68622--2/17/2006--QWEST

related topics

{financial, litigation, operation}

{regulation, change, law}

{product, market, service}

{cost, contract, operation}

{debt, indebtedness, cash}

{condition, economic, financial}

{competitive, industry, competition}

{loss, insurance, financial}

{cost, operation, labor}

{investment, property, distribution}

{property, intellectual, protect}

{cost, regulation, environmental}

Increasing competition, including product substitution, continues to cause access line losses, which could adversely affect our operating results and financial performance. Consolidation among participants in the telecommunications industry may allow our competitors to compete more effectively against us, which could adversely affect our operating results and financial performance. Rapid changes in technology and markets could require substantial expenditure of financial and other resources in excess of contemplated levels, and any inability to respond to those changes could reduce our market share. Third parties may claim we infringe upon their intellectual property rights, and defending against these claims could adversely affect our profit margins and our ability to conduct business. Risks Relating to Legal and Regulatory Matters Any adverse outcome of the investigation of QCII s business currently being conducted by the DOJ or the material litigation pending against QCII and us, including the securities actions, could have a material adverse impact on our financial condition and operating results, on the trading price of our debt securities and on our ability to access the capital markets. Current or future civil or criminal actions against QCII s former officers and employees could reduce investor confidence in QCII and us and cause the trading price for our debt securities to decline. We operate in a highly regulated industry, and are therefore exposed to restrictions on our manner of doing business and a variety of claims relating to such regulation. QCII s high debt levels pose risks to our viability and may make us more vulnerable to adverse economic and competitive conditions, as well as other adverse developments. We may be unable to significantly reduce the substantial capital requirements or operating expenses necessary to continue to operate our business, which may in turn affect our operating results. Declines in the value of QCII s qualified pension plan assets, or unfavorable changes in laws or regulations that govern pension plan funding, could require it to provide significant amounts of funding for its qualified pension plan. The cash needs of our affiliated companies consume a significant amount of the cash we generate. Our debt agreements and the debt agreements of QCII allow us and QCII to incur significantly more debt, which could exacerbate the other risks described herein. Other Risks Relating to Qwest If conditions or assumptions differ from the judgments, assumptions or estimates used in our critical accounting policies, the accuracy of our financial statements and related disclosures could be affected. Taxing authorities may determine we owe additional taxes relating to various matters, which could adversely affect our financial results. If we fail to extend or renegotiate our collective bargaining agreements with our labor unions as they expire from time to time, or if our unionized employees were to engage in a strike or other work stoppage, our business and operating results could be materially harmed.

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68622--2/17/2006--QWEST_CORP