sales of approximately 66,000 rural telephone
access lines during the past twelve months. Also contributing to the increase in
revenues were rate increases of $17 in various states, and interim compensation
revenues from IXCs as a result of the FCC payphone orders which took effect in
April 1997.
Interstate Access Service Revenues. Interstate access service revenues increased
$11, or 1.6 percent, to $698 during 1998, primarily due to a change in the
classification of universal service fundings which increased revenues by $19. In
1997 these fundings were offset against interstate access service revenues
through a contra-revenue account. Beginning in 1998 these fundings are recorded
as access expense within other operating expense. Excluding the effects of the
reclassification, interstate access revenues declined $8, or 1.2 percent,
primarily due to the effects of lower prices under the FCC's current price cap
plan and the effects of 1997 true-ups to sharing-related accruals. Partially
offsetting these decreases were the effects of a 6.1 percent increase in billed
interstate access minutes of use and increased demand for private line services.
Intrastate Access Service Revenues. Intrastate access service revenues increased
$6 in 1998, or 3.0 percent, to $206, primarily due to a 7.1 percent increase in
billed intrastate minutes of use and higher demand for private line services.
Partially offsetting the increase were net rate reductions of $5 in local
jurisdictions, the majority of which were in the state of Washington.
Long Distance Network Services Revenues. Long-distance network service revenues
decreased $49, or 19.6 percent, to $201, primarily due to the effects of
competition and rate reductions of $14 in local jurisdictions. Also contributing
to the decline were the implementation of multiple toll carrier plans ("MTCPs")
in various jurisdictions in 1997. The MTCPs essentially allow independent
telephone companies to act as toll carriers and are net income neutral with the
reduction in toll revenues largely offset by increased intrastate access service
revenues and lower access expense.
<PAGE>
Form 10-Q - Part I
Item 2. Management's Analysis of the Results of Operations (Dollars in
millions), continued
Other Services Revenues. Revenues from other services increased $35, or 19.6
percent, to $214, primarily as a result of greater sales of inside wire
maintenance, continued market penetration in voice messaging services and
increased sales of wireless communication services.
Costs and Expenses
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------
Three Months Ended Increase
March 31, (Decrease)
------------------------------------------------------------
1998 1997 $ %
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Employee-related expenses $822 $806 $16 2.0
Other operating expenses 511 450 61 13.6
Taxes other than income taxes 93 105 (12) (11.4)
Depreciation and amortization 518 522 (4) (0.8)
Interest expense 91 96 (5) (5.2)
Gain on sale of rural telephone exchanges - 18 (18) -
Other expense - net 27 22 5 22.7
--------------------------------------------------------------------------------------------------------------------
</TABLE>
Employee-Related Expenses. Total employee-related expenses increased $16, or 2.0
percent, to $822 during 1998, primarily due to higher contract labor costs and
increased salaries and wages. The higher contract labor costs were predominately
a result of systems development work (which includes expenses related to
interconnection and year 2000 costs) and marketing and sales efforts. The
increase in salaries and wages was a result of workforce increases and wage
increases which were largely offset by the transfer of approximately 1,200
employees during third-quarter 1997 to an unregulated affiliate.
Other Operating Expenses. Other operating expenses increased $61, or 13.6
percent, to $511 during 1998. The increase is primarily due to increased
affiliate expense as a result of the above referenced transfer of employees to
an unregulated affiliate, interconnection expenses and costs associated with
growth initiatives (primarily PCS). Other operating expenses also increased $19
due to the change in the classification of the universal service funding
expenses. Partially offsetting the increases were reduced access expense
(primarily due to dial-around competition and the MTCPs) and a 1997 reserve
adjustment associated with billing and collection activities performed for IXCs.
Taxes Other Than Income Taxes. Taxes other than income taxes decreased $12, or
11.4 percent, primarily as a result of adjustments related to the 1997 property
tax accrual.
Interest Expense. Interest expense decreased $5, or 5.2 percent, to $91,
primarily as a result of lower average debt levels as compared to 1997.
Partially offsetting the decrease was a reduction in the amount of interest
capitalized resulting from a lower average balance of telecommunications plant
under construction.
Gain On Sale of Rural Telephone Exchanges. In 1997, the Company sold certain
rural telephone exchanges in Nebraska resulting in a pretax gain of $18.
Other Expense - Net. Other expense increased primarily due to additional
interest expense associated with the Company's state regulatory liabilities.
Other Items
During the first quarter of 1998, Moody's downgraded the Company's senior
unsecured debt from Aa3 to A2 due to recent regulatory rulings and financial
challenges associated with the Separation. See "Contingencies." The Company's
debt remains under review by Moody's for possible downgrade pending
clarification of New U S WEST's corporate structure and future strategic
initiatives.
On May 7, 1998, Duff & Phelps reaffirmed the Company's senior unsecured debt and
commercial paper ratings of AA- and D-1+, respectively.
Contingencies
There are pending regulatory actions in local regulatory jurisdictions that call
for price decreases, refunds or both.
Oregon. On May 1, 1996, the OPUC approved a stipulation terminating prematurely
the Company's AFOR plan, and it then undertook a review of the Company's
earnings. In May 1997, the OPUC ordered the Company to reduce its annual
revenues by $97, effective May 1, 1997, and to issue a one-time refund,
including interest, of approximately $102 to reflect the revenue reduction for
the period May 1, 1996 through April 30, 1997. The one-time refund is for
interim rates which became subject to refund when the Company's AFOR plan was
terminated on May 1, 1996.
The Company filed an appeal of the order and asked for an immediate stay of the
refund with the Oregon Circuit Court which granted the Company's request for a
stay, pending a full review of the OPUC's order. On February 19, 1998, the
Oregon Circuit Court entered a judgment in the Company's favor on most of the
appealed issues. The OPUC appealed on March 19, 1998. The potential exposure,
including interest, at March 31, 1998, is not expected to exceed $210.
Utah. In another proceeding, the Utah Supreme Court has remanded a UPSC order to
the UPSC for hearing, thereby establishing two exceptions to the rule against
retroactive ratemaking: 1) unforeseen and extraordinary events, and 2)
misconduct. The UPSC's initial order denied a refund request from IXCs and other
parties related to the Tax Reform Act of 1986. The potential exposure, including
interest, at March 31, 1998, is not expected to exceed $160.
<PAGE>
Form 10-Q - Part I
Item 2. Management's Analysis of the Results of Operations (Dollars in
millions), continued
State Regulatory Accruals. The Company has accrued $148 at March 31, 1998, which
represents its estimated liability for all state regulatory proceedings,
predominately the items discussed above. It is possible that the ultimate
liability could exceed the recorded liability by an amount up to approximately
$220. The Company will continue to monitor and evaluate the risks associated
with its local regulatory jurisdictions, and will adjust estimates as new
information becomes available.
In addition to its estimated liability for state regulatory proceedings, the
Company has an accrued liability of approximately $230 at March 31, 1998 related
to rate refunds in the state of Washington. The Company expects that the
majority of these refunds will be issued to rate payers, IXCs and independent
LECs during the second- and third-quarters of 1998.
<PAGE>
Form 10-Q - Part II U S WEST Communications, Inc.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company and its subsidiaries are subject to claims and proceedings arising
in the ordinary course of business. While complete assurance cannot be given as
to the outcome of any contingent liabilities, in the opinion of the Company, any
financial impact to which the Company and its subsidiaries are subject is not
expected to be material in amount to the Company's operating results or its
financial position.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No.
<S> <C>
12 Statement regarding computation of earnings to
fixed charges ratio of U S WEST Communications,
Inc.
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K Filed During the First Quarter of 1998:
No reports on Form 8-K have been filed for the Company during the
first quarter of 1998.
<PAGE>
Form 10-Q - Part II U S WEST Communications, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
U S WEST Communications, Inc.
May 15, 1998 /s/ Allan R. Spies
-----------------------------
Allan R. Spies
Vice President and Chief
Financial Officer
Exhibit 12
<TABLE>
<CAPTION>
U S WEST COMMUNICATIONS, Inc.
RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Millions)
Quarter Ended
3/31/98 3/31/97
- - ------------------------------------------ -------- --------
<S> <C> <C>
Income before income taxes $ 607 $ 564
Interest expense (net of amounts
capitalized) 91 96
Interest factor on rentals (1/3) 16 15
-------- --------
Earnings $ 714 $ 675
Interest expense $ 97 $ 103
Interest factor on rentals (1/3) 16 15
-------- --------
Fixed charges $ 113 $ 118
Ratio of earnings to fixed charges 6.32 5.72
- - ------------------------------------------ -------- --------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000068622
<NAME> U S WEST COMMUNICATIONS, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 289
<SECURITIES> 0
<RECEIVABLES> 1,553
<ALLOWANCES> 0
<INVENTORY> 144
<CURRENT-ASSETS> 2,229
<PP&E> 33,447
<DEPRECIATION> 19,362
<TOTAL-ASSETS> 17,124
<CURRENT-LIABILITIES> 3,881
<BONDS> 4,931
0
0
<COMMON> 8,017
<OTHER-SE> (3,617)
<TOTAL-LIABILITY-AND-EQUITY> 17,124
<SALES> 2,669
<TOTAL-REVENUES> 2,669
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,944
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 91
<INCOME-PRETAX> 607
<INCOME-TAX> 233
<INCOME-CONTINUING> 374
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 374
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
