Use these links to rapidly review the documentQWEST CORPORATION FORM 10-Q TABLE OF CONTENTS

Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM 10-Q

ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended September 30, 2009oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                                to


Commission File No. 001-03040

QWEST CORPORATION(Exact name of registrant as specified in its charter)

Colorado(State or other jurisdiction of
incorporation or organization)

84-0273800(I.R.S. Employer Identification No.)1801 California Street, Denver, Colorado(Address of principal executive offices)

80202(Zip Code)


(303) 992-1400(Registrant's telephone number, including area code)

N/A(Former name, former address and former fiscal year, if changed since last report)



THE
REGISTRANT, A WHOLLY OWNED SUBSIDIARY OF QWEST COMMUNICATIONS INTERNATIONAL INC., MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS H(1) (a) AND (b) OF FORM
10-Q AND IS THEREFORE FILING THIS FORM WITH REDUCED DISCLOSURE FORMAT.

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 ý    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and
post such files). Yes o    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Accelerated filer o

Non-accelerated filer ý (Do not check if a
smaller reporting company)

Smaller reporting company o


Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o    No ý

On October 27, 2009, one share of Qwest Corporation common stock was outstanding.



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Table of Contents



QWEST CORPORATION        FORM 10-Q        TABLE OF CONTENTS



Glossary of Terms

iiPART IFINANCIAL INFORMATIONItem 1. Financial Statements

1Condensed Consolidated Statements of OperationsThree and nine months ended
September 30, 2009 and 2008 (unaudited)

1Condensed Consolidated Balance SheetsSeptember 30, 2009 and December 31, 2008
(unaudited)

2Condensed Consolidated Statements of Cash FlowsNine months ended September 30, 2009
and 2008 (unaudited)

3Notes to Condensed Consolidated Financial Statements
(unaudited)

4Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations

18Item 3. Quantitative and Qualitative Disclosures About Market
Risk

30Item 4. Controls and Procedures

30PART IIOTHER INFORMATIONItem 1. Legal Proceedings

32Item 1A. Risk Factors

32Item 6. Exhibits

39Signature

41


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GLOSSARY OF TERMS

Our industry uses many terms and acronyms that may not be familiar to you. To assist you in reading this document and other documents
we file with the Securities and Exchange Commission, we have provided below definitions of some of these terms.



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Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS



QWEST CORPORATION        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS        (UNAUDITED)

Three Months Ended
September 30,

Nine Months Ended
September 30,2009

2008

2009

2008(Dollars in millions)Operating revenue:Operating revenue

$
1,995

$
2,134

$
6,107

$
6,462Operating revenueaffiliates


407


422


1,265


1,325Total operating revenue


2,402


2,556


7,372


7,787Operating expenses:Cost of sales (exclusive of depreciation and amortization)


382


463


1,120


1,305Selling


394


471


1,269


1,385General, administrative and other operating


464


419


1,384


1,251Affiliates


47


60


129


150Depreciation and amortization


495


523


1,482


1,551Total operating expenses


1,782


1,936


5,384


5,642Operating income


620


620


1,988


2,145Other expense (income)net:Interest expense on long-term borrowingsnet


163


145


471


444Othernet


(16
)

(7
)

4


(7
)Total other expense (income)net


147


138


475


437Income before income taxes


473


482


1,513


1,708Income tax expense


180


183


575


649Net income

$
293

$
299

$
938

$
1,059


The
accompanying notes are an integral part of these condensed consolidated financial statements.

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QWEST CORPORATION        CONDENSED CONSOLIDATED BALANCE SHEETS        (UNAUDITED)

September 30,
2009

December 31,
2008(Dollars in millions)ASSETSCurrent assets:Cash and cash equivalents

$
1,070

$
233Accounts receivablenet of allowance of $53 and $52, respectively


818


907Accounts receivableaffiliates


65


127Deferred income taxesnet


190


203Prepaid expenses and other


240


241Total current assets


2,383


1,711Property, plant and equipmentnet


10,804


11,441Capitalized softwarenet


862


844Prepaid pensionaffiliate


968


1,047Other


320


400Total assets

$
15,337

$
15,443LIABILITIES AND STOCKHOLDER'S EQUITYCurrent liabilities:Current portion of long-term borrowings

$
511

$
19Accounts payable


425


430Accounts payableaffiliates


97


224Dividends payableQwest Services Corporation


100


400Accrued expenses and other


905


891Current portion of post-retirement and other post-employment benefits and otheraffiliates


176


179Deferred revenue and advance billings


398


409Total current liabilities


2,612


2,552Long-term borrowingsnet of unamortized debt discount and other of $157 and $103, respectively


7,845


7,569Post-retirement and other post-employment benefits and otheraffiliates


2,605


2,597Deferred income taxesnet


1,204


1,262Other


571


677Total liabilities


14,837


14,657Commitments and contingencies (Note 8)Stockholder's equity:Common stockone share without par value, owned by Qwest Services Corporation


11,297


11,326Accumulated deficit


(10,797
)

(10,540
)Total stockholder's equity


500


786Total liabilities and stockholder's equity

$
15,337

$
15,443


The
accompanying notes are an integral part of these condensed consolidated financial statements.

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QWEST CORPORATION        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS        (UNAUDITED)

Nine Months Ended
September 30,2009

2008(Dollars in millions)Operating activities:Net income

$
938

$
1,059Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization


1,482


1,551Deferred income taxes


(70
)

281Provision for bad debtnet


67


65Other non-cash chargesnet


9


22Changes in operating assets and liabilities:Accounts receivable


24


29Accounts receivableaffiliates


61


(42
)Prepaid expenses and other current assets


11


29Accounts payable and accrued expenses and other current liabilities


17


(87
)Accounts payable and accrued expenses and other current liabilitiesaffiliates


(138
)

(50
)Deferred revenue and advance billings


(28
)

(21
)Other non-current assets and liabilities including affiliates


70


(109
)Cash provided by operating activities


2,443


2,727Investing activities:Expenditures for property, plant and equipment and capitalized software


(821
)

(1,115
)Changes in interest in investments managed by Qwest Services Corporation


(1
)

(31
)Other


(6
)

13Cash used for investing activities


(828
)

(1,133
)Financing activities:Proceeds from long-term borrowings


738


Repayments of long-term borrowings, including current maturities


(20
)

(22
)Repayments of long-term borrowings, including current maturitiesaffiliates





(22
)Dividends paid to Qwest Services Corporation


(1,500
)

(1,800
)Equity infusions from Qwest Services Corporation





231Other


4


16Cash used for financing activities


(778
)

(1,597
)Cash and cash equivalents:Increase (decrease) in cash and cash equivalents


837


(3
)Beginning balance


233


292Ending balance

$
1,070

$
289


The
accompanying notes are an integral part of these condensed consolidated financial statements.

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QWEST CORPORATION        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS        For the Three and Nine Months Ended September 30, 2009    
(Unaudited)

Unless the context requires otherwise, references in this report to "QC" refer to Qwest Corporation, references to "Qwest," "we," "us,"
the "Company" and "our" refer to Qwest Corporation and its consolidated subsidiaries, references to "QSC" refer to our direct parent company, Qwest Services Corporation, and its consolidated
subsidiaries, and references to "QCII" refer to our ultimate parent company, Qwest Communications International Inc., and its consolidated subsidiaries.

Note 1: Basis of Presentation

The condensed consolidated balance sheet as of December 31, 2008, which was derived from audited financial statements, and the unaudited interim condensed consolidated financial
statements as of and for the three and nine months ended September 30, 2009 have been prepared in accordance with the
instructions for Form 10-Q. In compliance with those instructions, certain information and footnote disclosures normally included in consolidated financial statements prepared in
accordance with U.S. generally accepted accounting principles have been condensed or omitted. We believe that the disclosures made are adequate such that the information presented is not misleading.
We have evaluated subsequent events through October 28, 2009, the date these financial statements were issued. We have reclassified certain prior year revenue and expense amounts presented in our
Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2008 to conform to the current period presentation and to the presentation of 2008 results of
operations included in our Annual Report on Form 10-K for the year ended December 31, 2008.

In
the opinion of management, these statements include all normal recurring adjustments necessary to fairly present our condensed consolidated results of operations, financial position
and cash flows as of September 30, 2009 and for all periods presented. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial
statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2008.

The
condensed consolidated results of operations for the three and nine months ended September 30, 2009 and the condensed consolidated statement of cash flows for the nine months
ended September 30, 2009 are not necessarily indicative of the results or cash flows expected for the full year or of the results we would have attained had we operated as a stand-alone entity
during the periods presented.

Use of Estimates

Our condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. These
accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions we made when accounting for items and matters such as,
but not limited to, investments, long-term contracts, customer retention patterns, allowance for doubtful accounts, depreciation, amortization, asset valuations, internal labor
capitalization rates, affiliate transactions, intercompany allocations, recoverability of assets (including deferred tax assets), impairment assessments, pension, post-retirement and other
post-employment benefits, taxes, reserves and other provisions and contingencies are reasonable, based on information available at the time they were made. These estimates, intercompany
allocations, judgments and assumptions can affect the reported amounts of assets, liabilities and components of equity as of the dates of the condensed consolidated balance sheets, as well as the
reported amounts of

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QWEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the Three and Nine Months Ended September 30, 2009

(Unaudited)

Note 1: Basis of Presentation (Continued)

revenue,
expenses and components of cash flows during the periods presented in our condensed consolidated statements of operations and our condensed consolidated statements of cash flows. We also make
estimates in our assessments of potential losses in relation to threatened or pending legal
matters. See Note 8Commitments and Contingencies for additional information.



For
all of these and other matters, actual results could differ from our estimates.

Universal Service Funds (USF), Gross Receipts Taxes and Other Surcharges

Our revenue and general, administrative and other operating expenses included taxes and surcharges accounted for on a gross basis of
$48 million and $137 million for the three and nine months ended September 30, 2009, respectively, and $51 million and $151 million for the three and nine months
ended September 30, 2008, respectively.

Depreciation and Amortization

Property, plant and equipment is shown net of accumulated depreciation on our condensed consolidated balance sheets. Accumulated
depreciation was $32.767 billion and $32.499 billion as of September 30, 2009 and December 31, 2008, respectively.

Capitalized
software is shown net of accumulated amortization on our condensed consolidated balance sheets. Accumulated amortization was $1.551 billion and $1.448 billion
as of September 30, 2009 and December 31, 2008, respectively.

Effective
January 1, 2009, we changed our estimates of the average remaining economic lives of certain copper cable and telecommunications equipment assets. These changes resulted
in additional depreciation expense of approximately $9 million and $27 million for the three and nine months ended September 30, 2009, respectively, compared to the three and nine
months ended September 30, 2008, and will result in additional depreciation expense of approximately $36 million for the year ending December 31, 2009 compared to the year ended
December 31, 2008. The additional depreciation for these changes, net of deferred taxes, reduced net income by approximately $6 million and $17 million for the three and nine
months ended September 30, 2009, respectively, and will reduce net income by approximately $22 million for the year ending December 31, 2009.

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QWEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the Three and Nine Months Ended September 30, 2009

(Unaudited)

Note 1: Basis of Presentation (Continued)

Recently Adopted Accounting Pronouncements

Effective January 1, 2009, we adopted Financial Accounting Standards Board ("FASB") Staff Position ("FSP") Financial Accounting
Standard ("FAS") 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not
Orderly" (Accounting Standards Codification ("ASC") 820). This FSP provides guidelines for ensuring that fair value measurements are consistent with the principles presented in Statement of Financial
Accounting Standards No. 157, "Fair Value Measurements" (ASC 820). The adoption of this FSP has not had a material effect on our financial position or results of operations.

Effective
January 1, 2009, we adopted FSP FAS 115-2 and FAS 124-2, "Recognition and Presentation of
Other-Than-Temporary Impairments" (ASC 320). This FSP provides additional guidance designed to create greater clarity and consistency in accounting for and presenting
impairment losses on securities. The adoption of this FSP has not had a material effect on our financial position or results of operations.

Recently Issued Accounting Pronouncements

In October 2009, the FASB issued Accounting Standards Update ("ASU") Number 2009-13, "Revenue Recognition
(ASC 605) Multiple-Deliverable Revenue Arrangements a consensus of the FASB Emerging Issues Task Force." This ASU establishes a new selling price hierarchy to use when allocating the sales
price of a multiple element arrangement between delivered and undelivered elements. This ASU is generally expected to result in revenue recognition for more delivered elements than under current
rules. We are required to adopt this ASU prospectively for new or materially modified agreements as of January 1, 2011. We are evaluating the impact of this ASU, but do not expect adoption to
have a material impact on our financial statements.

Note 2: Fair Value of Financial Instruments

Our financial instruments consist of cash and cash equivalents, certain of our current and non-current investments (consisting of auction rate securities and an investment
fund), accounts receivable, accounts payable, interest rate hedges and long-term notes including the current portion. The carrying values of cash and cash equivalents, auction rate
securities, the investment fund, accounts receivable, accounts payable and interest rate hedges approximate their fair values. The carrying value of our long-term notes including the
current portion reflects original cost net of unamortized discounts and other and was $8.311 billion as of September 30, 2009. For additional information, see
Note 4Borrowings.

Fair
value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs when determining fair value and then we rank the estimated values based on the
reliability of the inputs used following the fair value hierarchy set forth by the FASB.

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QWEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the Three and Nine Months Ended September 30, 2009

(Unaudited)

Note 2: Fair Value of Financial Instruments (Continued)

The
table below presents the fair values for certain of our current and non-current investments, interest rate hedges and long-term notes including the current
portion, as well as the input levels used to determine these fair values as of September 30, 2009 and December 31, 2008:

Fair value as ofLevel

September 30, 2009

December 31, 2008(Dollars in millions)Assets:Auction rate securities


3

$
49

$
43Investment fund


3


2


9Fair value hedges


3


2


Total assets




$
53

$
52Liabilities:Long-term notes, including the current portion


1 & 2

$
8,145

$
6,189Cash flow hedges


3


5


8Total liabilities




$
8,150

$
6,197


The
three levels of the FASB fair value hierarchy are as follows:

Input Level

Description of InputLevel 1

Inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.Level 2

Inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques
for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.Level 3

Inputs are generally unobservable and typically reflect management's estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore
determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.


We
determined the fair value of our auction rate securities using a discounted cash flow model that takes into consideration the interest rate of the securities, the probability that we
will be able to sell the securities in an auction or that the securities will be redeemed early, the probability that a default will occur and its severity, a discount rate and other factors.

We
determined the fair value of our investment fund based on the asset values of the securities underlying the fund.

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QWEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the Three and Nine Months Ended September 30, 2009

(Unaudited)

Note 2: Fair Value of Financial Instruments (Continued)

We
determined the fair value of our interest rate hedges using projected future cash flows, discounted at the mid-market implied forward London Interbank Offered Rate
("LIBOR"). For additional information on our derivative financial instruments, see Note 5Derivative Financial Instruments.

We
determined the fair values of our long-term notes including the current portion based on quoted market prices where available or, if not available, based on discounted
future cash flows using current market interest rates.

The
table below presents a rollforward of the instruments valued using Level 3 inputs for the nine months ended September 30, 2009:

Instruments Valued Using Level 3 InputsAuction rate
securities

Investment
fund

Fair value
hedges

Cash flow
hedges(Dollars in millions)Balance at December 31, 2008

$
43

$
9

$


$
(8
)Transfers into (out of) Level 3











Additions


8


1





Dispositions





(10
)




Realized and unrealized gains (losses):Included in long-term debt








2


Included in other (expense) incomenet





2





Included in other comprehensive income


(2
)







3Balance at September 30, 2009

$
49

$
2

$
2

$
(5
)


Note 3: Investments

QSC manages the majority of our cash and investments. Our proportionate ownership of these investments, including illiquid investments, can change because we record our portion of the
entire portfolio of cash and investments managed by QSC. These changes are reflected on a net basis in cash flows from investing activities on our condensed consolidated statements of cash flows.

As
of September 30, 2009 and December 31, 2008, our investments included auction rate securities of $49 million and $43 million, respectively, which are
classified as non-current, available-for-sale investments and are included in other non-current assets at their estimated fair value on our condensed
consolidated balance sheets. Auction rate securities are generally long-term debt instruments that provide liquidity through a Dutch auction process that resets the applicable interest
rate at pre-determined calendar intervals, generally every 28 days. This mechanism generally allows existing investors to rollover their holdings and continue to own their
respective securities or liquidate their holdings by selling their securities at par value. Prior to August 2007, QSC invested in these securities

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QWEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the Three and Nine Months Ended September 30, 2009

(Unaudited)

Note 3: Investments (Continued)

for
short periods of time as part of its cash management program. However, the uncertainties in the credit markets have prevented QSC and other investors from liquidating holdings of these securities
in auctions since the third quarter of 2007. These securities:



We
recorded an immaterial amount of unrealized gains and losses, net of deferred income taxes, on these auction rate securities for the three and nine months ended September 30,
2009 and 2008. The cumulative unrealized losses, net of deferred income taxes, related to these securities were $9 million and $8 million as of September 30, 2009 and
December 31, 2008, respectively. These unrealized losses were recorded in accumulated other comprehensive income, which is included in accumulated deficit in our condensed consolidated balance
sheets. The cost basis of these securities was $63 million as of September 30, 2009 and $56 million as of December 31, 2008. We consider the decline in fair value to be a
temporary impairment because we believe it is more likely than not that we will ultimately recover the entire $63 million cost basis, in part because the securities are rated investment grade,
the securities are fully collateralized and the issuers continue to make required interest payments. At some point in the future, we may determine that the decline in fair value is other than
temporary if, among other factors, the issuers cease making required interest payments or if we believe it is more likely than not that we will be required to sell these securities before their values
recover. If the issuers cease making required interest payments, we would recognize the portion of the other-than-temporary decline in fair value that is due to credit loss in
other expense (income)net in our condensed consolidated statements of operations. If we believe that we will be required to sell these securities before their values recover, we would
recognize the entire other-than-temporary decline in fair value in other expense (income)net in our condensed consolidated statements of operations. Because we are
uncertain as to when the liquidity issues relating to these investments will improve, we continued to classify these securities as non-current as of September 30, 2009.

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QWEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the Three and Nine Months Ended September 30, 2009

(Unaudited)

Note 4: Borrowings

As of September 30, 2009 and December 31, 2008, our long-term borrowings, net of unamortized discounts and other, consisted of the following:

September 30,
2009

December 31,
2008(Dollars in millions)Current portion of long-term borrowings:Long-term notes

$
500

$
Long-term capital lease and other obligations


11


19Total current portion of long-term borrowings


511


19Long-term borrowings:Long-term notes


7,811


7,554Long-term capital lease and other obligations


34


15Total long-term borrowingsnet


7,845


7,569Total long-term borrowingsnet, including current portion

$
8,356

$
7,588


We
were in compliance with all provisions and covenants of our borrowings as of September 30, 2009.

New Issuance

In April 2009, we issued approximately $811 million of 8.375% Senior Notes due 2016. We are using the net proceeds of
$738 million for general corporate purposes, including repayment of indebtedness and funding and refinancing investments in our telecommunication assets.

Credit Facility

In April 2009, in connection with the addition of a new lender to QCII's revolving credit facility (the "Credit Facility"), the amount
available to QCII under the Credit Facility increased from $850 million to $910 million. In July 2009, in connection with a $35 million increase in commitment by an existing
lender to the Credit Facility, the amount available to QCII under the Credit Facility increased from $910 million to $945 million. The Credit Facility is currently undrawn and expires in
October 2010. Any amounts drawn on the Credit Facility by QCII are guaranteed by QSC and are secured by a senior lien on our stock.

Note 5: Derivative Financial Instruments

We sometimes use derivative financial instruments, specifically interest rate swap contracts, to manage interest rate risks. We execute these instruments with financial institutions we
deem creditworthy and monitor our exposure to these counterparties. An interest rate hedge is generally designated as either a cash flow hedge or a fair value hedge. In a cash flow hedge, a borrower
of

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QWEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the Three and Nine Months Ended September 30, 2009

(Unaudited)

Note 5: Derivative Financial Instruments (Continued)

variable
interest debt agrees with another party to make fixed payments equivalent to paying fixed rate interest on debt in exchange for receiving payments from the other party equivalent to receiving
variable rate interest on debt, the effect of which is to eliminate some portion of the variability in the borrower's overall cash flows. In a fair value hedge, a borrower of fixed rate debt agrees
with another party to make variable payments equivalent to paying variable rate interest on the debt in exchange for receiving fixed payments from the other party equivalent to receiving fixed rate
interest on debt, the effect of which is to eliminate some portion of the variability in the fair value of the borrower's overall debt portfolio due to changes in interest rates.

We
recognize all derivatives on our condensed consolidated balance sheets at fair value. We generally designate the derivative as either a cash flow hedge or a fair value hedge on the
date on which we enter into the derivative instrument.

For
a derivative that is designated as and meets all of the required criteria for a cash flow hedge, we record in accumulated other comprehensive income, which is included in accumulated
deficit in our condensed consolidated balance sheets, any changes in the fair value of the derivative. We then reclassify these amounts into earnings as the underlying hedged item affects earnings. In
addition, if there are any changes in the fair value of the derivative arising from ineffectiveness of the cash flow hedging relationship, we record those amounts immediately in other expense
(income)net in our condensed consolidated statements of operations. For a derivative that is designated as and meets all of the required criteria for a fair value hedge, we record in
other expense (income)net in our condensed consolidated statements of operations the changes in fair value of the derivative and the underlying hedged item. However, if the terms of this
type of derivative match the terms of the underlying hedged item such that we qualify to assume no ineffectiveness, then the fair value of the derivative is measured and the change in the fair value
for the period is assumed to equal the change in the fair value of the underlying hedged item for the period, with no impact in other expense (income)net.

We
assess quarterly whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item or whether our initial assumption of no
ineffectiveness is still valid. If we determine that a derivative is not highly effective as a hedge, a derivative has ceased to be a highly effective hedge or our assumption of no ineffectiveness is
no longer valid, then we discontinue hedge accounting with respect to that derivative prospectively. We record immediately in earnings changes in the fair value of derivatives that are not designated
as hedges.



During 2009 and 2008, we entered into the interest rate hedges described below as part of our short-term and
long-term debt strategies. One objective of our short-term debt strategy is to take advantage of favorable interest rates by swapping floating interest rate debt to fixed
interest rate debt using cash flow hedges. One objective of our long-term debt strategy is to achieve a more balanced ratio of fixed to floating interest rate debt by swapping a portion of
our fixed interest rate debt to floating interest rate debt through fair value hedges. This decreases our exposure to changes in the fair value of our fixed interest rate debt due to changes in
interest rates.

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QWEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the Three and Nine Months Ended September 30, 2009

(Unaudited)

Note 5: Derivative Financial Instruments (Continued)

We
evaluate counterparty credit risk before entering into any hedge transaction. Thereafter, we continue to closely monitor the financial market and the risk that our counterparties will
default on their obligations to us. We are prepared to unwind these hedge transactions if our counterparties' credit risk becomes unacceptable to us.

In
August 2009, we entered into interest rate hedges on $400 million of the outstanding $1.500 billion aggregate principal amount of our 8.875% Notes due in 2012. The
hedges have the economic effect of converting our fixed interest rate debt to a floating interest rate of one-month LIBOR plus 7.0575% until maturity. We designated the interest rates
swaps as fair value hedges. The terms of these hedges match the terms of the underlying debt such that we assume no ineffectiveness of the fair value hedging relationship and recognize the fair value
of the hedge with a corresponding adjustment to the carrying value of the debt.

In
March 2008, we entered into interest rate hedges on $500 million of the outstanding $750 million aggregate principal amount of our Floating Rate Notes due 2013. The
notes bear interest at a rate per year equal to LIBOR plus 3.25%. These hedges have the economic effect of converting our floating interest rate to fixed interest rates of approximately 6.0% for a
term of approximately two years. We designated these interest rate swaps as cash flow hedges. We did not recognize any gain or loss in earnings for hedge ineffectiveness for the nine months ended
September 30, 2009.

In
March 2008, we also entered into interest rate hedges on the outstanding $500 million aggregate principal amount of our 6.5% Notes due 2017. These hedges had the economic
effect of converting our fixed interest rate to a floating interest rate until these notes mature in 2017. We designated these interest rate swaps as fair value hedges. We terminated these hedges in
the fourth quarter of 2008.

We
valued the interest rate hedges using projected future cash flows, discounted at mid-market implied forward LIBOR. We determined this valuation excluding accrued interest.

The
balance sheet location and fair value of derivative instruments designated as hedging instruments as of September 30, 2009 are set forth below:

Asset Derivatives

Liability DerivativesBalance sheet location

Fair value

Balance sheet location

Fair value(Dollars in millions)Cash flow hedging contracts

Other current assets

$


Other current liabilities

$
5Fair value hedging contracts

Other non-current assets

$
2

Other non-current liabilities

$



12

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Table of Contents

QWEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the Three and Nine Months Ended September 30, 2009

(Unaudited)

Note 5: Derivative Financial Instruments (Continued)

The
fair value of derivative instruments designated as hedging instruments as of December 31, 2008 is described below:

Asset Derivatives

Liability DerivativesBalance sheet location

Fair value

Balance sheet location

Fair value(Dollars in millions)Cash flow hedging contracts

Other non-current assets

$


Other non-current liabilities

$
8Fair value hedging contracts

Other non-current assets

$


Other non-current liabilities

$



For
additional information on the fair value of our financial instruments, see Note 2Fair Value of Financial Instruments.

The
following table presents the effect of derivative instruments on our condensed consolidated statements of operations for the three and nine months ended September 30, 2009.

Derivatives in Cash Flow Hedging Relationships

Three Months Ended
September 30, 2009

Nine Months Ended
September 30, 2009(Dollars in millions)Interest rate contracts:Amount of gain recognized in other comprehensive income on derivative (effective portion), net of deferred taxes of $1 for both periods

$  1

$  2Location of amount reclassified from accumulated other comprehensive income into income (effective portion)

Interest expensenet

Interest expensenetAmount of loss reclassified from accumulated other comprehensive income into interest expense (effective portion), net of deferred taxes of $1 and $2,
respectively

$  1

$  3Location of amount recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)

Not Applicable

Not ApplicableAmount recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)

$

$


Note 6: Severance

For the three months ended September 30, 2009 and 2008, we recorded severance expenses of $11 million and $61 million, respectively. For the nine months ended
September 30, 2009 and 2008, we

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QWEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the Three and Nine Months Ended September 30, 2009

(Unaudited)

Note 6: Severance (Continued)

recorded
severance expenses of $54 million and $110 million, respectively. A portion of our severance expenses is included in each of cost of sales, selling expenses and general,
administrative and other operating expenses in our condensed consolidated statements of operations. As of September 30, 2009 and December 31, 2008, our severance liability was
$45 million and $54 million, respectively. We expect to pay substantially all of our accrued severance expenses during the next 12 months.

Note 7: Contribution to QCII Segments

Our operations are integrated into and are part of the segments of QCII. Our business contributes to all three of QCII's segments: business markets, mass markets and wholesale markets.
QCII's Chief Operating Decision Maker ("CODM"), who is also our CODM, reviews our financial information only
in connection with our quarterly and annual reports that we file with the Securities and Exchange Commission. Consequently, we do not provide our discrete financial information to the CODM on a
regular basis.

The
following table summarizes revenue among categories of products and services for the three and nine months ended September 30, 2009 and 2008:

Three Months
Ended
September 30,

Nine Months
Ended
September 30,2009

2008

2009

2008(Dollars in millions)Operating revenue by category:Strategic services*

$
722

$
704

$
2,163

$
2,077Legacy services*


1,226


1,387


3,806


4,252Affiliate and other services


454


465


1,403


1,458Total operating revenue

$
2,402

$
2,556

$
7,372

$
7,787


*Our
strategic services are primarily private line, broadband, video and Verizon Wireless services. Our legacy services are primarily local, access, ISDN,
traditional WAN and other more traditional telecommunications services.


Note 8: Commitments and Contingencies

QCII is involved in several legal proceedings to which we are not a party that, if resolved against QCII, could have a material adverse effect on our business and financial condition. We
have included below a discussion of these matters. Only those matters to which we are a party represent contingencies for which we have recorded, or could reasonably anticipate recording, reserves if
appropriate to do so.

Throughout
this note, when we refer to a class action as "putative" it is because a class has been alleged, but not certified in that matter. Until and unless a class has been certified
by the court, it has not been established that the named plaintiffs represent the class of plaintiffs they purport to represent. Settlement classes have been certified in connection with the
settlements of certain of the putative class

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QWEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the Three and Nine Months Ended September 30, 2009

(Unaudited)

Note 8: Commitments and Contingencies (Continued)

actions
described below where the courts held that the named plaintiffs represented the settlement class they purported to represent.

To
the extent appropriate, we have provided reserves for each of the matters described below.

The
terms and conditions of applicable bylaws, certificates or articles of incorporation, agreements or applicable law may obligate QCII to indemnify its former directors, officers or
employees with respect to certain of the matters described below, and QCII has been advancing legal fees and costs to certain former directors, officers or employees in connection with certain matters
described below.

KPNQwest Litigation/Investigation

On January 27, 2009, the trustees in the Dutch bankruptcy proceeding for KPNQwest, N.V. (of which QCII was a major
shareholder) filed a lawsuit in the federal district court for the District of Colorado alleging violations of the Racketeer Influenced and Corrupt Organizations Act and breach of duty and
mismanagement under Dutch law. QCII is a defendant in this lawsuit along with Joseph P. Nacchio, QCII's former chief executive officer, Robert S. Woodruff, QCII's former chief financial officer, and
John McMaster, the former president and chief executive officer of KPNQwest. Plaintiffs allege, among other things, that defendants' actions were a cause of the bankruptcy of KPNQwest, and they seek
damages for the bankruptcy deficit of KPNQwest of approximately $2.4 billion. Plaintiffs also seek treble and punitive damages as well as an award of plaintiffs' attorneys' fees and costs. A
lawsuit asserting the same claims that was previously filed in the federal district court for the District of New Jersey was dismissed without prejudice, and that dismissal was affirmed on appeal.

On
September 13, 2006, Cargill Financial Markets, Plc and Citibank, N.A. filed a lawsuit in the District Court of Amsterdam, located in the Netherlands, against QCII, KPN
Telecom B.V., Koninklijke KPN N.V. ("KPN"), Mr. Nacchio, Mr. McMaster, and other former employees or supervisory board members of QCII, KPNQwest or KPN. The lawsuit alleges
that defendants misrepresented KPNQwest's financial and business condition in connection with the origination of a credit facility and wrongfully allowed KPNQwest to borrow funds under that facility.
Plaintiffs allege damages of approximately
€219 million (or approximately $320 million based on the exchange rate on September 30, 2009).

On
October 31, 2002, Richard and Marcia Grand, co-trustees of the R.M. Grand Revocable Living Trust, dated January 25, 1991, filed a lawsuit in Arizona Superior
Court. As amended and following the appeal of a partial summary judgment against plaintiffs which was affirmed in part and reversed in part, plaintiffs allege, among other things, that defendants
violated state securities laws in connection with plaintiffs' investments in KPNQwest securities. QCII is a defendant in this lawsuit along with Qwest B.V. (one of QCII's subsidiaries),
Mr. Nacchio and Mr. McMaster. The Arizona Superior Court dismissed most of plaintiffs' claims, and plaintiffs voluntarily dismissed the remainder of their claims. Plaintiffs appealed the
court's decision to the Arizona Court of Appeals, which affirmed the Arizona Superior Court's decision. Plaintiffs claim to have lost approximately $9 million in their investments in KPNQwest,
and are also seeking interest and attorneys' fees.

On
August 23, 2005, the Dutch Shareholders Association (Vereniging van Effectenbezitters, or VEB) filed a petition for inquiry with the Enterprise Chamber of the Amsterdam Court
of Appeals,

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QWEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the Three and Nine Months Ended September 30, 2009

(Unaudited)

Note 8: Commitments and Contingencies (Continued)

located
in the Netherlands, with regard to KPNQwest. VEB sought an inquiry into the policies and course of business at KPNQwest that are alleged to have caused the bankruptcy of KPNQwest in May 2002,
and an investigation into alleged mismanagement of KPNQwest by its executive management, supervisory board members, joint venture entities (QCII and KPN), and KPNQwest's outside auditors and
accountants. On December 28, 2006, the Enterprise Chamber ordered an inquiry into the management and conduct of affairs of KPNQwest for the period January 1 through May 23, 2002.
On December 5, 2008, the Enterprise Chamber appointed investigators to conduct the inquiry.

QCII
will continue to defend against the pending KPNQwest litigation matters vigorously.

Other Matters

Several putative class actions relating to the installation of fiber optic cable in certain rights-of-way were
filed against QCII on behalf of landowners on various dates and in various courts in California, Colorado, Georgia, Illinois, Indiana, Kansas, Massachusetts, Mississippi, Missouri, Oregon, South
Carolina, Tennessee and Texas. For the most part, the complaints challenge QCII's right to install its fiber optic cable in railroad rights-of-way. Complaints in Colorado,
Illinois and Texas, also challenge QCII's right to install fiber optic cable in utility and pipeline rights-of-way. The complaints allege that the railroads, utilities and
pipeline companies own the right-of-way as an easement that did not
include the right to permit QCII to install its fiber optic cable in the right-of-way without the plaintiffs' consent. Most actions (California, Colorado, Georgia, Kansas,
Mississippi, Missouri, Oregon, South Carolina, Tennessee and Texas) purport to be brought on behalf of state-wide classes in the named plaintiffs' respective states. The Massachusetts
action purports to be on behalf of state-wide classes in all states in which QCII has fiber optic cable in railroad rights-of-way (other than Louisiana and
Tennessee), and also on behalf of two classes of landowners whose properties adjoin railroad rights-of-way originally derived from federal land grants. Several actions purport
to be brought on behalf of multi-state classes. The Illinois state court action purports to be on behalf of landowners in Illinois, Iowa, Kentucky, Michigan, Minnesota, Nebraska, Ohio and Wisconsin.
The Illinois federal court action purports to be on behalf of landowners in Arkansas, California, Florida, Illinois, Indiana, Missouri, Nevada, New Mexico, Montana and Oregon. The Indiana action
purports to be on behalf of a national class of landowners adjacent to railroad rights-of-way over which QCII's network passes. The complaints seek damages on theories of
trespass and unjust enrichment, as well as punitive damages. On July 18, 2008, a federal district court in Massachusetts entered an order preliminarily approving a settlement of all of the
actions described above, except the action pending in Tennessee. On September 10, 2009, the court denied final approval of the settlement on grounds that it lacked subject matter jurisdiction.
A motion for reconsideration is pending before the court.

Qwest
Communications Company, LLC ("QCC") is a defendant in litigation filed by several billing agents for the owners of payphones seeking compensation for coinless calls made
from payphones. The matter is pending in the United States District Court for the District of Columbia. Generally, the payphone owners claim that QCC underpaid the amount of compensation due to them
under Federal Communications Commission regulations for coinless calls placed from their phones onto QCC's network. The claim seeks compensation for calls, as well as interest and attorneys' fees. QCC
will vigorously defend against this action.

16

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QWEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the Three and Nine Months Ended September 30, 2009

(Unaudited)

Note 8: Commitments and Contingencies (Continued)

A
putative class action filed on behalf of certain of QCII's retirees was brought against QCII, the Qwest Group Life Insurance Plan and other related entities in federal district court
in Colorado in connection with QCII's decision to reduce the life insurance benefit for these retirees to a $10,000 benefit. The action was filed on March 30, 2007. The plaintiffs allege, among
other things, that QCII and other defendants were obligated to continue their life insurance benefit at the levels in place before QCII decided to reduce them. Plaintiffs seek restoration of the life
insurance benefit to previous levels and certain equitable relief. The district court ruled in QCII's favor on the central issue of whether QCII properly reserved our right to reduce the life
insurance benefit under applicable law and plan documents. The plaintiffs subsequently amended their complaint to assert additional claims. The court has since dismissed or granted summary judgment to
QCII on all of the plaintiffs' claims.

Note 9: Dividends

We did not declare any cash dividends during the three months ended September 30, 2009, but did declare a total of $1.200 billion in cash dividends during the nine months
ended September 30, 2009. We paid cash dividends to QSC of $300 million and $1.500 billion during the three and nine months ended September 30, 2009, respectively.

17

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Table of Contents

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless the context requires otherwise, references in this report to "QC" refer to Qwest Corporation, references
to "Qwest," "we," "us," the "Company" and "our" refer to Qwest Corporation and its consolidated subsidiaries, references to "QSC" refer to our direct parent company, Qwest Services Corporation, and
its consolidated subsidiaries, and references to "QCII" refer to our ultimate parent company, Qwest Communications International Inc., and its consolidated subsidiaries.

Certain
statements in this report constitute forward-looking statements. See "Special Note Regarding Forward-Looking Statements" at the end of this Item 2 for additional factors
relating to these statements, and see "Risk Factors" in Item 1A of Part II of this report for a discussion of certain risk factors applicable to our business, financial condition and
results of operations.

Business Overview and Presentation

We provide data, Internet, video and voice services. We generate revenue from services provided in the 14-state region of
Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming. We refer to this region as our local service area.

Our
operations are included in the consolidated operations of our ultimate parent, QCII, and generally account for the majority of QCII's consolidated revenue. In addition to our
operations, QCII maintains a national telecommunications network. Through its fiber optic network, QCII provides the following products and services that we do not provide:



For
certain products and services we provide, and for a variety of internal communications functions, we use parts of QCII's telecommunications network to transport data and voice
traffic. Through its network, QCII also provides nationally and globally some data and Internet access services that are similar to services we provide within our local service area. These services
include private line and our traditional wide area network, or WAN, services, which consist of asynchronous transfer mode and frame relay.

Our
analysis presented below is organized to provide the information we believe will be useful for understanding the relevant trends going forward. However, this discussion should be
read in conjunction with our condensed consolidated financial statements and the notes thereto in Item 1 of Part I of this report.

We
categorize our revenue among three categories of products and services, which are described below:



18

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We
have reclassified certain prior year revenue and expense amounts presented in our Quarterly Report on Form 10-Q for the three and nine months ended
September 30, 2008 to
conform to the current period presentation and to the presentation of our 2008 results of operations included in our Annual Report on Form 10-K for the year ended
December 31, 2008.

Business Trends

Our financial results were impacted by several significant trends, which are described below. We expect that these trends will continue
to affect our future results of operations, cash flows or financial position.



19

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While
these trends are important to understanding and evaluating our financial results, the other transactions, events and trends discussed in "Risk Factors" in Item 1A of
Part II of this report may also materially impact our business operations and financial results.

Results of Operations

The following table summarizes our results of operations for the three and nine months ended September 30, 2009 and 2008 and the
number of employees as of September 30, 2009 and 2008:

Three Months Ended September 30,

Nine Months Ended September 30,2009

2008

Increase/
(Decrease)

%
Change

2009

2008

Increase/
(Decrease)

%
Change(Dollars in millions)Operating revenue

$
2,402

$
2,556

$
(154
)

(6
)%
$
7,372

$
7,787

$
(415
)

(5
)%Operating expenses


1,782


1,936


(154
)

(8
)%

5,384


5,642


(258
)

(5
)%Operating income


620


620






%

1,988


2,145


(157
)

(7
)%Other expense (income)net


147


138


9


7
%

475


437


38


9
%Income before income taxes


473


482


(9
)

(2
)%

1,513


1,708


(195
)

(11
)%Income tax expense


180


183


(3
)

(2
)%

575


649


(74
)

(11
)%Net income

$
293

$
299

$
(6
)

(2
)%
$
938

$
1,059

$
(121
)

(11
)%Employees (as of September 30)














28,927


31,765


(2,838
)

(9
)%


Operating Revenue

Operating revenue decreased primarily due to lower legacy services revenue as a result of continued access line losses and declining
revenue from our traditional WAN services. Operating

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revenue
also decreased due to a decrease in affiliate and other services driven by reduced support associated with an affiliate's winding down of its wireless business. These decreases in overall
operating revenue were partially offset by increased revenue in our strategic services as a result of increased broadband and video subscribers.

The
following table summarizes our operating revenue for the three and nine months ended September 30, 2009 and 2008:

Three Months Ended September 30,

Nine Months Ended September 30,2009

2008

Increase/
(Decrease)

%
Change

2009

2008

Increase/
(Decrease)

%
Change(Dollars in millions)Operating revenue:Strategic services

$
722

$
704

$
18


3
%
$
2,163

$
2,077

$
86


4
%Legacy services


1,226


1,387


(161
)

(12
)%

3,806


4,252


(446
)

(10
)%Affiliate and other services


454


465


(11
)

(2
)%

1,403


1,458


(55
)

(4
)%Total operating revenue

$
2,402

$
2,556

$
(154
)

(6
)%
$
7,372

$
7,787

$
(415
)

(5
)%


The
following table summarizes our total broadband and video subscribers and access lines by customer channel as of September 30, 2009 and 2008:

September 30,2009

2008

Increase/
(Decrease)

%
Change(in thousands)Total broadband subscribers


2,931


2,707


224


8
%Total video subscribers


849


709


140


20
%Access lines:Business markets


2,468


2,680


(212
)

(8
)%Mass markets


7,045


8,021


(976
)

(12
)%Wholesale markets


1,048


1,168


(120
)

(10
)%Total access lines


10,561


11,869


(1,308
)

(11
)%


In
addition to the specific items discussed below, we believe declining general economic conditions negatively impacted our revenue.



Strategic services revenue increased primarily due to an increase in broadband subscribers and, to a lesser extent, an increase in
video subscribers as of September 30, 2009 compared to September 30, 2008. The increase in broadband services revenue resulting from an increase in subscribers was partially offset by
rate discounts. Strategic services revenue also increased due to selling Verizon Wireless services.



Legacy services revenue decreased primarily due to lower local services revenue and lower access services revenue, which were both
driven by access line losses resulting from the competitive pressures described in "Business Trends" above. Legacy services revenue also decreased due to a decrease in our traditional WAN services
revenue, driven by customer migration to more advanced technology services. Local services revenue was impacted by the competitive pressures described in "Business Trends" above

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as
customers disconnected primary and additional lines resulting in declining revenue, and a declining demand for unbundled network elements.



Affiliate services revenue decreased primarily due to reduced support associated with an affiliate's winding down of its wireless
business as we transition to selling Verizon Wireless services. In addition, we had reduced support associated with an affiliate's winding down of its video and data products and related services.
These decreases in affiliate services were partially offset by an increase in services we provided to support an affiliate's data and Internet product offerings.

We
estimate that the profit from affiliate services was approximately $70 million and $90 million, before income taxes, for the three months ended September 30, 2009
and 2008, respectively, and $230 million and $290 million, before income taxes, for the nine months ended September 30, 2009 and 2008, respectively.

Operating Expenses

The following table provides further detail regarding our total operating expenses for the three and nine months ended
September 30, 2009 and 2008:

Three Months Ended September 30,

Nine Months Ended September 30,2009

2008

Increase/
(Decrease)

%
Change

2009

2008

Increase/
(Decrease)

%
Change(Dollars in millions)Cost of sales (exclusive of depreciation and amortization):Employee-related costs

$
266

$
329

$
(63
)

(19
)%
$
779

$
931

$
(152
)

(16
)%Other


116


134


(18
)

(13
)%

341


374


(33
)

(9
)%Total cost of sales


382


463


(81
)

(17
)%

1,120


1,305


(185
)

(14
)%Selling:Employee-related costs


226


268


(42
)

(16
)%

745


802


(57
)

(7
)%Marketing, advertising and external commissions


107


122


(15
)

(12
)%

326


357


(31
)

(9
)%Other


61


81


(20
)

(25
)%

198


226


(28
)

(12
)%Total selling


394


471


(77
)

(16
)%

1,269


1,385


(116
)

(8
)%General, administrative and other operating:Employee-related costs


160


115


45


39
%

485


351


134


38
%Taxes and fees


103


101


2


2
%

300


277


23


8
%Real estate and occupancy costs


70


79


(9
)

(11
)%

206


231


(25
)

(11
)%Other


131


124


7


6
%

393


392


1



%Total general, administrative and other operating


464


419


45


11
%

1,384


1,251


133


11
%Affiliates


47


60


(13
)

(22
)%

129


150


(21
)

(14
)%Depreciation and amortization


495


523


(28
)

(5
)%

1,482


1,551


(69
)

(4
)%Total operating expenses

$
1,782

$
1,936

$
(154
)

(8
)%
$
5,384

$
5,642

$
(258
)

(5
)%


22

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Employee-related costs decreased primarily due to lower salaries, wages, benefits and severance related to employee reductions in our
network operations, due to the timing of when employee reductions occurred.

Other
cost of sales decreased primarily due to lower professional fees and network expenses due to our continued focus on managing costs associated with our network.



Employee-related costs decreased due to lower salaries, wages and benefits related to employee reductions in our sales organization,
along with decreased commissions
driven by lower sales headcount and lower attainment. These decreases were partially offset by increases in severance expenses.

Marketing,
advertising and external commissions decreased primarily due to reduced spending associated with media, direct mail and sponsorships.

Other
expenses decreased primarily due to lower professional fees as a result of a favorable rate change in credit processing fees and other cost savings initiatives.



Employee-related costs increased primarily due to increased pension and post-retirement benefits expenses. These benefits
expenses are based on several assumptions, including among other things discount rates and expected rates of return on plan assets that are set at the beginning of each year. In 2008 we recognized
combined net periodic benefits income, as pension income exceeded post-retirement benefit expense for the year. However, during 2008 QCII experienced significant losses on its pension and
post-retirement benefit plan assets, which have significantly impacted the pension and post-retirement benefits expenses we are recording in 2009. This increase in pension and
post-retirement benefits expenses was partially offset by decreased severance expense and lower expenses due to workforce reductions as we continue to manage our workforce to our workload.

We
expect to recognize approximately $205 million in combined net periodic benefits expense for 2009 as compared to combined net periodic benefits income of $13 million for
2008. This expected total combined net periodic benefits expense for 2009 is $33 million more than the amount we disclosed in our Annual Report on Form 10-K for the year
ended December 31, 2008, due primarily to adjustments to our estimates of the fair value of certain investments held by our plan trusts that were estimated based on previously available
preliminary information at December 31, 2008. Changes to QCII's assumptions at the end of 2009 may increase or decrease our expected combined net periodic benefits expenses beyond 2009.

Taxes
and fees increased as a result of a $40 million favorable property tax settlement and other favorable adjustments in the second quarter of 2008. These increases were
partially offset by lower USF charges resulting from continued access line erosion and a decrease in property taxes.

Real
estate and occupancy costs decreased primarily due to lower rent expense and fuel costs.



Affiliate expenses include charges for our use of long-distance services, wholesale Internet access and insurance,
occupancy charges and certain retiree benefits.

Affiliate
expenses decreased primarily due to reduced insurance costs driven by decreases in our workforce, and reduced support charges from our wireless affiliate partially offset by
increases in wholesale Internet access in support of our broadband business.

23

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The following table provides detail regarding depreciation and amortization expense:

Three Months Ended September 30,

Nine Months Ended September 30,2009

2008

Increase/
(Decrease)

%
Change

2009

2008

Increase/
(Decrease)

%
Change(Dollars in millions)Depreciation and amortization:Depreciation

$
438

$
465

$
(27
)

(6
)%
$
1,315

$
1,392

$
(77
)

(6
)%Amortization


57


58


(1
)

(2
)%

167


159


8


5
%Total depreciation and amortization

$
495

$
523

$
(28
)

(5
)%
$
1,482

$
1,551

$
(69
)

(4
)%


Depreciation
expense decreased due to lower capital expenditures and the changing mix of our investment in property, plant and equipment since 2002. If we do not significantly shorten
our estimates of the useful lives of our assets, we expect that our depreciation expense will continue to decrease for the foreseeable future. Amortization expense was higher for the nine months ended
September 30, 2009 due to an increase in internally developed capitalized software used to support our operations.

Effective
January 1, 2009, we changed our estimates of the average remaining economic lives of certain copper cable and telecommunications equipment assets. These changes resulted
in additional depreciation expense of approximately $9 million and $27 million for the three and nine months ended September 30, 2009, respectively, compared to the three and nine
months ended September 30, 2008 and will result in additional depreciation expense of approximately $36 million for the year ending December 31, 2009 compared to the year ended
December 31, 2008. The additional depreciation for these changes, net of deferred taxes, reduced net income by approximately $6 million and $17 million for the three and nine
months ended September 30, 2009, respectively, and will reduce net income by approximately $22 million for the year ending December 31, 2009.

Other Consolidated Results

The following table provides detail regarding other expense (income)net and income tax expense:

Three Months Ended
September 30,

Nine Months Ended
September 30,2009

2008

Increase/
(Decrease)

%
Change

2009

2008

Increase/
(Decrease)

%
Change(Dollars in millions)Other expense (income)net:Interest expense on long-term borrowingsnet

$
163

$
145

$
18


12
%
$
471

$
444

$
27


6
%Othernet


(16
)

(7
)

(9
)

(129
)%

4


(7
)

11


nmTotal other expense (income)net

$
147

$
138

$
9


7
%
$
475

$
437

$
38


9
%Income tax expense

$
180

$
183

$
(3
)

(2
)%
$
575

$
649

$
(74
)

(11
)%


nmPercentages
greater than 200% and comparisons between positive and negative values or to/from zero values are considered not meaningful.


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Interest expense on long-term borrowingsnet increased due to the issuance of $811 million of new debt
in the second quarter of 2009, partially offset by decreasing interest rates on floating rate debt.

Othernet
includes, among other things, interest income, income tax penalties, other interest expense (such as interest on income taxes), gains or losses related to certain
fair value interest rate hedges and underlying debt and gains or losses on investments. The change in othernet was primarily due to an interest benefit related to an income tax settlement
in the third quarter of 2008 and lower interest income resulting from lower interest rates in 2009. We also incurred higher tax related interest during the second quarter of 2009, which we reversed in
the third quarter of 2009.



The decrease in income tax expense was due to the decrease in income before income taxes. The effective income tax rate is the
provision for income taxes as a percentage of income before income taxes. Our effective income tax rate was 38% for the three months ended September 30, 2009 and 2008 and 38% for the nine
months ended September 30, 2009 and 2008.

Liquidity and Capital Resources

We are a wholly owned subsidiary of QSC, which is wholly owned by QCII. As such, factors relating to, or affecting, QCII's liquidity
and capital resources could have material impacts on us, including impacts on our credit ratings and on our access to capital markets and changes in the financial market's perception of us. QCII and
its consolidated subsidiaries had total
borrowings of $14.135 billion and $13.555 billion at September 30, 2009 and December 31, 2008, respectively.

QCII
has cash management arrangements between certain of its subsidiaries that include lines of credit, affiliate obligations, capital contributions and dividends. As part of these cash
management arrangements, affiliates provide lines of credit to certain other affiliates. Amounts outstanding under these lines of credit and intercompany obligations vary from time to time and are
classified as short-term borrowings.

Near-Term View

At September 30, 2009, we held cash and cash equivalents totaling $1.070 billion, and QCII had $945 million
available under its currently undrawn revolving credit facility (referred to as the Credit Facility), which expires in October 2010. We expect that our cash on hand and expected net cash generated by
operating activities will exceed our cash needs over the next 12 months.

During
the 12 months ended September 30, 2009, our net cash generated by operating activities totaled $3.195 billion. Although our revenue has been decreasing, we
believe that we will be able to continue to control costs to keep them aligned with revenue and therefore expect that we will continue to generate cash from operating activities sufficient to fund our
financing and investing activities. For the coming 12 months, our expected financing and investing cash needs include capital expenditures (anticipated to be approximately $1.3 billion
or less in 2009), $500 million of debt maturing in June 2010 and dividends to QSC.

We
have significant discretion in how we use our cash to pay for capital expenditures and for other costs of our business, as only a moderate portion of our capital expenditures is
dedicated to preservation activities or government mandates. We evaluate capital expenditure projects based on expected strategic impacts (such as forecasted revenue growth or productivity, expense
and service impacts) and our expected return on investment. If we are not successful in maintaining or increasing our net cash generated by operating activities in the near term, we may use this
discretion to decrease

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our
capital expenditures, which may impact future years' operating results and cash flows. For example, we lease certain office facilities and equipment under various capital lease arrangements when
the leasing arrangements are more favorable to us than purchasing the assets. Due to favorable economics we have increasingly turned to financing our assets through capital leases, which reduced our
capital expenditures by approximately $30 million for the nine months ended September 30, 2009.

At
September 30, 2009, our current liabilities exceeded our current assets by $229 million. Our working capital deficit improved as compared to our working capital deficit
at December 31, 2008 due to earnings before depreciation, amortization and proceeds from our long-term debt issuance, partially offset by capital expenditures, the reclassification
of non-current debt to current and dividends declared to QSC.

We
continue to look for opportunities to improve our capital structure by reducing debt and interest expense. We expect that at any time we deem conditions favorable we will also attempt
to improve our liquidity position by accessing debt markets in a manner designed to create positive economic value. Although we were able to issue new debt financing in April 2009, the unstable credit
markets and the decline in the economy may impair our ability to refinance maturing debt at terms that are as favorable as those from which we previously benefited or at terms that are acceptable to
us.

Long-Term View

We have historically operated with a working capital deficit due to our practice of declaring and paying regular cash dividends to QSC,
and it is likely that we will operate with a working capital deficit in the future. As discussed above, we continue to generate substantial cash from operations. We believe that these cash flows,
combined with continued access to the capital markets to refinance debt as it comes due, will provide sufficient liquidity to continue our planned investing and financing activities.



We have a significant amount of debt maturing in the next several years, including $500 million maturing in 2010,
$825 million maturing in 2011 and $1.500 billion maturing in 2012. We believe that we will continue to have access to capital markets to refinance our debt as necessary. Although we were
able to issue new debt financing in April 2009, the unstable credit markets and the decline in the economy may impair our ability to refinance maturing debt at terms that are as favorable as those
from which we previously benefited or at terms that are acceptable to us.

The
Credit Facility makes available to QCII $945 million of additional credit subject to certain restrictions as described below, is currently undrawn and expires in October 2010.
The Credit Facility has 13 lenders with commitments ranging from $15 million to $160 million. This facility has a cross payment default provision, and this facility and certain other
debt issues of QCII and its other subsidiaries also have cross acceleration provisions. When present, these provisions could have a wider
impact on liquidity than might otherwise arise from a default or acceleration of a single debt instrument. These provisions generally provide that a cross default under these debt instruments could
occur if:



Upon
a cross default, the creditors of a material amount of QCII's debt may elect to declare that a default has occurred under their debt instruments and to accelerate the principal
amounts due to

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those
creditors. Cross acceleration provisions are similar to cross default provisions, but permit a default in a second debt instrument to be declared only if in addition to a default occurring under
the first debt instrument, the indebtedness due under the first debt instrument is actually accelerated. As a wholly owned subsidiary of QCII, in the event of such a cross-default or
cross-acceleration, our business operations and financial condition could be affected, potentially impacting our credit ratings and access to the capital markets.

The
Credit Facility also contains various limitations, including a restriction on using any proceeds from the facility to pay settlements or judgments relating to the securities-related
actions discussed in Note 8Commitments and Contingencies to our condensed consolidated financial statements in Item 1 of Part I of this report. In addition, to the
extent that QCII's earnings before interest, taxes, depreciation and amortization, or EBITDA (as defined in QCII's debt covenants), is reduced by cash settlements or judgments relating to the matters
discussed in that note, QCII's debt to consolidated EBITDA ratios under certain debt agreements will be adversely affected. This could reduce QCII's liquidity and flexibility due to potential
restrictions on drawing on its Credit Facility and potential restrictions on incurring additional debt under certain provisions of its debt agreements. As a wholly owned subsidiary of QCII, our
business operations and financial condition could be similarly affected, potentially impacting our credit ratings and access to capital markets.

We
may also need to obtain additional financing or investigate other methods to generate cash (such as further cost reductions or the sale of assets) if:





Benefits paid by QCII's pension plan are paid through a trust. This pension plan is measured annually at December 31. The
accounting unfunded status of the pension plan was $745 million at December 31, 2008. Cash funding requirements can be significantly impacted by earnings on investments, the applicable
discount rate at the end of each year, changes in the plan and funding laws and regulations. As a result, it is difficult to determine future funding requirements with a high level of precision. Based
on the current funding laws and regulations, QCII will not be required to make any contributions to its plan in 2010. However, it is likely that a contribution will be required in 2011. The amount of
any required contributions in 2011 and beyond will depend on earnings on investments, discount rates, changes in the plan and funding laws and regulations. Based on returns through and market
conditions at September 30, 2009, on current funding laws and regulations and
other factors, QCII's projected required contribution in 2011 may be $0 to $300 million. QCII also anticipates that the accounting unfunded status may rise when it is measured at
December 31, 2009. Based on returns through and market conditions at September 30, 2009 and other factors, QCII currently estimates the accounting unfunded status may rise by an
additional amount between $400 million and $800 million. However, changes in market conditions may increase or decrease these ranges by material amounts.

Our
employees participate in the QCII pension plan. The amounts contributed by us through QCII are not segregated or restricted to pay amounts due to our employees and may be used to
provide

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benefits
to other employees of QCII's affiliates. Historically, QCII has only required us to pay our portion of their pension contribution.



Certain of QCII's post-retirement health care and life insurance benefits plans are unfunded. However, a trust has been
established to help cover the health care costs of retirees who are former occupational employees. As of December 31, 2008, the fair value of the trust assets was $915 million and QCII
believed that the trust assets would be adequate to provide continuing reimbursements for its occupational post-retirement health care costs for approximately five years. Thereafter,
covered benefits for its eligible retirees who are former occupational employees will be paid directly by QCII. This five year period could be substantially shorter depending on returns on plan
assets, projected benefit payments and future changes in benefit obligations; for instance, if QCII assumes that the rate of return on trust assets is zero and benefit reimbursements remain at
projected levels, the trust would still be exhausted in approximately five years, but if QCII assumes that the rate of return on trust assets were zero and benefit reimbursements increase by 20%, the
trust assets could be exhausted in three years.

Our
employees participate in the QCII post-retirement plan. The amounts contributed by us through QCII are not segregated or restricted to pay amounts due to our employees
and may be used to provide benefits to other employees of QCII's affiliates. Historically, QCII has only required us to pay our portion of their post-retirement contribution.

Historical View

The following table summarizes cash flow activities for the nine months ended September 30, 2009 and 2008:

Nine Months Ended September 30,2009

2008

Increase/
(Decrease)

%
Change(Dollars in millions)Cash flows:Provided by operating activities

$
2,443

$
2,727

$
(284
)

(10
)%Used for investing activities


828


1,133


(305
)

(27
)%Used for financing activities


778


1,597


(819
)

(51
)%




Cash provided by operating activities decreased primarily due to increased tax-related payments to QSC as a result of our
utilization in 2008 of deferred tax assets acquired as a result of QCII merging wholly owned subsidiaries into us. In addition, operating cash flows also decreased due to lower affiliate revenue and
increased payments on payroll due to timing of pay periods.



Cash used for investing activities decreased primarily due to lower capital expenditures resulting from the timing of our capital
expenditures, increased equipment capital leasing, a conservative approach to new capital investment and slower growth in capacity requirements in the network.



Cash used for financing activities decreased primarily due to our issuance of $811 million of Senior Notes in April 2009, which
resulted in net proceeds of $738 million.

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We
paid cash dividends of $1.500 billion and $1.800 billion for the nine months ended September 30, 2009 and 2008, respectively. We may declare and pay dividends to
QSC in excess of our earnings to the extent permitted by applicable law. Our debt covenants do not limit the amount of dividends we can pay to QSC.

We
were in compliance with all provisions and covenants of our borrowings as of September 30, 2009.

Letters of Credit

We maintain letter of credit arrangements with various financial institutions for up to $86 million. As of September 30,
2009, we had outstanding letters of credit of approximately $55 million.

Risk Management

We are exposed to market risks arising from changes in interest rates. The objective of our interest rate risk management program is to
manage the level and volatility of our interest expense. We currently use derivative financial instruments to manage our interest rate risk exposure and we may continue to employ them in the future.



As of September 30, 2009, we had $500 million of long-term notes maturing in the subsequent 12 months.
We would be exposed to changes in interest rates at any time that we choose to refinance any of this debt. A hypothetical increase of 100 basis points in the interest rate on a refinancing of the
entire current portion of long-term notes would decrease quarterly pre-tax earnings by approximately $2 million.



One objective of our short-term debt strategy is to take advantage of favorable interest rates by swapping floating
interest rate debt to fixed interest rate debt using cash flow hedges. One objective of our long-term debt strategy is to achieve a more balanced ratio of fixed to floating interest rate
debt by swapping a portion of our fixed interest rate debt to floating interest rate debt through fair value hedges. As of September 30, 2009, we had $750 million of floating interest
rate debt outstanding, of which $250 million was exposed to changes in interest rates, and $400 million of fixed rate debt which we converted to floating rate debt through interest rate
swaps. The exposure for these instruments is linked to the London Interbank Offered
Rate, or LIBOR. A hypothetical increase of 100 basis points in LIBOR relative to the net $650 million of floating interest rate debt and swaps that is exposed to changes in interest rates would
decrease quarterly pre-tax earnings by less than $2 million.



As of September 30, 2009, our cash and investments managed by QSC included $1.069 billion invested in highly liquid
cash-equivalent instruments, $49 million invested in auction rate securities and $2 million in an investment fund. As interest rates change, so will the interest income
derived from these instruments. Assuming that these investment balances were to remain constant, a hypothetical decrease of 100 basis points in interest rates would decrease quarterly
pre-tax earnings by approximately $3 million.

Off-Balance Sheet Arrangements

We have no special purpose or limited purpose entities that provide off-balance sheet financing, liquidity, or market or
credit risk support, and we do not engage in leasing, hedging, research and

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development
services or other relationships that expose us to any significant liabilities that are not reflected on the face of the condensed consolidated financial statements. There were no
substantial changes to our off-balance sheet arrangements or contractual commitments in the nine months ended September 30, 2009, when compared to the disclosures provided in our
Annual Report on Form 10-K for the year ended December 31, 2008.

Website Access and Important Investor Information

Our website address iswww.qwest.com, and we routinely post important investor
information in the "Investor Relations" section of our website atwww.qwest.com/about/investor. The information contained on, or that may be accessed
through, our website is not part of this report.

Special Note Regarding Forward-Looking Statements

This Form 10-Q contains or incorporates by reference forward-looking statements about our financial condition,
operating results and business. These statements include, among others:



These
statements may be made expressly in this document or may be incorporated by reference to other documents we have filed or will file with the Securities and Exchange Commission, or
SEC. You can find many of these statements by looking for words such as "may," "would," "could," "should," "plan," "believes," "expects," "anticipates," "estimates," or similar expressions used in
this document or in documents incorporated by reference in this document.

These
forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause our actual results to be materially different from any future results
expressed or implied by us in those statements. Some of these risks are described in Item 1A of Part II of this report.

These
risk factors should be considered in connection with any written or oral forward-looking statements that we or persons acting on our behalf may issue. Given these uncertainties, we
caution investors not to unduly rely on our forward-looking statements. We do not undertake any obligation to review or confirm analysts' expectations or estimates or to release publicly any revisions
to any forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events. Further, the information about our intentions
contained in this document is a statement of our intentions as of the date of this document and is based upon, among other things, the existing regulatory environment, industry conditions, market
conditions and prices, the economy in general and our assumptions as of such date. We may change our intentions, at any time and without notice, based upon any changes in such factors, in our
assumptions or otherwise.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information under the heading "Risk Management" in Item 2 of Part I of this report is incorporated herein by
reference.

ITEM 4.    CONTROLS AND PROCEDURES

The effectiveness of our or any system of disclosure controls and procedures is subject to certain limitations, including the exercise
of judgment in designing, implementing and evaluating the controls and procedures, the assumptions used in identifying the likelihood of future events and the inability to

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eliminate
misconduct completely. As a result, there can be no assurance that our disclosure controls and procedures will detect all errors or fraud. By their nature, our or any system of disclosure
controls and procedures can provide only reasonable assurance regarding management's control objectives.

Under
the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the design and operation of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, or the "Exchange Act") as of September 30,
2009. On the basis of this review, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures are designed, and are
effective, to give reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the SEC and to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is accumulated and
communicated to our management, including our Chief Executive Officer and Chief Financial Officer, in a manner that allows timely decisions regarding required disclosure.

There
were no changes in our internal control over financial reporting that occurred in the third quarter of 2009 that materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.

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PART IIOTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

The information contained in Note 8Commitments and Contingencies to our condensed consolidated financial statements
in Item 1 of Part I of this report is incorporated herein by reference.

ITEM 1A.    RISK FACTORS

Risks Affecting Our Business

Increasing competition, including product substitution, continues to cause access line losses, which has adversely affected and could continue to adversely affect our
operating results and financial condition.

We compete in a rapidly evolving and highly competitive market, and we expect competition to continue to intensify. We are facing
greater competition from cable companies, wireless providers, resellers and sales agents (including ourselves) and facilities-based providers using their own networks as well as those leasing parts of
our network. In addition, regulatory developments over the past several years have generally increased competitive pressures on our business. Due to some of these and other factors, we continue to
lose access lines.

We
are continually evaluating our responses to these competitive pressures. Some of our more recent responses are product bundling and packaging and QCII's and our continuing focus on
customer service. However, we may not be successful in these efforts. We may not be able to distinguish our service levels from those of our competitors, and we may not be successful in integrating
our product offerings, especially products for which we act as a reseller or sales agent, such as wireless services and video services. If these initiatives are unsuccessful or insufficient, we are
otherwise unable to sufficiently stem or offset our continuing access line losses and our revenue declines significantly without corresponding cost reductions, this would adversely affect our
operating results and financial condition, as well as our ability to service debt and pay other obligations.

Unfavorable general economic conditions in the United States could negatively impact our operating results and financial condition.

Unfavorable general economic conditions, including the current recession in the United States and the recent financial crisis affecting
the banking system and financial markets, could negatively affect our business. While it is often difficult for us to predict the impact of general economic conditions on our business, these
conditions could adversely affect the affordability of and consumer demand for some of our products and services and could cause customers to shift to lower priced products and services or to delay or
forgo purchases of our products and services. One or more of these circumstances could cause our revenue to decline. Also, our customers may not be able to obtain adequate access to credit, which
could affect their ability to make timely payments to us. If that were to occur, we could be required to increase our allowance for doubtful accounts, and the number of days outstanding for our
accounts receivable could increase. In addition, as discussed below under the heading "Risks Affecting our Liquidity," due to recent turmoil in the credit markets and the continued decline in the
economy, we may not be able to refinance maturing debt at terms that are as favorable as those from which we previously benefited, at terms that are acceptable to us or at all. For these reasons,
among others, if the current economic conditions persist or decline, this could adversely affect our operating results and financial condition, as well as our ability to service debt and pay other
obligations.

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 condition.

The telecommunications industry has experienced some consolidation, and several of our competitors have consolidated with other
telecommunications providers. This consolidation results in

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competitors
that are larger and better financed and affords our competitors increased resources and greater geographical reach, thereby enabling those competitors to compete more effectively against
us. We have experienced and expect further increased pressures as a result of this consolidation and in turn have been and may continue to be forced to respond with lower profit margin product
offerings and pricing plans in an effort to retain and attract customers. These pressures could adversely affect our operating results and financial condition, as well as our ability to service debt
and pay other obligations.

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 and adversely affect our operating results and financial condition.

The telecommunications industry is experiencing significant technological changes, and our ability to execute our business plans and
compete depends upon our and our affiliates' ability to develop and deploy new products and services, such as broadband, wireless, video and VoIP services. The development and deployment of new
products and services could also require substantial expenditure of financial and other resources in excess of contemplated levels. If we are not able to develop new products and services to keep pace
with technological advances, or if those products and services are not widely accepted by customers, our ability to compete could be adversely affected and our market share could decline. Any
inability to keep up with changes in technology and markets could also adversely affect our operating results and financial condition, as well as our ability to service debt and pay other obligations.

Our reseller and sales agency arrangements expose us to a number of risks, one or more of which may adversely affect our business and operating results.

We rely on reseller and sales agency arrangements with other companies to provide some of the services that we sell to our customers,
including video services and wireless products and services. If we fail to extend or renegotiate these arrangements as they expire from time to time or if these other companies fail to fulfill their
contractual obligations to us or our customers, we may have difficulty finding alternative arrangements and our customers may experience disruptions to their services. In addition, as a reseller or
sales agent, we do not control the availability, retail price, design, function, quality, reliability, customer service or branding of these products and services, nor do we directly control all of
the marketing and promotion of these products and services. To the extent that these other companies make decisions that negatively impact our ability to market and sell their products and services,
our business plans and goals and our reputation could be negatively impacted. If these reseller and sales agency arrangements are unsuccessful due to one or more of these risks, our business and
operating results may be adversely affected.

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.

From time to time, we receive notices from third parties or are named in lawsuits filed by third parties claiming we have infringed or
are infringing upon their intellectual property rights. We may receive similar notices or be involved in similar lawsuits in the future. Responding to these claims may require us to expend significant
time and money defending our use of affected technology, may require us to enter into licensing agreements requiring royalty payments that we would not otherwise have to pay or may require us to pay
damages. If we are required to take one or more of these actions, our profit margins may decline. In addition, in responding to these claims, we
may be required to stop selling or redesign one or more of our products or services, which could significantly and adversely affect the way we conduct business.

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Risks Relating to Legal and Regulatory Matters

Any adverse outcome of the KPNQwest litigation 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.

As described in Note 8Commitments and Contingencies to our condensed consolidated financial statements in
Item 1 of Part I of this report, the KPNQwest matters present material and significant risks to QCII and us. In the aggregate, the plaintiffs in the KPNQwest matters seek billions of
dollars in damages. In addition, the outcome of one or more of these matters could have a negative impact on the outcomes of the other matters. QCII continues to defend against these matters
vigorously and is currently unable to provide any estimate as to the timing of their resolution.

We
can give no assurance as to the impacts on QCII's and our financial results or financial condition that may ultimately result from these matters. The ultimate outcomes of these
matters are still uncertain, and substantial settlements or judgments in these matters could have a significant impact on QCII and us. The magnitude of such settlements or judgments resulting from
these matters could materially and adversely affect QCII's financial condition and ability to meet its debt obligations, potentially impacting its credit ratings, its ability to access capital markets
and its compliance with debt covenants. In addition, the magnitude of any such settlements or judgments may cause QCII to draw down significantly on its cash balances, which might force it to obtain
additional financing or explore other methods to generate cash. Such methods could include issuing additional securities or selling assets. As a wholly owned subsidiary of QCII, our business
operations and financial condition could be similarly affected.

Further,
there are other material proceedings pending against QCII as described in Note 8Commitments and Contingencies to our condensed consolidated financial
statements in Item 1 of Part I of this report that, depending on their outcome, may have a material adverse effect on QCII's and our financial position. Thus, we can give no assurances
as to the impacts on QCII's and our operating results or financial condition as a result of these matters.

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.

We are subject to significant state and federal regulation. Interstate communications (including international communications that
originate or terminate in the U.S.) are regulated by the Federal Communications Commission, or FCC, pursuant to the Communications Act of 1934, as amended by the Telecommunications Act of 1996, and
other laws. Intrastate communications are regulated by state utilities commissions pursuant to state utility laws. Generally, we must obtain and maintain certificates of authority from the FCC and
regulatory bodies in most states where we offer regulated services and must obtain prior regulatory approval of rates, terms and conditions for regulated services, where required. We are subject to
numerous, and often quite detailed, requirements under federal, state and local laws, rules and regulations. Accordingly, we cannot ensure that we are always in compliance with all these requirements
at any single point in time. The agencies responsible for the enforcement of these laws, rules and regulations may initiate inquiries or actions based on customer complaints or on their own
initiative.

Regulation
of the telecommunications industry is changing rapidly, and the regulatory environment varies substantially from state to state. A number of state legislatures and state
utility commissions have adopted reduced or modified forms of regulation for retail services. These changes also generally allow more flexibility for rate changes and for new product introduction, and
they enhance our ability to respond to competition. At the same time, some of the changes at both the state and federal level may have the potential effect of reducing some regulatory protections,
including having FCC-approved tariffs that include rates, terms and conditions. Despite these regulatory changes, a substantial portion

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of
our local voice services revenue remains subject to FCC and state utility commission pricing regulation, which could expose us to unanticipated price declines. For instance, in 2009 the state
utility commissions in Arizona, New Mexico and Minnesota will be considering price cap plans that govern the rates that we charge in each of these states. The FCC is also considering changing the
rates that carriers can charge each other for originating, carrying and terminating traffic and for local access facilities. Also under review by the FCC and state commissions are the intercarrier
compensation issues arising from the delivery of traffic destined for entities that offer conference and chat line services for free (known in the industry as "access stimulation," or "traffic
pumping"), and of traffic bound for Internet service providers that cross local exchange boundaries (known as "VNXX traffic"). There can be no assurance that future regulatory, judicial or legislative
activities will not have a material adverse effect on our operations, or that regulators or third parties will not raise material issues with regard to our compliance or noncompliance with applicable
regulations.

All
of our operations are also subject to a variety of environmental, safety, health and other governmental regulations. We monitor our compliance with federal, state and local
regulations governing the management, discharge and disposal of hazardous and environmentally sensitive materials. Although we believe that we are in compliance with these regulations, our management,
discharge or disposal of hazardous and environmentally sensitive materials might expose us to claims or actions that could have a material adverse effect on our business, financial condition and
operating results.

Risks Affecting Our Liquidity

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.

Our ultimate parent, QCII, continues to carry significant debt. As of September 30, 2009, our consolidated debt was
approximately $8.356 billion, which was included in QCII's consolidated debt of approximately $14.135 billion as of that date. Approximately $5.819 billion of QCII's debt, which
includes approximately $2.825 billion of our debt obligations, comes due over the next three years. The $5.819 billion amount also includes $1.265 billion of QCII's 3.50%
Convertible Senior Notes due 2025 (referred to as the 3.50% Convertible Senior Notes), which QCII may elect to redeem at any time on or after November 20, 2010 and holders may require QCII to
repurchase for cash on November 15, 2010. In addition, holders of these 3.50% Convertible Senior Notes may also elect to convert the principal of their notes into cash during periods when
specified, market-based conversion requirements are met. While we currently believe QCII and we will have the financial resources to meet our obligations when they come due, we cannot fully anticipate
our future condition or that of QCII, the credit markets or the economy generally. We may have unexpected costs and liabilities, and we may have limited access to financing. In addition, QCII has
$193 million of potential stock repurchases remaining under its previously disclosed stock repurchase program, and it is the current expectation of QCII's Board of Directors that QCII will
continue to pay a quarterly cash dividend. Cash used by QCII to purchase its common stock or to pay dividends will not be available for other purposes, including the repayment of debt.

We
may periodically need to obtain financing in order to meet our debt obligations as they come due. Due to recent turmoil in the credit markets and the continued decline in the economy,
we may not be able to refinance maturing debt at terms that are as favorable as those from which we previously benefited, at terms that are acceptable to us or at all. We may also need to obtain
additional financing or investigate other methods to generate cash (such as further cost reductions or the sale of assets) if revenue and cash provided by operations decline, if economic conditions
continue to weaken, if competitive pressures increase, if holders of the 3.50% Convertible Senior Notes elect to convert their notes because market-based conversion provisions are met or require QCII
to repurchase their notes for cash on November 15, 2010, if QCII or we are required to contribute a material amount of cash to

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QCII's
pension or other post-retirement benefit plans or if QCII becomes subject to significant judgments or settlements in one or more of the matters discussed in
Note 8Commitments and Contingencies to our condensed consolidated financial statements in Item 1 of Part I of this report. We can give no assurance that this
additional financing will be available on terms that are acceptable to us or at all. Also, we may be impacted by factors relating to or affecting our liquidity and capital resources due to perception
in the market, impacts on our credit ratings or provisions in our financing agreements that may restrict our flexibility under certain conditions.

QCII's
$945 million revolving credit facility (referred to as the Credit Facility), which is currently undrawn, has a cross payment default provision, and the Credit Facility and
certain other debt issues of QCII and its other subsidiaries have cross acceleration provisions. When present, these provisions could have a wider impact on liquidity than might otherwise arise from a
default or acceleration of a single debt instrument. As a subsidiary of QCII, any such event could adversely affect our ability to conduct business or access the capital markets and could adversely
impact our credit ratings. In addition, the Credit Facility contains various limitations, including a restriction on using any proceeds from the facility to pay settlements or judgments relating to
the securities-related actions discussed in Note 8Commitments and Contingencies to our condensed consolidated financial statements in Item 1 of Part I of this report.

The
degree to which we, together with QCII, are leveraged may have other important limiting consequences, including the following:



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.

The industry in which we operate is capital intensive, and we anticipate that our capital requirements will continue to be significant
in the coming years. Although we have reduced our operating expenses over the past few years, we may be unable to further significantly reduce these costs, even if revenue in some areas of our
business is decreasing. While we believe that our planned level of capital expenditures will meet both our maintenance and our core growth requirements going forward, this may not be the case if
circumstances underlying our expectations change.

Adverse changes in the value of assets or obligations associated with QCII's employee benefit plans could negatively impact QCII's stockholders' equity balance, which may in
turn affect our business and liquidity.

Our employees participate in employee benefit plans sponsored by QCII.

QCII
maintains a qualified pension plan, a non-qualified pension plan and post-retirement benefit plans. The funded status of these plans is the difference
between the value of all plan assets and benefit obligations under these plans. The process of calculating benefit obligations is complex. Adverse changes in interest rates or market conditions, among
other assumptions and factors, could cause a significant increase in QCII's benefit obligations or a significant decrease in the value of plan assets. With respect to QCII's qualified pension plan,
adverse changes could require QCII to contribute a material amount of cash to the plan or could accelerate the timing of any required cash payments. The

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amounts
contributed by us through QCII are not segregated or restricted and may be used to provide benefits to employees of QCII's other subsidiaries. QCII determines our cash contribution and,
historically, has only required us to pay our portion of its required pension contribution. It is likely that QCII will be required to make a cash contribution to this plan in 2011. Any future
material cash contributions in 2011 and beyond could have a negative impact on QCII's liquidity by reducing its cash flows, which in turn could affect our liquidity.

In
addition, QCII's condensed consolidated balance sheets indirectly reflect the value of all plan assets and benefit obligations under these plans. The accounting for employee benefit
plans is complex, and significant increases in QCII's benefit obligations or significant decreases of the value of plan assets can occur without necessarily impacting QCII's net income in the short
term. In addition, QCII's benefit obligations could increase significantly if it needs to unfavorably revise the assumptions it used to calculate the obligations. The value of QCII's plan assets was
several times larger than QCII's stockholders' equity as of December 31, 2007. However, asset values decreased significantly in 2008, which caused QCII's previous stockholders' equity position
to become a deficit position as of December 31, 2008. Stockholders' equity or deficit is one of several measures used by certain customers and vendors, among others, to evaluate a company's
financial condition. As such, QCII's current stockholders' deficit position or any future increases in its stockholders' deficit could adversely impact QCII's competitiveness in obtaining favorable
purchase arrangements and make it more challenging to compete for certain sales contracts, among other things.

Because
we are a wholly owned subsidiary of QCII, these events could adversely affect our ability to conduct business or to access the capital markets.

The cash needs of our affiliated companies consume a significant amount of the cash we generate.

We regularly declare and pay dividends to our direct parent, QSC. We may declare and pay dividends in excess of our earnings to the
extent permitted by applicable law, which may consume a significant amount of the cash we generate. Our debt covenants do not limit the amount of dividends we can pay to our parent.

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 in this report.

The terms of QCII's and our debt instruments permit both QCII and us to incur additional indebtedness. Additional debt may be necessary
for many reasons, including to adequately respond to competition, to comply with regulatory requirements related to our service obligations or for financial reasons alone. Incremental borrowings or
borrowings at maturity on terms that impose additional financial risks to our various efforts to improve our operating results and financial condition could exacerbate the other risks described in
this report.

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.

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles
requires management to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. Our critical accounting policies,
which are described in our Annual Report on Form 10-K for the year ended December 31, 2008, describe those significant accounting policies and methods used in the preparation
of our consolidated financial statements that are considered "critical" because they require judgments, assumptions and estimates that materially impact our consolidated financial statements and
related disclosures. As a result, if future events or assumptions differ significantly from the judgments,

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assumptions
and estimates in our critical accounting policies, these events or assumptions could have a material impact on our consolidated financial statements and related disclosures.

Taxing authorities may determine we owe additional taxes relating to various matters, which could adversely affect our financial results.

We are included in the consolidated federal income tax return of QCII. As such, we could be severally liable for tax examinations and
adjustments attributed to other members of the QCII affiliated group. As a significant taxpayer, QCII is subject to frequent and regular audits by the Internal Revenue Service, or IRS, as well as
state and local tax authorities. These audits could subject us to tax liabilities if adverse positions are taken by these tax authorities.

Because
prior to 1999 we were a member of affiliated groups filing consolidated U.S. federal income tax returns, we could be severally liable for tax examinations and adjustments not
directly applicable to us or to current members of the QCII affiliated group. Tax sharing agreements have been executed between QCII and previous affiliates, and QCII believes the liabilities, if any,
arising from adjustments to previously filed returns would be borne by the affiliated group member determined to have a deficiency under the terms and conditions of such agreements and applicable tax
law. We have not generally provided for liabilities attributable to current or former affiliated companies or for claims they have asserted or may assert against us.

We
believe that we have adequately provided for tax contingencies. However, QCII's tax audits and examinations may result in tax liabilities that differ materially from those that we
have recorded in our condensed consolidated financial statements. Because the ultimate outcomes of all of these matters are uncertain, we can give no assurance as to whether an adverse result from one
or more of them will have a material effect on 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.

We are a party to collective bargaining agreements with our labor unions, which represent a significant number of our employees. Our
current four-year agreements with the Communications Workers of America and the International Brotherhood of Electrical Workers expire on October 6, 2012. Although we believe that
our relations with our employees and unions are satisfactory, no assurance can be given that we will be able to successfully extend or renegotiate our collective bargaining agreements as they expire
from time to time. The impact of future negotiations, including changes in wages and benefit levels, could have a material impact on our financial results. Also, if we fail to extend or renegotiate
our collective bargaining agreements, if significant disputes with our unions arise, or if our unionized workers engage in a strike or other work stoppage, we could incur higher ongoing labor costs or
experience a significant disruption of operations, which could have a material adverse effect on our business.

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ITEM 6.    EXHIBITS

Exhibits identified in parentheses below are on file with the SEC and are incorporated herein by reference. All other exhibits are
provided as part of this electronic submission.

Exhibit
Number

Description(3.1
)
Restated Articles of Incorporation of Qwest Corporation (incorporated by reference to Qwest Corporation's Annual Report on Form 10-K for the year ended December 31, 1997, File No. 001-03040).(3.2
)
Articles of Amendment to the Articles of Incorporation of Qwest Corporation (incorporated by reference to Qwest Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, File
No. 001-03040).(3.3
)
Amended and Restated Bylaws of Qwest Corporation (incorporated by reference to Qwest Corporation's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 001-03040).(4.1
)
Indenture, dated as of April 15, 1990, by and between Mountain States Telephone and Telegraph Company and The First National Bank of Chicago (incorporated by reference to Qwest Corporation's Annual Report on
Form 10-K for the year ended December 31, 2002, File No. 001-03040).(4.2
)
First Supplemental Indenture, dated as of April 16, 1991, by and between U S WEST Communications, Inc. and The First National Bank of Chicago (incorporated by reference to Qwest Corporation's Annual Report on
Form 10-K for the year ended December 31, 2002, File No. 001-03040).(4.3
)
Indenture, dated as of October 15, 1999, by and between U S West Communications, Inc. and Bank One Trust Company, N.A. (incorporated by reference to Qwest Corporation's Annual Report on Form 10-K for the
year ended December 31, 1999, File No. 001-03040).(4.4
)
Officer's Certificate of Qwest Corporation, dated as of March 12, 2002 (including forms of 87/8% notes due March 15, 2012) (incorporated by reference to Qwest Corporation's
Form S-4, File No. 333-115119).(4.5
)
First Supplemental Indenture, dated as of August 19, 2004, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Qwest Communications International Inc.'s Quarterly
Report on Form 10-Q for the quarter ended September 30, 2004, File No. 001-15577).(4.6
)
Second Supplemental Indenture, dated as of November 23, 2004, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Qwest Corporation's Current Report on Form 8-K
filed November 23, 2004, File No. 001-03040).(4.7
)
Third Supplemental Indenture, dated as of June 17, 2005, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Qwest Corporation's Current Report on Form 8-K filed
June 23, 2005, File No. 001-03040).(4.8
)
Fourth Supplemental Indenture, dated August 8, 2006, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Qwest Corporation's Current Report on Form 8-K filed
August 8, 2006, File No. 001-03040).(4.9
)
Fifth Supplemental Indenture, dated May 16, 2007, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Qwest Corporation's Current Report on Form 8-K filed
May 18, 2007, File No. 001-03040).


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Exhibit
Number

Description(4.10
)
Sixth Supplemental Indenture, dated April 13, 2009, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Qwest Corporation's Current Report on Form 8-K filed
April 13, 2009, File No. 001-03040).(10.1
)
Registration Rights Agreement, dated April 13, 2009, among Qwest Corporation and the initial purchasers listed therein (incorporated by reference to Qwest Corporation's Current Report on Form 8-K filed
April 13, 2009, File No. 001-03040).(10.2
)
Aircraft Time Sharing Agreement, dated December 1, 2008, by and between Qwest Corporation and Edward A. Mueller (incorporated by reference to Qwest Communications International Inc.'s Annual Report on
Form 10-K for the year ended December 31, 2008, File No. 001-15577).12

Calculation of Ratio of Earnings to Fixed Charges.31.1

Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2

Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


()    Previously
 filed.


In
accordance with Item 601(b) (4) (iii) (A) of Regulation S-K, copies of certain instruments defining the rights of holders of certain of our
long-term debt are not filed herewith. Pursuant to this regulation, we hereby agree to furnish a copy of any such instrument to the SEC upon request.

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SIGNATURE

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.

QWEST CORPORATIONBy:

/s/ R. WILLIAM JOHNSTON R. William Johnston Senior Vice President, Controller and Chief Accounting Officer
(Chief Accounting Officer and Duly Authorized Officer)


October
28, 2009

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