updated 5/3/2005 3:22:15 PM ET 2005-05-03T19:22:15

Qwest Communications International Inc., which lost a bidding war for MCI Inc. to rival Verizon Communications Inc., said Tuesday it swung to a profit in the latest first quarter from a loss a year ago, due to a gain on the sale of wireless assets.

The phone company that provides local service in 14 mostly Western states earned $57 million , or 3 cents per share, in the January-March period, versus last year's loss of $310 million, or 17 cents per share.

The latest quarter includes a gain on asset sales of 14 cents per share, compared with a loss of 17 cents a year ago. Excluding the gain, Qwest posted a loss of 11 cents per share in the latest quarter.

Revenue edged down to $3.45 billion from $3.48 billion last year, as competitive pressures were partially offset by gains in long-distance and DSL. The company also said it benefited from price initiatives in consumer long-distance, packages and wholesale long distance.

Analysts surveyed by Thomson Financial were looking for the company to post losses of 10 cents per share before items on sales of $3.45 billion in the latest quarter.

On Monday, Qwest dropped out of the three-month bidding war for long-distance provider MCI after MCI agreed to an $8.54 billion deal with Verizon and rejected a higher-priced offer from Qwest for the fourth time.

MCI accepted Verizon's bid even though it was 13 percent less than the $9.85 billion offered by Qwest. Throughout the bidding process, MCI directors suggested they were troubled by Qwest's $17.3 billion in debt.

In a conference call with analysts on Tuesday, Qwest CEO Dick Notebaert said a number of companies will be looking at how to create "a meaningful third leg" to compete after proposed mega-mergers between Verizon and MCI and between SBC Communications Inc. and AT&T Corp.

"The market is full of great opportunities," Notebaert said in a conference call with analysts. "There are a number of opportunities in our sector, a number of companies, a number of businesses." He would not elaborate.

Analyst Anna Maria Kovacs of Regulatory Source Associates Inc. expects Qwest to demand that the merging companies divest assets before combining — and then to capitalize by snapping up divested local facilities to feed its long-distance network.

"While that would not accomplish everything Qwest hoped to do, it could get it part of the way," Kovacs wrote in a research note.

Janco Partners analyst Donna Jaegers said Qwest might have to go it alone for a few years until more partnership opportunities arise.

Qwest and BellSouth Corp. are the two remaining independent phone companies following the 1984 breakup of the national Bell monopoly into AT&T and seven Baby Bells.

"The problem is, there are no suitors right now," Jaegers said. "The only eligible suitor is BellSouth, and they haven't made any acquisitions. I don't think they're really interested in acquiring a whole new region."

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