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

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FORM 10-Q

|ý                                                             | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|For the quarterly period ended September 30, 2003            
|or                                                           
|o                                                             | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period
from                             to

Commission File No. 001-03040

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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)

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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 THE REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL INSTRUCTIONS H(2).

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes o    No ý

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

On
December 31, 2003, one share of Qwest Corporation common stock was outstanding.

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QWEST CORPORATION

FORM 10-Q

TABLE OF CONTENTS



|                             | Item |  |                                                                                                                    
|---------------------------- | ---- |  | -------------------------------------------------------------------------------------------------------------------
|PART IFINANCIAL INFORMATION
|                             | 1.   |  | Financial Statements                                                                                               
|                             |      |  | Condensed Consolidated Statements of OperationsThree and nine months ended September 30, 2003 and 2002 (unaudited)
|                             |      |  | Condensed Consolidated Balance SheetsSeptember 30, 2003 (unaudited) and December 31, 2002                         
|                             |      |  | Condensed Consolidated Statements of Cash FlowsNine months ended September 30, 2003 and 2002 (unaudited)          
|                             |      |  | Notes to Condensed Consolidated Financial Statements (unaudited)                                                   
|                             | 2.   |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                              
|                             | 3.   |  | Quantitative and Qualitative Disclosures About Market Risk                                                         
|                             | 4.   |  | Controls and Procedures                                                                                            
|PART IIOTHER INFORMATION   
|                             | 1.   |  | Legal Proceedings                                                                                                  
|                             | 6.   |  | Exhibits and Reports on Form 8-K                                                                                   
|                             |      |  | Signature Page                                                                                                     

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PART IFINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

QWEST CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(DOLLARS IN MILLIONS)

(UNAUDITED)

|                                                                                                       |                                                                           | Three Months Ended
September 30, |       | Nine Months Ended
September 30, |      
|------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------- | -------------------------------- | ----- | ------------------------------- | -----
|
|Operating revenues                                                                                     |                                                                           | $                                | 2,649 |                                 | $    
|Operating revenuesaffiliates                                                                          |                                                                           |                                  | 173   |                                 |      
|                                                                                                       |                                                                           |                                  |       |                                 |      
|                                                                                                       |                                                                           | Total operating revenues         |       |                                 | 2,822
|Operating expenses:                                                                                    |                                                                           |                                  |       |                                 |      
|                                                                                                       | Cost of sales (exclusive of depreciation and amortization detailed below) |                                  |       | 638                             |      
|                                                                                                       | Cost of salesaffiliates                                                  |                                  |       | 113                             |      
|                                                                                                       | Selling, general and administrative                                       |                                  |       | 443                             |      
|                                                                                                       | Selling, general and administrativeaffiliates                            |                                  |       | 363                             |      
|                                                                                                       | Depreciation                                                              |                                  |       | 615                             |      
|                                                                                                       | Intangible assets amortization                                            |                                  |       | 92                              |      
|                                                                                                       | Asset impairment charges                                                  |                                  |       | 230                             |      
|                                                                                                       | Restructuring, Merger-related and other charges (credits)                 |                                  |       |                                |      
|                                                                                                       |                                                                           |                                  |       |                                 |      
|                                                                                                       |                                                                           | Total operating expenses         |       |                                 | 2,494
|                                                                                                       |                                                                           |                                  |       |                                 |      
|Operating income                                                                                       |                                                                           |                                  | 328   |                                 |      
|                                                                                                       |                                                                           |                                  |       |                                 |      
|Other expense (income):                                                                                |                                                                           |                                  |       |                                 |      
|                                                                                                       | Interest expensenet                                                      |                                  |       | 147                             |      
|                                                                                                       | Interest expensenetaffiliates                                           |                                  |       | 40                              |      
|                                                                                                       | Other expense (income)net                                                |                                  |       |                                |      
|                                                                                                       |                                                                           |                                  |       |                                 |      
|                                                                                                       |                                                                           | Total other expensenet          |       |                                 | 187  
|                                                                                                       |                                                                           |                                  |       |                                 |      
|Income before income taxes and cumulative effect of change in accounting principle                     |                                                                           |                                  | 141   |                                 |      
|Income tax expense                                                                                     |                                                                           |                                  | (55   | )                               |      
|                                                                                                       |                                                                           |                                  |       |                                 |      
|Income before cumulative effect of change in accounting principle                                      |                                                                           |                                  | 86    |                                 |      
|Cumulative effect of change in accounting principle, net of taxes of $0, $0, $139 and $0, respectively |                                                                           |                                  |      |                                 |      
|                                                                                                       |                                                                           |                                  |       |                                 |      
|Net income                                                                                             |                                                                           | $                                | 86    |                                 | $    
|                                                                                                       |                                                                           |                                  |       |                                 |      

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

1

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QWEST CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(DOLLARS IN MILLIONS)

|                                                                                                                  |                                                  | September 30,
2003                         |        | December 31,
2002 |       
|----------------------------------------------------------------------------------------------------------------- | ------------------------------------------------ | ------------------------------------------ | ------ | ----------------- | ------
|
|ASSETS                                                                                                            |                                                  |                                            |        |                  
|Current assets:                                                                                                   |                                                  |                                            |        |                   |       
|                                                                                                                  | Cash and cash equivalents                        |                                            | $      | 1,408             |       
|                                                                                                                  | Restricted cash                                  |                                            |        | 12                |       
|                                                                                                                  | Accounts receivablenet                          |                                            |        | 1,171             |       
|                                                                                                                  | Accounts receivableaffiliates                   |                                            |        | 91                |       
|                                                                                                                  | Deferred income taxes                            |                                            |        | 80                |       
|                                                                                                                  | Prepaid and other assets                         |                                            |        | 245               |       
|                                                                                                                  | Prepaid income taxesQSC                         |                                            |        | 57                |       
|                                                                                                                  |                                                  |                                            |        |                   |       
|Total current assets                                                                                              |                                                  |                                            | 3,064  |                   |       
|Property, plant and equipmentnet                                                                                 |                                                  |                                            | 16,651 |                   |       
|Intangible assetsnet                                                                                             |                                                  |                                            | 1,159  |                   |       
|Other assets                                                                                                      |                                                  |                                            | 1,399  |                   |       
|                                                                                                                  |                                                  |                                            |        |                   |       
|                                                                                                                  | Total assets                                     |                                            | $      | 22,273            |       
|                                                                                                                  |                                                  |                                            |        |                   |       
|LIABILITIES AND STOCKHOLDER'S EQUITY                                                                              |                                                  |                                            |        |                  
|Current liabilities:                                                                                              |                                                  |                                            |        |                   |       
|                                                                                                                  | Current borrowings                               |                                            | $      | 41                |       
|                                                                                                                  | Current borrowingsaffiliates                    |                                            |        | 2,079             |       
|                                                                                                                  | Accounts payable                                 |                                            |        | 568               |       
|                                                                                                                  | Accounts payableaffiliates                      |                                            |        | 433               |       
|                                                                                                                  | Dividends payableQSC                            |                                            |        | 238               |       
|                                                                                                                  | Accrued expenses and other current liabilities   |                                            |        | 987               |       
|                                                                                                                  | Deferred revenue and customer deposits           |                                            |        | 517               |       
|                                                                                                                  |                                                  |                                            |        |                   |       
|Total current liabilities                                                                                         |                                                  |                                            | 4,863  |                   |       
|Long-term borrowings (net of unamortized debt discount of $159 million and $142 million, respectivelysee Note 3) |                                                  |                                            | 7,724  |                   |       
|Post-retirement and other post-employment benefit obligations                                                     |                                                  |                                            | 2,631  |                   |       
|Deferred income taxes                                                                                             |                                                  |                                            | 2,437  |                   |       
|Deferred credits and other                                                                                        |                                                  |                                            | 770    |                   |       
|                                                                                                                  |                                                  |                                            |        |                   |       
|                                                                                                                  | Total liabilities                                |                                            |        | 18,425            |       
|                                                                                                                  |                                                  |                                            |        |                   |       
|Commitments and contingencies (Note 7)                                                                            |                                                  |                                            |        |                   |       
|Stockholder's equity:                                                                                             |                                                  |                                            |        |                   |       
|                                                                                                                  | Common stockone share without par, owned by QSC |                                            |        | 8,288             |       
|                                                                                                                  | Note receivableaffiliate                        |                                            |        | (286              | )     
|                                                                                                                  | Accumulated deficit                              |                                            |        | (4,154            | )     
|                                                                                                                  |                                                  |                                            |        |                   |       
|                                                                                                                  |                                                  | Total stockholder's equity                 |        |                   | 3,848 
|                                                                                                                  |                                                  |                                            |        |                   |       
|                                                                                                                  |                                                  | Total liabilities and stockholder's equity |        | $                 | 22,273
|                                                                                                                  |                                                  |                                            |        |                   |       

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

2

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QWEST CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN MILLIONS)

(UNAUDITED)

|                          |                                                                 | Nine Months Ended September 30,                                  |                                      
|------------------------- | --------------------------------------------------------------- | ---------------------------------------------------------------- | -------------------------------------
|
|OPERATING ACTIVITIES      |                                                                 |                                                                  |                                      
|                          | Net income                                                      |                                                                  | $                                    
|                          | Adjustments to net income:                                      |                                                                  |                                      
|                          |                                                                 | Depreciation and amortization                                    |                                      
|                          |                                                                 | Provision for bad debts                                          |                                      
|                          |                                                                 | Cumulative effect of change in accounting principlenet          |                                      
|                          |                                                                 | Asset impairment charges                                         |                                      
|                          |                                                                 | Deferred income taxes                                            |                                      
|                          |                                                                 | Income tax benefit distributed to QSC                            |                                      
|                          |                                                                 | Other non-cash items                                             |                                      
|                          | Changes in operating assets and liabilities:                    |                                                                  |                                      
|                          |                                                                 | Accounts receivable                                              |                                      
|                          |                                                                 | Accounts receivableaffiliates                                   |                                      
|                          |                                                                 | Prepaids and other current assets                                |                                      
|                          |                                                                 | Prepaid income taxesQSC                                         |                                      
|                          |                                                                 | Accounts payable, accrued expenses and other current liabilities |                                      
|                          |                                                                 | Accounts payableaffiliates                                      |                                      
|                          |                                                                 | Deferred revenue and customer deposits                           |                                      
|                          |                                                                 | Other long-term assets and liabilities                           |                                      
|                          |                                                                 |                                                                  |                                      
|                          |                                                                 |                                                                  | Cash provided by operating activities
|                          |                                                                 |                                                                  |                                      
|INVESTING ACTIVITIES      |                                                                 |                                                                  |                                      
|                          | Expenditures for property, plant and equipment                  |                                                                  |                                      
|                          | Other                                                           |                                                                  |                                      
|                          |                                                                 |                                                                  |                                      
|                          |                                                                 |                                                                  | Cash used for investing activities   
|                          |                                                                 |                                                                  |                                      
|FINANCING ACTIVITIES      |                                                                 |                                                                  |                                      
|                          | Net repayments of current borrowings                            |                                                                  |                                      
|                          | Net proceeds from (repayments of) current borrowingsaffiliates |                                                                  |                                      
|                          | Proceeds from long-term borrowings                              |                                                                  |                                      
|                          | Repayments of current portion of long-term borrowings           |                                                                  |                                      
|                          | Dividends paid to QSC                                           |                                                                  |                                      
|                          | Debt issuance costs                                             |                                                                  |                                      
|                          |                                                                 |                                                                  |                                      
|                          |                                                                 |                                                                  | Cash used for financing activities   
|                          |                                                                 |                                                                  |                                      
|CASH AND CASH EQUIVALENTS |                                                                 |                                                                  |                                      
|                          | Increase in cash                                                |                                                                  |                                      
|                          | Beginning balance                                               |                                                                  |                                      
|                          |                                                                 |                                                                  |                                      
|                          | Ending balance                                                  |                                                                  | $                                    
|                          |                                                                 |                                                                  |                                      

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        THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003        (UNAUDITED)

Unless the context requires otherwise, references in this report to "Qwest," "we," "us," the "Company" and "our" refer to Qwest
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 interim financial statements are unaudited. We prepared these condensed consolidated financial statements 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 generally accepted accounting principles in the United States of America ("GAAP") have been condensed or omitted.

We
have revised this presentation to conform to our current year consolidated financial statements. These statements include all the adjustments necessary to fairly present our condensed
consolidated results of operations, financial position and cash flows as of September 30, 2003 and for all periods presented. These condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements, included in our annual report on Form 10-K for the year ended December 31, 2002 (the "2002
Form 10-K"). The condensed consolidated results of operations for the three and nine month periods ended September 30, 2003 and the condensed consolidated statement of cash
flows for the nine month period ended September 30, 2003 are not necessarily indicative of the results or cash flows expected for the full year.

We
intend to transfer ownership of Qwest Wireless LLC ("Qwest Wireless") to an affiliate in the near future. After this transfer, we will no longer have significant wireless
operations. This transfer will take place as soon as we have received all necessary regulatory approvals, perhaps as early as the first quarter of 2004.

Related party transactions

We record intercompany charges at the amounts billed to us by our affiliates. Regulatory rules require certain expenses to be billed by affiliates at estimated
fair value or fully distributed cost as more fully described in Note 6Related Party Transactions. Regulators periodically review our compliance with regulations. Adjustments to
intercompany charges that result from these reviews are recorded in the period they become known. We purchase services such as marketing and advertising, information technology, product and technical
services as well as general support services from affiliates. We provide to our affiliates telephony and data services, wireless as well as other services.

Recently adopted accounting pronouncements and cumulative effect of adoption

On January 1, 2003, we adopted Statement of Financial Accounting Standards ("SFAS") No. 143, "Accounting for Asset Retirement Obligations" ("SFAS
No. 143"). This statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset
retirement costs, generally referred to as asset retirement obligations. SFAS No. 143 requires entities to record the fair value of a legal liability for an asset retirement obligation required
to be settled under law or written or oral contract. If a reasonable estimate of fair value can be made, the fair value of the liability will be recognized in the period it is incurred, or if not, in
the period a reasonable estimate of fair value can be made. This cost is initially capitalized and then

4

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amortized
over the estimated remaining useful life of the asset. We have determined that we have legal asset retirement obligations associated with the removal of a limited group of
long-lived assets and recorded a cumulative effect of a change in accounting principle charge upon adoption of SFAS No. 143 of $7 million (liability of $12 million net
of an asset of $5 million) as of January 1, 2003.

Prior
to the adoption of SFAS No. 143, we have included in our group depreciation rates estimated net removal costs (removal costs less salvage). These costs have historically
been reflected in the calculation of depreciation expense and therefore recognized in accumulated depreciation. When the assets were actually retired and removal costs were expended, the net removal
costs were recorded as a reduction to accumulated depreciation. While SFAS No. 143 requires the recognition of a liability for asset retirement obligations that are legally binding, it
precludes the recognition of a liability for asset
retirement obligations that are not legally binding. Therefore, upon adoption of SFAS No. 143, we reversed the net removal costs within accumulated depreciation for these fixed assets where the
removal costs exceeded the estimated salvage value and we did not have a legal removal obligation. This resulted in income from the cumulative effect of a change in accounting principle of
$365 million pretax upon adoption of SFAS No. 143 on January 1, 2003. The net income impact for the nine months ended September 30, 2003 related to the adoption of SFAS
No. 143 is $219 million ($365 million less the $7 million charge disclosed above, net of income taxes of $139 million).

On
a going forward basis, the net costs of removal related to these assets will be charged to our consolidated statement of operations in the period in which the costs are incurred. As a
result, the adoption of SFAS No. 143 is expected to decrease our depreciation expense on an annual basis by approximately $33 million and increase operating expenses related to the
accretion of the fair value of our legal asset retirement obligations by approximately $1 million annually beginning January 1, 2003. Based on historical charges and activity through the
nine months ended September 30, 2003, we believe that recurring removal costs will be approximately $35 million to $45 million annually which will be charged to our consolidated
statement of operations as incurred.

In
December 2002, the Financial Accounting Standards Board ("FASB") issued SFAS No. 148, "Accounting for Stock-Based CompensationTransition and
Disclosurean amendment of FASB Statement No. 123," ("SFAS No. 148"), which is effective for financial statements related to periods ending after December 15, 2002.
SFAS No. 148 requires the following expanded disclosure regarding stock-based compensation.

Our
employees participate in the QCII stock incentive plans which is described more fully in the QCII annual report on Form 10-K for the year ended December 31, 2002
(the "QCII 2002 Form 10-K"). QCII's stock incentive plans, in which our employees participate, are accounted for using the intrinsic-value recognition and measurement principles of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Under the intrinsic-value method, no compensation expense is recognized for options granted to employees when the
strike price of those options equals or exceeds the value of the underlying security on the measurement date. In certain instances, the strike price has been established prior to the measurement date,
in which event any excess of the stock price on the measurement date over the exercise price is recorded as deferred compensation and amortized over the service period during which the stock option
award vests using the accelerated method described in FASB Interpretation No. 28, "Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans." QCII allocates to
us, through a contribution, our share of the deferred compensation expense described herein based on options granted.

5

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Had
compensation cost for our employees' participation in the QCII stock-based compensation plans been determined under the fair-value-method in accordance with the provisions of SFAS
No. 123,
"Accounting for Stock-Based Compensation," our net income would have been changed to the pro forma amounts indicated below:

|            |                                                                                                                                                    | Three Months Ended
September 30, |   | Nine Months Ended
September 30, |  
|----------- | -------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------- | - | ------------------------------- | -
|
|
|Net income: |                                                                                                                                                    |                                  |   |                                 |  
|            | As reported                                                                                                                                        |                                  | $ | 86                              |  
|            | Add: Stock-option-based employee compensation expense included in reported net income, net of related tax effects                                  |                                  |   |                                |  
|            | Deduct: Total stock-option-based employee compensation expense determined under fair-value-based method for all awards, net of related tax effects |                                  |   | (10                             | )
|            |                                                                                                                                                    |                                  |   |                                 |  
|            | Pro forma                                                                                                                                          |                                  | $ | 76                              |  
|            |                                                                                                                                                    |                                  |   |                                 |  

The pro forma amounts reflected above may not be representative of the effects on our reported net income or loss in future years because the number of future
shares to be issued under these plans is not known and the assumptions used to determine the fair value can vary significantly.

Note 2: Asset Impairment Charges

2003 Impairment Charge

In August 2003, we entered into a services agreement with a subsidiary of Sprint Corporation ("Sprint") that allows us to resell Sprint wireless services,
including access to Sprint's nationwide personal communications service ("PCS") wireless network, to consumer and business customers, primarily within our local service area. We plan to begin offering
these Sprint services under our brand name in early 2004. Our wireless customers who are currently being serviced through our proprietary wireless network will be transitioned onto Sprint's network.
Due to the anticipated decrease in usage of our own wireless network following the transition of our customers onto Sprint's network, in the third quarter of 2003 we performed an evaluation of the
recoverability of the carrying value of our long-lived wireless network assets.

In
accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"), we compared gross undiscounted cash flow
projections to the carrying value of the long-lived wireless network assets and determined that certain asset groups were not expected to be recovered through future projected cash flows.
For those asset groups that were not recoverable, we then estimated the fair value using recent selling prices for comparable assets. Our cell sites, switches, related tools and equipment inventory
and certain information technology systems that support the wireless network were determined to be impaired by $230 million. Estimating the fair value of the asset groups involved significant
judgment and a variety of assumptions.

6

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In
accordance with SFAS No. 144, the fair value of the impaired assets becomes the new basis for accounting purposes. As such, approximately $25 million in accumulated
depreciation was eliminated in connection with the accounting for the impairments. The impact of the impairments will reduce our annual depreciation and amortization expense by approximately
$40 million, effective October 1, 2003.

2002 Impairment Charge

Effective June 30, 2002, pursuant to SFAS No. 144, a general deterioration of the telecommunications market, downward revisions to our expected
future results of operations and other factors indicated that our investments in long-lived assets may have been impaired at that date. In
accordance with SFAS No. 144, we performed an evaluation of the recoverability of the carrying value of our long-lived assets using gross undiscounted cash flow projections. For
impairment analysis purposes, we grouped our property, plant and equipment and projected cash flows by our traditional telephone network and our wireless network. Based on the gross undiscounted cash
flow projections, we determined that our traditional telephone network was not impaired. However, we determined that our wireless network, which provided PCS in select markets in our local service
area, was impaired at June 30, 2002. For the wireless network, we then estimated the fair value based on replacement cost. Based on our analysis, the estimated fair value of the wireless assets
was less than our carrying amounts and we recorded an impairment charge of $825 million as of June 30, 2002. Replacement cost was determined by using current cost adjusted for physical
deterioration, functional obsolescence and economic obsolescence.

In
accordance with SFAS No. 144, the fair value of the impaired assets becomes the new basis for accounting purposes. As such, approximately $410 million in accumulated
depreciation was eliminated in connection with the accounting for the impairments as of June 30, 2002. The impact of the impairments has reduced our estimated annual depreciation and
amortization expense by approximately $135 million, effective July 1, 2002.

Note 3: Borrowings

Our borrowings, net of discounts and premiums, consisted of the following for the dates indicated:

September 30,
2003

December 31,
2002(Dollars in millions)Current borrowings:Current borrowingsaffiliates

$
2,079

$
1,888Current portion of long-term borrowings


17


1,179Current portion of capital lease obligations and other


24


76Total current borrowings

$
2,120

$
3,143Long-term borrowings:Long-term notes

$
7,711

$
5,995Long-term capital lease obligations and other


13


21Total long-term borrowings

$
7,724

$
6,016


7

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Current borrowingsaffiliates represent short-term borrowings on unsecured lines of credit (the "Affiliates Lines of Credit") by our wholly owned
subsidiary, Qwest Wireless, from affiliates that are wholly owned by QCII. The Affiliates Lines of Credit mature in January 2005 and have an interest rate of 7.50% per annum. We expect that the
maturities of these lines of credit will be extended by our affiliates as necessary. Qwest Corporation does not guarantee the borrowings of Qwest Wireless.

On
June 9, 2003, we completed a senior term loan in two tranches for a total of $1.75 billion principal amount of indebtedness. The term loan consists of a
$1.25 billion floating rate tranche, due in 2007, and a $500 million fixed rate tranche, due in 2010. The term loan is unsecured and ranks equally with all of our current indebtedness.
The floating rate tranche cannot be prepaid for two years and thereafter is subject to prepayment premiums through 2006. There are no mandatory prepayment requirements. The covenant and default terms
are substantially the same as those associated with our other long-term debt. The net proceeds were used to refinance our debt due in 2003 and fund or refinance our investment in telecommunications
assets.

The
floating rate tranche bears interest at London Interbank Offered Rates plus 4.75% (with a minimum interest rate of 6.50%) and the fixed rate tranche bears interest at 6.95% per
annum. The interest rate on the floating rate tranche was 6.50% at September 30, 2003. The lenders funded the entire principal amount of the loan subject to the original issue discount for the
floating rate tranche of 1.00% and for the fixed rate tranche of 1.652%.

Note 4: Restructuring Charges

The restructuring reserves balances discussed below are included in our condensed consolidated balance sheet in the category of accrued expenses and other current
liabilities for the current portion and deferred credits and other for the long-term portion.



During the nine months ended September 30, 2003, QCII identified employee reductions in various functional areas. As a result, we established a reserve and
recorded a charge to our condensed consolidated statement of operations of $19 million to cover the costs associated with these actions as more fully described below.

An
analysis of activity associated with our portion of the 2003 restructuring reserve for the nine months ended September 30, 2003 is as follows:

2003
Provision

2003
Utilization

September 30,
2003
Balance(Dollars in millions)Severance and employee-related charges

$
19

$
13

$
6


The 2003 activities includes charges of $19 million for severance benefits and other charges pursuant to established severance policies associated with a
reduction in employees. We identified approximately 650 employees from various functional areas to be terminated as part of this reduction. Through September 30, 2003, approximately 600 of the
planned reductions had been completed and $13 million of the restructuring reserve had been used for severance payments and enhanced pension benefits.

8

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Other
charges classified as restructuring, primarily severance-related payments not associated with the specific plans, were $4 million for the nine months ended
September 30, 2003.



During 2002, in response to shortfalls in employee reductions planned as part of the 2001 restructuring plan (as discussed below), and due to continued declines
in our revenue and general economic conditions, QCII identified employee reductions in various functional areas and permanently abandoned a number of operating and administrative facilities. In
connection with that restructuring, we recorded a restructuring reserve and recorded a charge to our condensed consolidated statement of operations to cover the costs associated with these actions.

An
analysis of activity associated with our 2002 restructuring plan for the nine months ended September 30, 2003 is as follows:

|                                                              |       | January 1,
2003
Balance |    | 2003
Utilization |   | September 30,
2003
Balance
|------------------------------------------------------------- | ----- | ----------------------- | -- | ---------------- | - | --------------------------
|
|Severance and employee-related charges                        |       | $                       | 37 |                  | $ | 27                        
|Contractual settlements, legal contingencies and lease losses |       |                         | 23 |                  |   | 4                         
|                                                              |       |                         |    |                  |   |                           
|                                                              | Total |                         | $  | 60               |   | $                         
|                                                              |       |                         |    |                  |   |                           

During 2002, QCII identified approximately 2,400 of our employees from various functional areas to be terminated as part of this reduction. As of
September 30, 2003, approximately 2,350 of the reductions had been accomplished. We expect the remaining employee reductions to be essentially completed by December 31, 2003. For the
nine months ended September 30, 2003, $27 million of the restructuring reserve had been used for severance payments and enhanced pension benefits.

Also
as part of the 2002 restructuring, we permanently abandoned 25 leased facilities and recorded a charge to restructuring and other charges in our condensed consolidated statement of
operations. The abandonment costs include rental payments due over the remaining terms of the leases, net of estimated sublease rentals, and estimated costs to terminate the leases. For the nine
months ended September 30, 2003, we utilized $4 million of the established reserves primarily for payments of amounts due under the leases. We expect the balance of the reserve to be
utilized over the remaining terms of the leases, which are up to five years.



During the fourth quarter of 2001, a plan was approved by QCII to reduce employee levels, consolidate and sublease facilities, abandon certain capital projects
and terminate certain operating

9

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leases
as discussed in more detail below. An analysis of activity associated with our 2001 plan for the nine months ended September 30, 2003 is as follows:

|                                                              |       | January 1,
2003
Balance |    | 2003
Utilization |   | September 30,
2003
Balance
|------------------------------------------------------------- | ----- | ----------------------- | -- | ---------------- | - | --------------------------
|
|Severance and employee-related charges                        |       | $                       | 10 |                  | $ | 1                         
|Contractual settlements, legal contingencies and lease losses |       |                         | 11 |                  |   | 7                         
|                                                              |       |                         |    |                  |   |                           
|                                                              | Total |                         | $  | 21               |   | $                         
|                                                              |       |                         |    |                  |   |                           

In 2001, QCII identified approximately 4,800 of our employees from various functional areas to be terminated as part of an employee reduction and we accrued a
restructuring reserve for severance benefits for those employees. At September 30, 2003, approximately 3,700 employees had been terminated. For the nine months ended September 30, 2003,
$1 million of the 2001 restructuring reserve had been used for severance payments, enhanced pension benefits and other employee-related outlays. In 2002, in response to this shortfall in
planned employee terminations, QCII reviewed our manpower complement in other functional areas and identified employees to be terminated as part of another staffing reduction. These planned reductions
are discussed above in connection with our 2002 restructuring activities.

Due
to our staffing reduction and consolidation of our operations, we accrued a restructuring reserve associated with the termination of nine operating lease agreements across the
country. For the nine months ended September 30, 2003, we utilized $7 million of the established reserve for payments associated with contract termination costs related to exiting these
buildings.



During the fourth quarter of 2003, as part of an ongoing effort of evaluating costs of operations, QCII further reduced employee levels in certain areas of our
business. As a result, we plan to record a charge to our condensed statement of operations during the fourth quarter of 2003, primarily for estimated severance costs, ranging from $35 million
to $55 million.

Note 5: Contributions to QCII Segments

Our operations are integrated into and are part of the segments of the QCII consolidated group. The chief operating decision maker ("CODM") for QCII makes
resource allocation decisions and assessments of financial performance for the consolidated group based on wireline, wireless and other segmentation. For more information about QCII's reporting
segments, see the QCII 2002 Form 10-K. Our business contributes to the segments reported by QCII, but the QCII CODM reviews our financial information only in connection with this
filing. Consequently, we do not provide discrete financial information for Qwest Corporation to a CODM on a regular basis. However, for reporting purposes only, we have separated our operating
activities for all periods presented into segments in a manner consistent with consolidated segment results regularly reviewed by QCII's CODM. This segment presentation excludes affiliate revenue and
expenses that are eliminated in consolidation by QCII.

10

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Revenue
and expenses are based on the types of products and services described below. Network infrastructure is designed to be scalable and flexible to handle multiple products and
services. As a result, QCII does not allocate network infrastructure costs to individual products. Direct administrative costs include sales, customer support, collections and marketing. Indirect
administrative costs such as finance, information technology, real estate, legal, marketing services and human resources are included in the other services operating expenses. QCII manages indirect
administrative services costs centrally; consequently, these costs are not allocated to wireline or wireless services. Similarly, depreciation, amortization, interest expense, interest income and
other income (expense) are not allocated to either wireline or wireless services operating expenses.

Wireline
services include revenue from the provision of voice services and data and Internet services. Voice services consist of local voice services (such as basic local exchange
services, switching services, custom calling features, enhanced voice services, operator services, public telephone services, collocation services and revenue from the sales of customer premises
equipment ("CPE")); IntraLATA long-distance voice services (long-distance services within our local service area); and access services (which are primarily wholesale switched
access services). Access services revenue is generated principally from charges to interexchange carriers ("IXCs"), for use of our local network to connect their customers to their
long-distance networks. An IXC is a telecommunications company that provides long-distance services to end-users by handling calls that are made from a phone
exchange in one local access transport area ("LATA") to an exchange in another LATA or between exchanges within a LATA. Data and Internet services include data services (such as traditional private
lines, wholesale private lines, integrated services digital network, frame relay, asynchronous transfer mode and related CPE) and Internet services (such as digital subscriber line, Internet dial
access, professional services and related CPE). Depending on the product or service purchased, a customer may pay an up-front fee, a monthly fee, a usage charge or a combination of these
fees and charges.

Our
wireless services are provided through our wholly owned subsidiary, Qwest Wireless, which holds 10 Megahertz licenses to provide PCS in most markets in our local service area. We
offer wireless services to residential and business customers providing them the ability to use the same telephone number for their wireless phone as for their home or business phone. In
August 2003, we entered into a services agreement with a subsidiary of Sprint that allows us to resell Sprint wireless services, including access to Sprint's nationwide PCS wireless network, to
consumer and business customers, primarily within our local service area. In the third quarter of 2003 we reviewed the carrying value of our wireless assets and determined that they were impaired.
Accordingly, we recorded a charge of $230 million to our consolidated statements of operations.

We
intend to transfer ownership of Qwest Wireless to an affiliate in the near future. After this transfer, we will no longer have significant wireless operations. This transfer will take
place as soon as we have received all necessary regulatory approvals, perhaps as early as the first quarter of 2004.

Other
services revenue is predominately derived from subleases of some of our unused real estate assets, such as space in our office buildings, warehouses and other properties. Our other
services expenses include unallocated corporate expenses for functions such as finance, information technology, real estate, legal, marketing services and human resources.

11

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The revenue and expenses shown below are derived from transactions with external customers.

|                                            |                               | Three Months Ended
September 30,                     |   | Nine Months Ended
September 30, |      
|------------------------------------------- | ----------------------------- | ---------------------------------------------------- | - | ------------------------------- | -----
|
|
|Operating revenue:                          |                               |                                                      |   |                                 |      
|                                            | Wireline services             |                                                      | $ | 2,492                           |      
|                                            | Wireless services             |                                                      |   | 152                             |      
|                                            | Other services                |                                                      |   | 5                               |      
|                                            |                               |                                                      |   |                                 |      
|                                            |                               | Total contribution to QCII segment revenue           |   | $                               | 2,649
|                                            |                               |                                                      |   |                                 |      
|Operating expenses:                         |                               |                                                      |   |                                 |      
|                                            | Wireline services             |                                                      | $ | 737                             |      
|                                            | Wireless services             |                                                      |   | 88                              |      
|                                            | Other Services                |                                                      |   | 256                             |      
|                                            |                               |                                                      |   |                                 |      
|                                            |                               | Total contribution to QCII segment expenses          |   | $                               | 1,081
|                                            |                               |                                                      |   |                                 |      
|Contribution to QCII segment income (loss): |                               |                                                      |   |                                 |      
|                                            | Wireline services             |                                                      | $ | 1,755                           |      
|                                            | Wireless services             |                                                      |   | 64                              |      
|                                            | Other services                |                                                      |   | (251                            | )    
|                                            |                               |                                                      |   |                                 |      
|                                            |                               | Total contribution to QCII segment income            |   | $                               | 1,568
|                                            |                               |                                                      |   |                                 |      
|Capital expenditures:                       |                               |                                                      |   |                                 |      
|                                            | Wireline                      |                                                      | $ | 357                             |      
|                                            | Wireless                      |                                                      |   | 2                               |      
|                                            | Other                         |                                                      |   | 87                              |      
|                                            |                               |                                                      |   |                                 |      
|                                            |                               | Total contribution to QCII capital expenditures      |   | $                               | 446  
|                                            | Non-cash investing activities |                                                      |   | (1                              | )    
|                                            |                               |                                                      |   |                                 |      
|                                            |                               | Total contribution to QCII cash capital expenditures |   | $                               | 445  
|                                            |                               |                                                      |   |                                 |      

12

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The following table reconciles the segment information to net income for the three and nine months ended September 30, 2003 and 2002:

|                                          |         | Three Months Ended
September 30,                                  |       | Nine Months Ended
September 30, |    
|----------------------------------------- | ------- | ----------------------------------------------------------------- | ----- | ------------------------------- | ---
|
|
|Total contribution to QCII segment income |         | $                                                                 | 1,568 |                                 | $  
|                                          | Add:    |                                                                   |       |                                 |    
|                                          |         | Affiliate revenue                                                 |       |                                 | 173
|                                          |         | Cumulative effect of change in accounting principle, net of taxes |       |                                 |   
|                                          | Deduct: |                                                                   |       |                                 |    
|                                          |         | Affiliate expenses                                                |       |                                 | 476
|                                          |         | Depreciation                                                      |       |                                 | 615
|                                          |         | Intangible assets amortization                                    |       |                                 | 92 
|                                          |         | Asset impairment charges                                          |       |                                 | 230
|                                          |         | Restructuring, Merger-related and other charges (credits)         |       |                                 |   
|                                          |         | Total other expensenet                                           |       |                                 | 187
|                                          |         | Income tax expense                                                |       |                                 | 55 
|                                          |         |                                                                   |       |                                 |    
|Net income                                |         | $                                                                 | 86    |                                 | $  
|                                          |         |                                                                   |       |                                 |    

Note 6: Related Party Transactions

We purchase services from our affiliates, such as marketing and advertising, information technology, product and technical services as well as general support
services. We provide to our affiliates telephony and data services, wireless and other services.

Our
affiliates provide services and also contract services from third parties on our behalf. In the latter case, the third parties bill our affiliates who in turn charge us for our
respective share of these third party expenses. Our affiliates charge us for services rendered by their employees applying a fully distributed costs ("FDC") methodology. FDC rates are determined using
current salary rates including factors for taxes, employee benefits, including stock-based compensation, facilities and overhead costs. These salary rates are charged to us based on actual hours
worked or charges are allocated to us based on estimates.

We
charge our affiliates based on tariffed rates for telephony and data services. We bill prevailing third party rates for wireless services and for other services we bill either FDC or
market rates.

We
describe in further detail below the services provided by our affiliates.



Marketing, sales and advertising, which support preparation for joint marketing our services, include the development of marketing and advertising plans, sales
unit forecasts, market research, sales training and compensation plans.

13

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Information technology services primarily include the labor cost of developing, testing and implementing the system changes necessary to support order entry,
provisioning and billing of services, as well as the cost of improving, maintaining and operating our shared internal communications networks.



Product and technical services relate to forecasting demand volumes and developing plans around network utilization and optimization, developing and implementing
plans for overall product development, provisioning and customer care.



General support services include legal, regulatory, general finance and accounting, tax, human resources and executive support.



This category includes the costs of miscellaneous services, such as rental of office space, procurement and communications services.

Note 7: Commitments and Contingencies

Legal Proceedings Involving Qwest



On June 27, 2002, a putative class action was filed in the District Court for the County of Boulder against us, QCII, The Anschutz Family Investment Co.,
Philip Anschutz, Joseph P. Nacchio and
Robin R. Szeliga on behalf of purchasers of QCII's stock between June 28, 2000 and June 27, 2002 and owners of U S WEST Inc. ("U S WEST") stock on June 28, 2000. The
complaint alleges, among other things, that QCII and the individual defendants issued false and misleading statements and engaged in improper accounting practices in order to accomplish the U S WEST
Merger, to make QCII appear successful and to inflate the value of QCII's stock. The complaint asserts claims under Sections 11, 12, 15 and 17 of the Securities Act of 1933, as amended, (the "1933
Act"). The complaint seeks unspecified monetary damages, disgorgement of illegal gains and other relief. On July 31, 2002, the defendants removed this state court action to federal district
court in Colorado and subsequently moved to consolidate this action with the consolidated securities action identified below. The plaintiffs have moved to remand the lawsuit back to state court.
Defendants have opposed that motion, which is pending before the court.



On February 14, 2002, the Minnesota Department of Commerce filed a formal complaint against us with the Minnesota Public Utilities Commission alleging that
we, in contravention of federal and state law, failed to file interconnection agreements with the Minnesota Commission relating to certain of our wholesale customers, and thereby allegedly
discriminated against other competitive local

14

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exchange
carriers ("CLECs"). On October 21, 2002, the Minnesota Commission adopted in full a proposal by an administrative law judge that we committed 26 individual violations of federal law by
failing to file, as required under Section 252 of the Telecommunications Act of 1996, 26 distinct provisions found in 12 separate agreements with individual CLECs for regulated services in
Minnesota. The order also found that we agreed to provide and did provide to McLeodUSA Incorporated ("McLeod"), and Eschelon Telecom, Inc. ("Eschelon"), discounts on regulated wholesale
services of up to 10% that were not made available to other CLECs, thereby unlawfully discriminating against them. The order found we also violated state law, that the harm caused by our conduct
extended to both customers and competitors, and that the damages to CLECs would amount to several million dollars for Minnesota alone.

On
February 28, 2003, the Minnesota Commission issued its initial, written decision imposing fines and penalties, which was later revised on April 8, 2003 to include a fine
of nearly $26 million and ordered us to:



The
Minnesota Commission issued its final, written decision setting forth the penalties described above on May 21, 2003. On June 19, 2003, we appealed the Minnesota
Commission's orders to the United States District Court for the District of Minnesota. The appeal is pending.

Arizona,
Colorado, New Mexico, Washington, Iowa and South Dakota have also initiated formal proceedings regarding our alleged failure to file required agreements in those states. On
July 25, 2003, we entered into a settlement with the staff of the Arizona Corporation Commission to settle this and several other proceedings. The proposed settlement, which must be approved by
the Arizona Commission, requires that we provide approximately $21 million in consideration in the form of a voluntary contribution to the Arizona State Treasury, contributions to certain
organizations and/or infrastructure investments and refunds in the form of bill credits to CLECs. On December 1, 2003, an administrative law judge issued a recommended decision denying the
proposed settlement. The judge also recommended final orders requiring us to pay approximately $11 million in penalties and to issue credits to CLECs for a 24-month period from
October 2000 to September 2002 equal to 10% of all wholesale intrastate services performed by us. We plan to file exceptions to the recommended decisions with the full Arizona
Commission. New Mexico has issued an order providing its interpretation of the standard for filing these agreements, identified certain of our contracts as coming within that standard and opened a
separate docket to consider further proceedings. Colorado has also opened an investigation into these matters. On June 26, 2003, we received from the Federal Communications

15

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Commission
("FCC") a letter of inquiry seeking information about these matters. We submitted our initial response to this inquiry on July 31, 2003. The proceedings and investigations in New
Mexico, Colorado and Washington and at the FCC could result in the imposition of fines and other penalties against us that could be material. Iowa and South Dakota have concluded their inquiries
resulting in no imposition of penalties or obligations to issue credits to CLECs in those states.

Illuminet, Inc.
("Illuminet"), a traffic aggregator, and several of its customers have filed complaints with regulatory agencies in Idaho, Nebraska, Iowa, North Dakota and New
Mexico, alleging that they are entitled to refunds due to our purported improper implementation of tariffs governing certain signaling services we provide in those states. The commissions in Idaho and
Nebraska have ruled in favor of Illuminet and awarded it $1.5 million and $4.8 million, respectively. We sought reconsideration in both states, which was denied, and subsequently
perfected appeals in both states. The proceedings in the other states and in states where Illuminet has not yet filed complaints could result in agency decisions requiring additional refunds.

We
have other regulatory actions pending in local regulatory jurisdictions, which call for price decreases, refunds or both. These actions are generally routine and incidental to our
business.



From time to time we receive complaints and become subject to investigations regarding "slamming" (the practice of changing long-distance carriers
without the customer's consent), "cramming" (the practice of charging a consumer for goods or services that the consumer has not authorized or ordered) and other sales practices. Through
December 2003, we resolved allegations and complaints of slamming and cramming with the Attorneys General for the states of Arizona, Colorado, Idaho, Oregon, Utah and Washington. In each of
those states, we agreed to comply with certain terms governing our sales practices and to pay each of the states between $200,000 and $3.75 million. On December 11, 2003, we received a
request for information from the FCC related to changes in certain customers' preferred carriers for interLATA or intraLATA long distance service. We may become subject to other investigations or
complaints in the future, and any such complaints or investigations could result in further legal action and the imposition of fines, penalties or damage awards.

We
are subject to a number of environmental matters as a result of our prior operations as part of the Bell System. We believe that expenditures in connection with remedial actions under
the current environmental protection laws or related matters will not be material to our business or financial condition.

Legal Proceedings Involving QCII

QCII is involved in several investigations, securities actions and other matters that, if resolved against QCII, could have a material adverse effect on our
business and financial condition. These matters are more fully described below.



On April 3, 2002, the Securities and Exchange Commission ("SEC") issued an order of investigation that made formal an informal investigation of QCII
initiated on March 8, 2002. QCII is continuing in its efforts to cooperate fully with the SEC in its investigation. The investigation includes,

16

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without
limitation, inquiry into several specifically identified QCII accounting practices and transactions and related disclosures that are the subject of the various adjustments and restatements
described in the QCII 2002 Form 10-K. Some of those accounting practices and transactions and related disclosures also are the subject of various adjustments and restatements
described in our 2002 Form 10-K. The investigation also includes inquiry into disclosure and other issues related to transactions between QCII and certain of its vendors and certain
investments in the securities of those vendors by individuals associated with QCII.

On
July 9, 2002, QCII was informed by the U.S. Attorney's Office for the District of Colorado of a criminal investigation of its business. QCII believes the U.S. Attorney's Office
is investigating various matters that include the subjects of the investigation by the SEC. QCII is continuing in its efforts to cooperate fully with the U.S. Attorney's Office in its investigation.

During
2002, the United States Congress held hearings regarding QCII and matters that are similar to those being investigated by the SEC and the U.S. Attorney's Office. QCII cooperated
fully with Congress in connection with those hearings.

While
QCII is continuing in its efforts to cooperate fully with the SEC and the U.S. Attorney's Office in each of their respective investigations, QCII cannot predict the outcome of
those investigations. QCII has engaged in discussions with the SEC staff in an effort to resolve the issues raised in the SEC's investigation of it. Such discussions are preliminary and QCII cannot
predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. However, settlements typically involve, among other things, the SEC making
claims under the federal securities laws in a complaint filed in United States District Court that, for purposes of the settlement, the defendant neither admits nor denies. Were such a settlement to
occur, QCII would expect such claims to address many of the accounting practices and transactions and related disclosures that are the subject of the various restatements QCII has made as well as
additional transactions. In addition, any settlement with the SEC may also involve, among other things, the imposition of a civil penalty, the amount of which could be material, and the entry of a
court order that would require, among other things, that QCII and its officers and directors comply with provisions of the federal securities laws as to which there have been allegations of prior
violations.

In
addition, as previously reported, the SEC has conducted an investigation concerning QCII's earnings release for the fourth quarter and full year 2000 issued on January 24,
2001. The release provided pro forma normalized earnings information that excluded certain nonrecurring expense and income items resulting primarily from QCII's Merger with U S WEST. On
November 21, 2001, the SEC staff informed QCII of its intent to recommend that the SEC authorize an action against QCII that would allege it should have included in the earnings release a
statement of its earnings in accordance with GAAP. At the date of this filing, no action has been taken by the SEC. However, QCII expects that if its current discussions with the staff of the SEC
result in a settlement, such settlement will include allegations concerning the January 24, 2001 earnings release.

Also,
as previously announced in July 2002 by the General Services Administration ("GSA"), the GSA is conducting a review of all contracts with QCII for purposes of determining
present responsibility. On September 12, 2003, we were informed that the Inspector General of the GSA had referred to the GSA Suspension/Debarment Official the question of whether QCII
(including us and its other subsidiaries) should be considered for debarment. QCII has been informed that the basis for the

17

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referral
is last February's indictment against four former QCII employees in connection with a transaction with the Arizona School Facilities Board in June 2001 and a civil complaint filed the
same day by the SEC against the same former employees and others relating to the Arizona School Facilities Board transaction and a transaction with Genuity Inc. ("Genuity") in 2000. QCII is
cooperating fully with the GSA and believes that it and we will remain suppliers of the government, although QCII cannot predict the outcome of this referral.



Since July 27, 2001, 13 putative class action complaints have been filed in federal district court in Colorado against QCII alleging violations of the
federal securities laws. One of those cases has been dismissed. By court order, the remaining actions have been consolidated into a consolidated securities action, (the "consolidated securities
action"). Plaintiffs in the consolidated securities action named as defendants in the Fourth Consolidated Amended Class Action Complaint (the "Fourth Consolidated Complaint"), which was filed on or
about August 21, 2002, QCII, its former Chairman and Chief Executive Officer, Joseph P. Nacchio, its former Chief Financial Officers, Robin R. Szeliga and Robert S. Woodruff, other of
its former officers and current directors and Arthur Andersen LLP. The Fourth Consolidated Complaint is purportedly brought on behalf of purchasers of QCII's publicly traded securities between
May 24, 1999 and February 14, 2002, and alleges, among other things, that during the putative class period, QCII and certain of the individual defendants made materially false statements
regarding the results of QCII's operations in violation of section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), that certain of the individual defendants are liable as control
persons under section 20(a) of the Exchange Act, and that during the putative class period, certain of the individual defendants sold some of their shares of QCII's common stock in violation of
section 20A of the Exchange Act. The Fourth Consolidated Complaint also alleges that QCII's financial results during the putative class period and statements regarding those results were false
and misleading due to the alleged: (i) overstatement of revenue, (ii) understatement of costs, (iii) manipulation of employee
benefits in order to increase profitability and (iv) misstatement of certain assets and liabilities. The Fourth Consolidated Complaint further alleges that QCII and certain of the individual
defendants violated Section 11 of the 1933 Act, and that certain of the individual defendants are liable as control persons under Section 15 of the 1933 Act by preparing and
disseminating false registration statements and prospectuses for: (1) the registration of 897,907,706 shares of QCII's common stock to be issued to U S WEST shareholders dated June 21,
1999, as amended August 13, 1999 and September 17, 1999; (2) the exchange of $3.25 billion of QCII's notes dated July 12, 2001; and (3) the exchange of
$3.75 billion of QCII's notes dated October 30, 2001. The Fourth Consolidated Complaint seeks unspecified compensatory damages and other relief. However, lead counsel for the plaintiffs
has indicated that plaintiffs will seek damages in the billions of dollars. On September 20, 2002, both QCII and the individual defendants filed motions to dismiss the Fourth Consolidated
Complaint. Those motions are currently pending before the court. On November 4, 2002, lead plaintiffs in the consolidated securities action filed a motion for a temporary restraining order and
preliminary injunction seeking to enjoin QCII's sale of Qwest Dex, Inc. or, in the alternative, to place the proceeds of such sale in a constructive trust for the benefit of the plaintiffs. The
court denied both motions.

On
October 22, 2001, an alleged derivative lawsuit was filed in the United States District Court for the District of Colorado, naming as defendants each of the then members of
QCII's Board of Directors, (the "Board") and naming QCII as a nominal defendant. The derivative complaint is based

18

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upon
the allegations made in the consolidated securities action and alleges, among other things, that the Board members intentionally or negligently breached their fiduciary duties to QCII by failing
to oversee implementation of securities laws that prohibit insider trading. The derivative complaint also alleges that the Board members breached their fiduciary duties to QCII by causing or
permitting it to commit alleged securities violations, thus (i) causing it to be sued for such violations, and (ii) subjecting it to adverse publicity, increasing its cost of raising
capital and impairing earnings. The derivative complaint further alleges that certain directors sold shares between April 26, 2001 and May 15, 2001 using non-public
information about QCII. On or about October 31, 2001, the court filed an order consolidating this derivative lawsuit with the consolidated securities action. In December 2001, the
derivative lawsuit was stayed, pending further order of the court, based on the fact that the merits of the derivative lawsuit are intertwined with the resolution of the consolidated securities
action. In March 2002, plaintiffs filed a first amended derivative complaint. The first amended derivative complaint adds allegations relating to the disclosures of QCII's consolidated
financial results from April 2000 through February 2002. On or about November 5, 2002, plaintiffs filed a second amended derivative complaint. The second amended complaint adds as
defendants to the lawsuit certain former officers, including Robin R. Szeliga, Robert S. Woodruff and others. The second amended complaint contains allegations in addition to those set forth in the
prior complaints, stating, among other things, that (i) certain officers and/or directors traded QCII's stock while in the possession of inside information, and (ii) certain officers
and/or directors caused the restatement of more than $1 billion in revenue by concealing improper accounting practices. Plaintiffs seek, among other remedies, disgorgement of alleged insider
trading profits. The lawsuit remains stayed.

On
March 6, 2002, an alleged derivative lawsuit was filed in the District Court for the City and County of Denver, naming as defendants each of the then members of the Board,
certain former officers of QCII and Arthur Andersen LLP. QCII is named as a nominal defendant. The derivative complaint is based upon the allegations made in the consolidated securities action and
alleges that the Board
members intentionally or recklessly breached their fiduciary duties to QCII by causing or allowing it to issue financial disclosures that were false or misleading. Plaintiffs seek unspecified damages
on QCII's behalf against the defendants. On July 2, 2002, this state court derivative lawsuit was stayed pending further order of the court. On or about August 1, 2003, the plaintiffs
filed an amended derivative complaint, which does not contain claims against QCII's former officers and Arthur Andersen LLP, but continues to assert claims against the Board defendants. In the amended
complaint, the plaintiffs allege, among other things, that the individual defendants abdicated their duty to implement and maintain an adequate internal accounting control system and thus allegedly
violated (i) their fiduciary duties of loyalty and good faith; (ii) GAAP; and (iii) QCII's Audit Committee's charter (which requires, among other things, that QCII's Audit
Committee serve as an independent and objective party to monitor QCII's financial reporting and internal control system). The amended complaint also states new claims against Mr. Nacchio for
his alleged breach of fiduciary duties. Plaintiffs seek a court order requiring that Mr. Nacchio disgorge to QCII all of his 2001 compensation, including salary, bonus, long-term
incentive payouts and stock options. In addition, the plaintiffs contend that Mr. Nacchio breached his fiduciary duties to QCII by virtue of his sales of its stock allegedly made using his
knowledge of material non-public information. The plaintiffs seek the imposition of a constructive trust on any profits Mr. Nacchio obtained by virtue of these sales.

Since
March 2002, seven putative class action suits were filed in federal district court in Colorado purportedly on behalf of all participants and beneficiaries of the Qwest
Savings and Investment Plan

19

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and
predecessor plans, (the "Plan"), from March 7, 1999 until the present. By court order, five of these putative class actions have been consolidated, and the claims made by the plaintiff in
the sixth case were subsequently included in the Second Amended and Consolidated Complaint described below and referred to as the "consolidated ERISA action". QCII expects the seventh putative class
action to be consolidated with the other cases since it asserts substantially the same claims. The consolidated amended complaint filed on July 5, 2002 names as defendants, among others, QCII,
several former and current directors, officers and employees of QCII, Qwest Asset Management, the Plan's Investment Committee, and the Plan Administrative Committee of the pre-Merger QCII
401(k) Savings Plan. Plaintiffs filed a Second Amended and Consolidated Complaint on May 21, 2003, naming as additional defendants a former employee and QCII's Plan Design Committee. The
consolidated ERISA action, which is brought under the Employee Retirement Income Security Act, ("ERISA"), alleges, among other things, that the defendants breached fiduciary duties to the Plan members
by allegedly excessively concentrating the Plan's assets invested in QCII's stock, requiring certain participants in the Plan to hold the matching contributions received from QCII in the Qwest Shares
Fund, failing to disclose to the participants the alleged accounting improprieties that are the subject of the consolidated securities action, failing to investigate the prudence of investing in
QCII's stock, continuing to offer QCII's stock as an investment option under the Plan, failing to investigate the effect of the Merger on Plan assets and then failing to vote the Plan's shares against
it, preventing plan participants from acquiring QCII's stock during certain periods and, as against some of the individual defendants, capitalizing on their private knowledge of QCII's financial
condition to reap profits in stock sales. Plaintiffs seek equitable and declaratory relief, along with attorneys' fees and costs and restitution. Plaintiffs moved for class certification on
January 15, 2003, and QCII has opposed that motion, which is pending before the court. Defendants filed motions to dismiss on August 22, 2002. Those motions are also pending before the
court.

On
August 9, 2002, an alleged derivative lawsuit was filed in the Court of Chancery of the State of Delaware, naming as defendants each of the then members of the Board and QCII
current Chief Financial Officer, Oren G. Shaffer, and naming QCII as a nominal defendant. On or about September 16, 2002, an amended complaint was filed in the action, naming the same
defendants except Mr. Shaffer, who is no longer a defendant in the action. A separate alleged derivative lawsuit was filed in the Court of Chancery of the State of Delaware on or about
August 28, 2002. That lawsuit names as defendants QCII's former Chairman and Chief Executive Officer, Joseph P. Nacchio, QCII's former Chief Financial Officer, Robert S. Woodruff, former Board
member, Marilyn Carlson Nelson, and each of the then members of the Board and names QCII as a nominal defendant. On October 30, 2002, these two alleged derivative lawsuits were consolidated,
and an Amended Complaint (the "Second Amended Complaint") was later filed on or about January 23, 2003, and names as defendants the current members of the Board, former Board member Hank Brown,
QCII's former Chief Executive Officer, Joseph P. Nacchio, and QCII's former Chief Financial Officer, Robert Woodruff, and names QCII as a nominal defendant. In the Second Amended Complaint, the
plaintiffs allege, among other things, that the individual defendants (i) breached their fiduciary duties by allegedly engaging in illegal insider trading in QCII's stock; (ii) failed to
ensure compliance with federal and state disclosure, anti-fraud and insider trading laws within QCII, resulting in exposure to it; (iii) appropriated corporate opportunities, wasted
corporate assets and self-dealt in connection with investments in initial public offering securities through QCII's investment bankers; and (iv) improperly awarded severance
payments of $13 million to QCII's former Chief Executive Officer, Mr. Nacchio. The plaintiffs seek recovery of

20

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incentive
compensation allegedly wrongfully paid to certain defendants, all severance payments made to Messrs. Nacchio and Woodruff, and all costs including legal and accounting fees.
Plaintiffs have also requested, among other things, that the individual defendants compensate QCII for any insider trading profits. Plaintiffs likewise allege that QCII is entitled to contribution and
indemnification by each of the individual defendants. Plaintiffs request that the court cancel all unexercised stock options awarded to Messrs. Nacchio and Woodruff to which they were not
entitled, that the defendants return to QCII all salaries and other remuneration paid to them by it during the time they breached their fiduciary duties, and that the court order the defendants to
enforce policies, practices and procedures on behalf of QCII designed to detect and prevent illegal conduct by its employees and representatives. On March 17, 2003, defendants moved to dismiss
the Second Amended Complaint, or, in the alternative, to stay the action. That motion is pending before the court.

On
November 22, 2002, plaintiff Stephen Weseley IRA Rollover filed a purported derivative lawsuit in Denver District Court, naming as defendants each of the then members of the
Board, certain of QCII's former officers, Anschutz Company and QCII as a nominal defendant. Plaintiff alleges, among other things, that the director defendants breached their fiduciary duties to QCII
and damaged QCII by deliberately in bad faith or recklessly (i) implementing a sham system of internal controls completely inadequate to ensure proper recognition of revenue;
(ii) causing QCII to issue false and misleading statements and financial results to the market regarding its earnings, revenues, business and investments; (iii) exposing QCII to massive
liability for securities fraud; (iv) damaging QCII's reputation; and (v) trading QCII's shares while in possession of material, non-public information regarding its true
financial condition. The complaint purports to state causes of action for breach of fiduciary duty, gross negligence and unjust enrichment against some of QCII's former officers and breach of contract
and breach of the duty of loyalty/insider trader trading against several of QCII's former officers and former and current directors. On or about January 7, 2003, plaintiff's counsel filed a
proposed amended complaint which substitutes a new plaintiff, Thomas R. Strauss, and adds another
former officer as a defendant. In the amended complaint, plaintiff seeks (i) disgorgement of bonuses and other incentive compensation paid to certain defendants; (ii) disgorgement of any
profits that certain defendants made by virtue of their alleged trading on material, inside information; and (iii) other damages. By order dated January 9, 2003, the court permitted the
substitution and Strauss became the plaintiff in this lawsuit under the amended complaint.

On
December 10, 2002, the California State Teachers' Retirement System, ("CalSTRS"), filed suit against QCII, certain of QCII's former officers and certain of QCII's current
directors and several other defendants, including Arthur Andersen LLP and several investment banks, in the Superior Court of the State of California in and for the County of San Francisco. CalSTRS
alleges that the defendants engaged in fraudulent conduct that caused CalSTRS to lose in excess of $150 million invested in QCII's equity and debt securities. The complaint alleges, among other
things, that in press releases and other public statements, defendants represented that QCII was one of the highest revenue producing telecommunications companies in the world, with highly favorable
results and prospects. CalSTRS alleges that defendants were engaged, however, "in a scheme to falsely inflate QCII's revenues and decrease its expenses so that QCII would appear more successful than
it actually was." The complaint purported to state causes of action against QCII for (i) violation of California Corporations Code Section 25400 et seq. (securities laws) (seeking, among
other damages, the difference between the price at which CalSTRS sold QCII's notes and stock and their true value); (ii) violation of California Corporations Code Section 17200 et seq.
(unfair competition); (iii) fraud, deceit and concealment; and

21

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(iv) breach
of fiduciary duty. Among other requested relief, CalSTRS seeks compensatory, special and punitive damages, restitution, pre-judgment interest and costs. QCII and the
individual defendants filed a demurrer, seeking dismissal of all claims. In response, the plaintiff voluntarily dismissed the unfair competition claim but maintained the balance of the complaint. The
court denied the demurrer as to the California securities law and fraud claims, but dismissed the breach of fiduciary duty claim against QCII with leave to amend. The court also dismissed the claims
against Robert S. Woodruff and Robin R. Szeliga on jurisdictional grounds. On or about July 25, 2003, plaintiff filed a First Amended Complaint. The material allegations remain largely
the same, but plaintiff no longer alleges claims against Mr. Woodruff and Ms. Szeliga following the court's dismissal of the claims against them, and reasserted its claim against QCII
for breach of fiduciary duty as an allegation of aiding and abetting breach of fiduciary duty. QCII filed a second demurrer to that claim, and on November 7, 2003, the court dismissed that
claim without leave to amend.

On
November 27, 2002, the State of New Jersey (Treasury Department, Division of Investment) ("New Jersey") filed a lawsuit similar to the CalSTRS action in New Jersey Superior
Court, Mercer County. On October 17, 2003, New Jersey filed an amended complaint alleging, among other things, that QCII, certain of QCII's former officers and certain current directors and
Arthur Andersen LLP caused QCII's stock to trade at artificially inflated prices by employing improper accounting practices, and by issuing false statements about QCII's business, revenues and
profits. As a result, New Jersey contends that it incurred tens of millions of dollars in losses. New Jersey's complaint purports to state causes of action against QCII for: (i) fraud;
(ii) negligent misrepresentation; and (iii) civil conspiracy. Among other requested relief, New Jersey seeks from the defendants, jointly and severally, compensatory, consequential,
incidental and punitive damages. On November 17, 2003, QCII filed a motion to dismiss. That motion is pending before the court.

On
January 10, 2003, the State Universities Retirement System of Illinois ("SURSI") filed a lawsuit similar to the CalSTRS and New Jersey lawsuits in the Circuit Court of Cook
County, Illinois. SURSI filed suit against QCII, certain of QCII's former officers and certain current directors, and several other defendants, including Arthur Andersen LLP and several investment
banks. On October 29, 2003, SURSI filed a second amended complaint, dropping (i) certain individual and corporate defendants and (ii) its claim under the Illinois Consumer Fraud
and Deceptive Business Practices Act. The second amended complaint alleges that defendants engaged in fraudulent conduct that caused it to lose in excess of $12.5 million invested in QCII's
common stock and debt and equity securities. The complaint alleges, among other things, that in press releases and other public statements, defendants represented that QCII was one of the highest
revenue producing telecommunications companies in the world, with highly favorable results and prospects. SURSI alleges that defendants were engaged, however, in a scheme to falsely inflate QCII's
revenues and decrease its expenses by, among other allegations, improper conduct related to transactions with the Arizona School Facilities Board, Genuity, Calpoint LLC, KMC, KPNQwest and Koninklijke
KPN, N.V. The complaint purports to state causes of action against QCII under: (i) the Illinois Securities Act; (ii) common law fraud; (iii) common law negligent
misrepresentation; and (iv) Section 11 of the 1933 Act. SURSI seeks, among other relief, punitive and exemplary damages, costs, equitable relief including an injunction to freeze or
prevent disposition of the defendants' assets and disgorgement.

The
consolidated securities action, the consolidated ERISA action and the CalSTRS, New Jersey and SURSI actions described above present material and significant risk to QCII. Some of the

22

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allegations
in these lawsuits include many of the same subjects that the SEC and U.S. Attorney's Office are investigating. Moreover, the size, scope and nature of QCII's recent restatements of its
financial statements for fiscal 2001 and 2000 affect the risks presented by these cases. While QCII intends to defend against these matters vigorously, the ultimate outcomes of these cases are very
uncertain, and QCII can give no assurance as to the impacts on its financial results or financial condition as a result of these matters. Each of these cases is in a preliminary phase. None of the
plaintiffs or the defendants has advanced evidence concerning possible recoverable damages, and QCII has not yet conducted discovery on these and other relevant issues. QCII has disclosed that it is
unable to estimate reasonably a range of loss that it would incur if the plaintiffs in one or more of these lawsuits were to prevail. QCII has engaged in discussions for the purposes of resolving
these matters and continues to evaluate any possible range of loss. Any settlement of or judgment on one or more of these claims could be material, and QCII cannot give any assurance that it would
have the resources available to pay such judgments. Also, in the event of an adverse outcome of one or more of these matters, QCII's ability to meet its debt service obligations and its financial
condition could be materially and adversely affected. As a wholly owned subsidiary of OCII, our business operations and financial condition would be similarly affected.



In January 2001, an amended purported class action complaint was filed in Denver District Court against QCII and certain current and former officers and directors
on behalf of stockholders of U S WEST. The complaint alleges that QCII has a duty to pay a quarterly dividend to U S WEST stockholders of record as of June 30, 2000.
Plaintiffs further claim that the defendants attempted to avoid paying the dividend by changing the record date from June 30, 2000 to July 10, 2000. In September 2002, QCII filed a
motion for summary judgment on all claims. Plaintiffs filed a cross-motion for summary judgment on their breach of contract claims only. On July 15, 2003, the court denied both summary judgment
motions.

Several
purported class actions relating to the installation of fiber optic cable in certain rights-of-way were filed in various courts against QCII on behalf of landowners in Alabama,
California, Colorado, Georgia, Illinois, Indiana, Kansas, Louisiana, Mississippi, Missouri, North Carolina, Oregon, South Carolina, Tennessee and Texas. Class certification was denied in the Louisiana
proceeding and, subsequently, summary judgment was granted in our favor. A new Louisiana class action complaint has recently been filed. Class certification was also denied in the California
proceeding, although plaintiffs have filed a motion for reconsideration. Class certification was granted in the Illinois proceeding. Class certification has not been resolved yet in the other
proceedings. The complaints challenge QCII's right to install its fiber optic cable in railroad rights-of-way and, in Colorado, Illinois and Texas, also challenge QCII's right
to install fiber optic cable in utility and pipeline rights-of-way. In Alabama, the complaint challenges QCII's right to install fiber optic cable in any
right-of-way, including public highways. The complaints allege that the railroads, utilities and pipeline companies own a limited property right-of-way
that did not include the right to permit QCII to install its fiber optic cable on the plaintiff's property. 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 Alabama, California, Colorado, Georgia, Kansas, Louisiana, Mississippi, Missouri, North Carolina, Oregon, South
Carolina, Tennessee and Texas actions purport to be on behalf of a class of such landowners in those states, respectively. The Illinois action purports to be on behalf of landowners adjacent to
railroad

23

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rights-of-way
over which QCII's network passes in Illinois, Iowa, Kentucky, Michigan, Minnesota, Nebraska, Ohio and Wisconsin. Plaintiffs in the Illinois action have filed a
motion to expand the class to a nationwide class. The complaints seek damages on theories of trespass and unjust enrichment, as well as punitive damages. Together with some of the other
telecommunication carrier defendants, in September 2002, QCII filed a proposed settlement of all these matters in the United States District Court for the Northern District of Illinois. On
July 25, 2003, the court granted preliminary approval of the settlement and entered an order enjoining competing class action claims, except those in Louisiana. The settlement and the court's
injunction are opposed by some, but not all, of the plaintiffs' counsel and are on appeal before the Seventh Circuit Court of Appeals. At this time, QCII cannot determine whether such settlement will
be ultimately approved or the final cost of the settlement if it is approved.

Note 8: Subsequent Events

Dividends

For the nine months ended September 30, 2003, we have declared regular dividends amounting to $1.034 billion. In addition, in August and November of
2003, we declared and paid dividends in the amount of $360 million and $719 million, respectively, relating to net income from prior periods that had not been declared or paid as
dividends in those periods. We plan to declare and make additional dividend payments in the future until all net income from wireline entities from prior periods has been declared and remitted as
dividends. We estimate that the incremental amount (in addition to the $1.079 billion declared in 2003) of such dividends will be approximately $1.3 billion.

QCII Purchase Agreement

On December 18, 2003, QCII entered into an agreement to purchase certain telecommunications assets from Allegiance Telecom, Inc. ("Allegiance") for
a purchase price consisting of $300 million in cash, a convertible promissory note in the amount of $90 million and the assumption of certain liabilities. The agreement is subject to
approval by the U.S. Bankruptcy Court and certain other government regulatory agencies. The Bankruptcy Court has designated QCII as the stalking horse bidder in the sale process. Other interested
potential bidders will have an opportunity to offer higher bids for the assets of Allegiance. If QCII is successful in the bidding process, it expects to consummate the transaction some time in 2004.
In that event, it is possible that some portion of the Allegiance assets will be transferred to or purchased by us, although we have not yet determined the amount or the price we would pay for them.

24

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

Unless the context requires otherwise, references in this report to "Qwest," "we," "us," the "Company" and "our" refer to Qwest
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 set forth below under this caption constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. See "Special Note Regarding Forward-Looking Statements" at the end of this Item 2 for additional factors relating to such statements as well as for a discussion of certain risk factors
applicable to our business, financial condition and results of operations.

Business Overview

We are wholly owned by Qwest Services Corporation, or QSC, which is wholly owned by QCII. We provide local telecommunications and related services, IntraLATA
long-distance services and wireless, data and video services within our local service area, which consists of the 14-state region of Arizona, Colorado, Idaho, Iowa, Minnesota,
Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming.

We
intend to transfer ownership of Qwest Wireless LLC, to an affiliate in the near future. After this transfer, we will no longer have significant wireless operations. This transfer will
take place as soon as we have received all necessary regulatory approvals, perhaps as early as the first quarter of 2004. Qwest Wireless will therefore be presented in discontinued operations after
the date of transfer.

Results of Operations

Overview

We generate revenue from the provision of voice services, data and Internet services, wireless services, other services and services to our affiliates. Depending
on the product or service purchased, a customer may pay an up-front fee, a monthly fee, a usage charge or a combination of these. A further description of each revenue category is as
follows:



25

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Business Trends

Our results continue to be impacted by a number of factors influencing the telecommunications industry and our local service area. First, the weak economy in our
local service area has continued to impact demand from both our consumer and business customers. The impacts include reduced demand for services resulting in loss of access lines, renegotiated
commitments and loss of customers. We believe demand will continue to be affected because the economy's recovery in our local service area is expected to lag the national recovery. Second, technology
substitution and competition are expected to lead to continued access line loss. We expect industry-wide competitive factors to continue to impact our results and we have developed new
strategies for offering complementary services such as satellite television and wireless. Third, our results continue to be impacted by regulatory responses to the competitive landscape for our local
services.



In general, we expect to see a continued decrease in voice-related revenue as a result of a decrease in access lines and wireless subscribers. Access lines are
expected to continue decreasing primarily because of technology substitution, including wireless and cable substitution for wireline telephony, and cable modem substitution for dial-up
Internet access lines. In addition, our competitors have accelerated their use of unbundled network element platform, or UNE-P, to deliver voice services. The use of UNE-P is having an
impact on our operations in 2003, resulting in incremental retail access line losses and is causing downward pressure on our revenue.

We
have also begun to experience and expect increased competitive pressure from telecommunications providers either emerging from bankruptcy protection or reorganizing their capital
structure to more effectively compete against us. As a result of these increased competitive pressures, we have been and may continue to be forced to respond with less profitable product offerings and
pricing plans that allow us to retain and attract customers. These pressures could adversely affect our operating results and financial performance.

Starting
in 2004, wireless offerings will be expanded through a new arrangement with Sprint. This arrangement will enable utilization of Sprint's nationwide digital wireless network to
offer customers new voice and data capabilities.

We
expect the pace of growth in affiliate revenue to accelerate. We continued to transition telecommunications traffic previously carried by third parties. In addition, our affiliates
have expanded their data communications needs. During 2004, we expect affiliate revenue to rise due to an increase in access fees charged to our affiliates selling interexchange services in our
region.

26

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Our expenses continue to be impacted by shifting demand due to increased competition and the expansion of our product offerings. Expenses associated with our new
product offerings tend to be more variable in nature. While existing products tend to rely upon our embedded cost structure, the mix of products we expect to sell, combined with regulatory and market
pricing stresses may pressure operating margins.

We
expect the pace of affiliate cost increases to slow and potentially stabilize as a result of the completion in 2003 of the bulk of functional consolidation and employee transfers.

Presentation

The analysis is organized in a way that provides the information required, while highlighting the information that we believe will be instructive for
understanding the relevant trends going forward. In addition to the discussion of the historical information that reviews the current reporting presentation of our condensed consolidated financial
statements, an overview of the operational results is provided below. Our financial results in this section are prepared in accordance with generally accepted accounting principles in the United
States of America, or GAAP.

Our
operations are integrated into and are a part of the segments of the QCII consolidated group. The chief operating decision maker, or CODM, for QCII makes resource allocation
decisions and assessments of financial performance for the consolidated group based on wireline, wireless and other segmentation. For more information about QCII's reporting segments, see QCII's
annual report on Form 10-K for the year ended December 31, 2002, the QCII 2002 Form 10-K. Our business contributes to the segments reported by QCII, but the QCII CODM reviews our financial
information only in connection with this filing. Consequently, we do not provide discrete financial information for Qwest Corporation to a CODM on a regular basis. See further discussion in
Note 5Contributions to QCII segments to our condensed consolidated financial statements in Item 1 of this report.

27

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Results of Operations

|                        |                                                                                    | Three Months Ended September 30, |       | Nine Months Ended September 30, |  
|----------------------- | ---------------------------------------------------------------------------------- | -------------------------------- | ----- | ------------------------------- | -
|
|
|Operating revenues      |                                                                                    | $                                | 2,822 |                                 | $
|Operating expenses:     |                                                                                    |                                  |       |                                 |  
|                        | Cost of sales (exclusive of depreciation and amortization detailed below)          |                                  |       | 751                             |  
|                        | Selling, general and administrative                                                |                                  |       | 806                             |  
|                        | Depreciation                                                                       |                                  |       | 615                             |  
|                        | Intangible assets amortization                                                     |                                  |       | 92                              |  
|                        | Asset impairment charges                                                           |                                  |       | 230                             |  
|                        | Restructuring, merger-related and other charges (credits)                          |                                  |       |                                |  
|                        |                                                                                    |                                  |       |                                 |  
|Operating income        |                                                                                    | $                                | 328   |                                 | $
|Other expense (income): |                                                                                    |                                  |       |                                 |  
|                        | Interest expensenet                                                               |                                  |       | 187                             |  
|                        | Other (income) expensenet                                                         |                                  |       |                                |  
|                        |                                                                                    |                                  |       |                                 |  
|                        | Total other expensenet                                                            |                                  |       | 187                             |  
|                        | Income before income taxes and cumulative effect of change in accounting principle |                                  |       | 141                             |  
|                        | Income tax expense                                                                 |                                  |       | (55                             | )
|                        |                                                                                    |                                  |       |                                 |  
|                        | Income before cumulative effect of change in accounting principle                  |                                  |       | 86                              |  
|                        | Cumulative effect of change in accounting. principle, net of taxes                 |                                  |       |                                |  
|                        |                                                                                    |                                  |       |                                 |  
|                        | Net income                                                                         |                                  | $     | 86                              |  
|                        |                                                                                    |                                  |       |                                 |  

---

nmnot meaningful

Operating Revenues

|                           |                          | Three Months Ended September 30, |       | Nine Months Ended September 30, |  
|-------------------------- | ------------------------ | -------------------------------- | ----- | ------------------------------- | -
|
|
|Voice services             |                          | $                                | 1,966 |                                 | $
|Data and Internet services |                          |                                  | 526   |                                 |  
|Wireless                   |                          |                                  | 152   |                                 |  
|Other services             |                          |                                  | 5     |                                 |  
|Affiliate services         |                          |                                  | 173   |                                 |  
|                           |                          |                                  |       |                                 |  
|                           | Total operating revenues |                                  | $     | 2,822                           |  
|                           |                          |                                  |       |                                 |  

For a description of the products and services included in each revenue line item, see "Overview" above.

28

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Voice Services

Voice ServicesThree months ended September 30, 2003 as compared to the three months ended September 30, 2002

Voice services revenue decreased $148 million, or 7%, for the three months ended September 30, 2003 as compared to the same period in 2002. The
voice services revenue decrease was the result of access line losses and pricing declines driven by competitive pressures.

For
the three months ended September 30, 2003 as compared to the same period in 2002, local voice revenue declined $129 million associated with the loss of approximately
842,000 access lines, with pricing declines driven by competitive pressures. The access line losses were driven by a weak demand in our local service area, technology substitution to wireless and
broadband services and competition. We are experiencing competition in both the business and consumer markets from both facility and non facility-based providers such as cable companies providing
telephony services, competitive local exchange carriers and other telecommunications providers reselling our services. Partially offsetting these declines was growth in UNE-P revenue.

In
addition to the revenue decreases above, voice services declined $19 million for the three months ended September 30, 2003 as compared to the same period in 2002
primarily due to declines in intra-LATA long-distance and demand for services such as collocation, public telephone services and
directory assistance. The declines were primarily driven by the soft telecommunications market, wireless substitution of public telephones and deteriorating economic conditions.

Voice ServicesNine months ended September 30, 2003 as compared to the nine months ended September 30, 2002

Voice services revenue decreased $525 million, or 8%, for the nine months ended September 30, 2003 as compared to the same period in 2002 primarily
as a result of access line losses, pricing declines and a reduction in access services revenue.

We
experienced a decline in local voice services revenue of $368 million for the nine months ended September 30, 2003 as compared to the same period in 2002 associated with
the loss of access lines and pricing declines driven by competitive pricing pressures. Partially offsetting these declines is growth in UNE-P revenue.

We
also experienced a revenue decline of $72 million in access services revenue for the nine months ended September 30, 2003 as compared to the same period in 2002. The
access services revenue declines were due primarily to the same regulatory and industry effects described above. In addition to the revenue decreases above, voice services declined $85 million
for the nine months ended September 30, 2003 as compared to the same period in 2002 primarily due to declines in intra-LATA long-distance and demand for services such as
collocation, public telephone services and directory assistance. The declines were primarily driven by the soft telecommunications market, wireless substitution of public telephones and deteriorating
economic conditions.

Data and Internet Services

Data and Internet services revenue declined $12 million, or 2%, for the three months ended September 30, 2003 as compared to the same periods in
2002, and declined $31 million, or 2%, for the nine months ended September 30, 2003 as compared to the same periods in 2002. Data services revenue declines are mainly the result of the
bankruptcy of large customers, primarily in 2002, such as Touch America, Inc., MCI and Genuity, Inc.

29

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Wireless

Wireless services revenue decreased $27 million, or 15%, for the three months ended September 30, 2003 as compared to the same period in 2002 and
decreased $93 million, or 17%, for the nine months ended September 30, 2003 as compared to the same period in 2002. The decrease is due to our prior strategic decision to
de-emphasize marketing of wireless services on a stand-alone basis coupled with intense industry competition, resulting in a customer decline of 172,000, or 16%.

Affiliate Services

Affiliate services revenue consists of telecommunications services provided to affiliated enterprises. Affiliate services revenue increased $59 million, or
52%, and $149 million, or 49%, for the three and nine months ended September 30, 2003, respectively, as compared to the same periods in 2002. The increases were caused by a migration of
telecommunications services from third-party providers onto our networks.

Operating Expense

The following table provides further detail regarding our operating expenses for the periods as specified:

|                    |                                                           | Three Months Ended September 30, |   | Nine Months Ended September 30, |      
|------------------- | --------------------------------------------------------- | -------------------------------- | - | ------------------------------- | -----
|
|
|Operating expenses: |                                                           |                                  |   |                                 |      
|                    | Cost of sales                                             |                                  | $ | 751                             |      
|                    | Selling, general and administrative ("SG&A")              |                                  |   | 806                             |      
|                    | Depreciation                                              |                                  |   | 615                             |      
|                    | Intangible assets amortization                            |                                  |   | 92                              |      
|                    | Asset impairment charges                                  |                                  |   | 230                             |      
|                    | Restructuring, Merger-related and other charges (credits) |                                  |   |                                |      
|                    |                                                           |                                  |   |                                 |      
|                    |                                                           | Total operating expenses         |   | $                               | 2,494
|                    |                                                           |                                  |   |                                 |      

---

nmnot meaningful

Cost of Sales

The following table shows a breakdown of cost of sales by major component for the three and nine months ended September 30, 2003 and 2002:

|                                   |                     | Three Months Ended September 30, |     | Nine Months Ended September 30, |  
|---------------------------------- | ------------------- | -------------------------------- | --- | ------------------------------- | -
|
|
|Employee and service-related costs |                     | $                                | 442 |                                 | $
|Network costs                      |                     |                                  | 91  |                                 |  
|Non-employee related costs         |                     |                                  | 105 |                                 |  
|Affiliate costs                    |                     |                                  | 113 |                                 |  
|                                   |                     |                                  |     |                                 |  
|                                   | Total cost of sales |                                  | $   | 751                             |  
|                                   |                     |                                  |     |                                 |  

Cost of sales includes salaries and wages, benefits, network costs, materials and supplies, contracted engineering services, computer systems
support and the cost of CPE sold.

30

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Cost of SalesThree months ended September 30, 2003 as compared to the three months ended September 30, 2002

Total cost of sales increased $109 million, or 17%, for the three months ended September 30, 2003 as compared to the same period in 2002. Cost of
sales, as a percent of revenue, was 27% for the three months ended September 30, 2003 as compared to 22% for the three months ended September 30, 2002.
Cost of sales increased primarily due to a decreased net pension credit, higher retiree healthcare costs and regulatory fees.

Employee
and service-related costs, such as salaries and wages, benefits, commissions, overtime and third-party customer service increased $44 million, or 11%, for the three
months ended September 30, 2003 as compared to the same period in 2002. The increase is primarily due to a decreased net pension credit and higher retiree healthcare costs.

Our
network costs increased $15 million, or 20%, for the three months ended September 30, 2003 as compared to the same period in 2002. In July 2003, we amended our
agreement with Microsoft so that we are responsible for providing broadband services to end users. Previously, these services were provided to Microsoft on a wholesale basis. This change required that
we become responsible for all costs associated with providing this service to end users. As a result, the associated revenue and costs increased.

Non-employee
related costs, such as real estate, cost of CPE sold, and regulatory fees increased $38 million, or 57%, for the three months ended September 30,
2003 as compared to the same period in 2002. The increase is primarily attributable to increases in regulatory fees.

Affiliate
costs, such as services for corporate administration, information technology, advertising, and technical support, increased $12 million, or 12%, for the three months
ended September 30, 2003 as compared with the same period in 2002. The increases were due to higher costs for technical support and sales.

Cost of SalesNine months ended September 30, 2003 as compared to the nine months ended September 30, 2002

Total cost of sales increased $107 million, or 5% for the nine months ended September 30, 2003 as compared to the same period in 2002. Cost of
sales, as a percent of revenue, was 25% for the nine months ended September 30, 2003 as compared to 23% for the same period in 2002. Cost of sales increased primarily due to decreased net
pension credit and higher retiree healthcare costs and regulatory fees.

Employee
and service-related costs increased $57 million, or 5%, for the nine months ended September 30, 2003 as compared to the same period in 2002. The increase is
primarily due to a decreased net pension credit and higher retiree healthcare costs. Partially offsetting the increases were lower staffing costs and other employee costs resulting from prior
restructuring efficiencies and lower professional fees due to decreased use of third-party vendors.

Non-employee
related costs increased $43 million, or 16%, for the nine months ended September 30, 2003 as compared to the same period in 2002. The increase is
attributable to increases in regulatory fees.

Affiliate
costs increased $17 million, or 6%, for the nine months ended September 30, 2003 as compared with the same period in 2002. The increases were due to higher costs
for technical support and sales.

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Selling, General and Administrative (SG&A) Expense

The following table shows a breakdown of SG&A by major component for the three and nine months ended September 30, 2003 and 2002:

|                                   |            | Three Months Ended September 30, |     | Nine Months Ended September 30, |  
|---------------------------------- | ---------- | -------------------------------- | --- | ------------------------------- | -
|
|
|Employee and service-related costs |            | $                                | 192 |                                 | $
|Bad debt                           |            |                                  | 46  |                                 |  
|Property and other taxes           |            |                                  | 100 |                                 |  
|Non-employee related costs         |            |                                  | 105 |                                 |  
|Affiliate costs                    |            |                                  | 363 |                                 |  
|                                   |            |                                  |     |                                 |  
|                                   | Total SG&A |                                  | $   | 806                             |  
|                                   |            |                                  |     |                                 |  

SG&AThree months ended September 30, 2003 as compared to the three months ended September 30, 2002

SG&A expenses include taxes other than income taxes, bad debt charges, salaries and wages not directly attributable to the provision of products or services,
benefits, sales commissions, rent for administrative space, advertising, professional service fees and computer systems support.

Total
SG&A decreased $108 million, or 12%, for the three months ended September 30, 2003 as compared to the same period in 2002. SG&A, as a percent of revenue, was 28% for
the three months ended September 30, 2003 compared to 31% for the same period in 2002. Decreases in employee costs, professional fees, bad debt, and marketing and advertising were the primary
causes of the decline.

Employee
and service-related costs, such as salaries and wages, benefits, sales commissions, overtime and professional fees (such as telemarketing, and customer service costs), decreased
$37 million, or 16%, for the three months ended September 30, 2003 as compared to the same period in 2002. The decline is primarily due to an increase in expenses that are eligible for
capitalization, reduced professional fees due to decreased use of third-party vendors and lower internal commissions partially offset by decreases in the net pension credit and higher retiree
healthcare costs.

Bad
debt expense decreased $31 million, or 40%, for the three months ended September 30, 2003 as compared to the same period in 2002. This decrease was primarily related to
improved collections practices and tighter credit policies.

Non-employee
related costs, such as marketing and advertising, rent for administrative space and software expenses, decreased $27 million, or 20%, for the three months
ended September 30, 2003 as compared to the same period in 2002. The decrease was primarily driven by a decrease in marketing and advertising expenses due to third quarter cost reduction
efforts.

SG&ANine months ended September 30, 2003 as compared to the nine months ended September 30, 2002

SG&A, as a percent of revenue, was 28% for the nine months ended September 30, 2003 compared to 30% for the same period in 2002. Total SG&A decreased
$285 million, or 11%, for the nine months ended September 30, 2003 as compared to the same period in 2002. The decrease relates primarily to lower professional fees, lower bad debt, and
lower marketing and advertising costs, offset by a decreased net pension credit and higher retiree healthcare costs.

Employee
and service-related costs decreased $98 million, or 14%, for the nine months ended September 30, 2003 as compared to the same period in 2002. The decrease was
primarily related to lower professional fees paid to third-party service providers and other related costs as we shifted

32

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certain
previously outsourced customer service and sales functions to employees; partially offset by decreases in the net pension credit and higher retiree healthcare costs.

Bad
debt expense decreased $167 million, or 54%, for the nine months ended September 30, 2003 as compared to the same period in 2002. Bad debt also decreased as a
percentage of revenue to 2% for the nine months ended September 30, 2003 from 3% for the same period in 2002. Bad debt declined across the business as a result of fewer customer bankruptcy
filings, improved collections practices and tighter credit policies.

Property
and other taxes decreased $36 million, or 10%, for the nine months ended September 30, 2003 as compared to the same period in 2002. Reduced property and other
taxes are attributable to changes in estimates of property tax liabilities.

Non-employee
related costs decreased $49 million, or 12%, for the nine months ended September 30, 2003 as compared to the same period in 2002. The decrease was
driven primarily by a decrease in marketing and advertising spending due to third quarter cost reduction efforts.

Affiliate
expenses, such as services for corporate administration, information technology, advertising and technical support, increased $65 million, or 7%, for the nine months
ended September 30, 2003 as compared to the same period in 2002. The increases were due to higher administrative costs, which includes costs resulting from our accounting restatement.

Combined Pension and Post-Retirement Benefits

Our employees participate in the QCII pension, post-retirement and other post-employment benefit plans. Our results include
post-retirement benefit expenses allocated to us by QCII, net of pension credits, of $54 million in the third quarter of 2003, a pension credit, net of post-retirement
benefits expenses, of $5 million in the third quarter of 2002, post-retirement benefit expenses, net of pension credits, of $163 million in the nine months ended
September 30, 2003 and a pension credit, net of post-retirement expenses, of $17 million in the nine months ended September 30, 2002. Absent these expenses or credits,
our net income in the applicable period would have been higher or lower by these amounts. The net pension expense or credit is a function of the amount of pension and post-retirement
benefits earned, interest on projected benefit obligations, amortization of costs and credits from prior benefit
changes and the expected return on the assets held in the various plans. The net pension expense or credit is allocated partially to cost of sales with the remaining balance included in SG&A.

The
change to a net benefit expense in the three and nine months ended September 30, 2003 from a net pension credit in the three and nine months ended September 30, 2002 is
primarily due to decreased returns on investments and increased medical costs for plan participants.

Depreciation

Depreciation expense decreased $25 million, or 4%, for the three months ended September 30, 2003 compared to the same period in 2002. The decrease
was the result of certain assets becoming fully depreciated in 2002 and the completion of certain capitalized lease agreements in the three months ended September 30, 2002. The decrease was the
result of the $825 million impairment we recorded as of June 30, 2002 and the resulting decrease in the depreciable basis of our fixed assets discussed below; certain assets becoming
fully depreciated in 2002; and the completion of certain capitalized lease agreements in the nine month period ended September 30, 2002.

Depreciation
expense decreased $178 million, or 9%, for the nine months ended September 30, 2003 as compared to the same period in 2002.

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Intangible Assets Amortization

Amortization expense increased $11 million, or 14%, for the three months ended September 30, 2003 compared to the same period of 2002. The increase
was attributed to increases in capitalized software costs. For the nine months ended September 30, 2003, amortization expense increased $43 million, or 19%, compared to the same period
of 2002. The increase was attributed to increases in capitalized software costs partially offset by an impairment of certain of our intangible assets recorded on June 30, 2002, which reduced
our annual amortization by $10 million.

Asset Impairment Charges

In August 2003, we entered into a services agreement with a subsidiary of Sprint that allows us to resell Sprint wireless services, including access to
Sprint's nationwide PCS wireless network, to consumer and
business customers, primarily within our local service area. We plan to begin offering these Sprint services under our brand name in early 2004. Our wireless customers who are currently being serviced
through our proprietary wireless network will be transitioned onto Sprint's network. Due to the anticipated decrease in usage of our own wireless network following the transition of our customers onto
Sprint's network, in the third quarter of 2003 we performed an evaluation of the recoverability of the carrying value of our long-lived wireless network assets.

In
accordance with Statement of Financial Accounting Standards, or SFAS, No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," or SFAS
No. 144, we compared gross undiscounted cash flow projections to the carrying value of the long-lived wireless network assets and determined that certain asset groups were not
expected to be recovered through future projected cash flows. For those asset groups that were not recoverable, we then estimated the fair value using recent selling prices for comparable assets. Our
cell sites, switches, related tools and equipment inventory and certain information technology systems that support the wireless network were determined to be impaired by $230 million.

Effective
June 30, 2002, pursuant to SFAS, No. 144, a general deterioration of the telecommunications market, downward revisions to our expected future results of
operations and other factors indicated that our investments in long-lived assets may have been impaired at that date. In accordance with SFAS No. 144, we performed an evaluation of
the recoverability of the carrying value of our long-lived assets using gross undiscounted cash flow projections. For impairment analysis purposes, we grouped our property, plant and
equipment and projected cash flows by our traditional telephone network and our wireless network. Based on the gross undiscounted cash flow projections, we determined that our traditional telephone
network was not impaired at June 30, 2002. However, we determined that the value of our wireless network, which provides PCS in select markets in our local service area, was impaired at
June 30, 2002. For the wireless network, we then estimated the fair value based on replacement costs. Based on our analysis, the estimated fair value of the wireless assets was less than our
carrying amounts and we recorded an impairment charge of $825 million as of June 30, 2002. Replacement cost was determined by using current cost adjusted for physical deterioration,
functional obsolescence and economic obsolescence.

In
accordance with SFAS No. 144, the fair value of the impaired assets becomes the new basis for accounting purposes. As such, approximately $410 million in accumulated
depreciation was eliminated in connection with the accounting for the impairments. The impact of the impairments reduced our annual depreciation and amortization expense by approximately
$135 million, effective July 1, 2002. Additionally, the 2003 impairment will reduce our annual depreciation and amortization expense by approximately $40 million, effective
October 1, 2003.

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Restructuring, Merger-Related and Other Charges (Credits)

A summary of restructuring, Merger-related and other charges (credits), which includes the reversal of Merger-related reserves in 2002, recorded to our condensed
consolidated statements of operations for the three and nine months ended September 30, 2003 is as follows:

|                                                         |  | Three Months
Ended
September 30, |   | Nine Months
Ended
September 30, |  
|-------------------------------------------------------- |  | -------------------------------- | - | ------------------------------- | -
|
|
|2003 restructuring                                       |  | $                                |  |                                 | $
|2002 restructuring plan charges                          |  |                                  |  |                                 |  
|2001 restructuring plan reversals                        |  |                                  |  |                                 |  
|Other restructuring costs                                |  |                                  |  |                                 |  
|Other Merger-related reversals                           |  |                                  |  |                                 |  
|                                                         |  |                                  |   |                                 |  
|Total restructuring and Merger-related charges (credits) |  | $                                |  |                                 | $
|                                                         |  |                                  |   |                                 |  

2003 Activities

During the nine months ended September 30, 2003, QCII identified planned employee reductions in various functional areas. As a result, we established a
reserve and recorded a charge of $19 million to our condensed consolidated statement of operations to cover the costs associated with these actions.

The
charge of $19 million relates to severance benefits and other charges pursuant to established severance policies associated with a reduction in employees. We identified
approximately 650 employees from various functional areas to be terminated as part of this reduction. Through September 30, 2003, we completed approximately 600 of the planned reductions, and
used $13 million of the restructuring reserve for severance payments and enhanced pension benefits.

Other
severance related charges not associated with the specific restructuring plans were $4 million for nine months ended September 30, 2003.

As
a result of these restructuring activities, we expect to realize reduced employee and related expenses of approximately $38 million per annum.

2002 Activities

During 2002, in response to shortfalls in employee reductions planned as part of the 2001 restructuring plan (as discussed below), and due to the continued
declines in our revenue and general economic conditions, QCII identified planned reductions in employees from various functional areas and permanently abandoned a number of operating and
administrative facilities. These activities included charges of $49 million for the three and nine months ended September 30, 2002, for severance benefits and employee-related matters
pursuant to established severance policies triggered by a reduction in employees, which we recorded directly to restructuring and other charges in our condensed consolidated statement of operations.
QCII identified approximately 2,400 of our employees from various functional areas to be separated from Qwest as part of the staffing reduction. The affected employees are entitled to receive
severance benefits pursuant to established severance policies. As of September 30, 2002, we completed approximately 1,600 of the planned reductions resulting in the utilization of
$17 million for cash payments and enhanced pension benefits. At September 30, 2003, our restructuring activities under this plan were substantially complete. For the nine months ended
September 30, 2003, we used $27 million of the restructuring reserve for severance payments and enhanced pension benefits.

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In
conjunction with the staffing reductions, we permanently abandoned 25 real estate facilities and recorded a charge of $25 million for the three and nine months ended
September 30, 2002 related to the rental payments due under the leases, net of estimated subleases rentals, and estimates of amounts to terminate the leases. For the nine months ended
September 30, 2003, we utilized $4 million of the established reserves primarily for payments of amounts due under the leases. We expect that the remaining reserve will be utilized over
the remaining term of the leases, which are up to five years.

In
addition, other severance-related charges not associated with the specific restructuring plans were $7 million for the three and nine months ended September 30, 2003.

As
a result of these restructuring activities, we realized a cost savings of $42M for the nine months ended September 30, 2003.

2001 Activities

During the fourth quarter of 2001, in order to streamline our business and consolidate operations in response to lower customer demand resulting from a decline in
economic conditions, QCII implemented plans to reduce the number of our employees, consolidate and sublease facilities, abandon
certain capital projects and terminate certain operating leases. During the three and nine months ended September 30, 2003 we utilized none and $8 million of the reserve, respectively.

As
a result of the shortfall in actual terminations we reversed $64 million of the severance accruals established in 2001, which we recorded as a reduction in restructuring
charges in our three and nine months ended September 30, 2002, condensed consolidated statement of operations.

Subsequent event

During the fourth quarter of 2003, as part of an ongoing effort of evaluating costs of operations, QCII further reduced employee levels in certain areas of our
business. As a result, we plan to record a charge to our condensed consolidated statement of operations during the fourth quarter of 2003, primarily for estimated severance costs ranging from $35 to
$55 million.

Merger-Related Charges

During the nine months ended September 30, 2002, we reversed $30 million of the Merger-related accrual. The reversal resulted from favorable
developments in the matters underlying contractual settlements and legal contingencies.

Total Other ExpenseNet

Other expensenet includes interest expense, net of capitalized interest and other incomenet which includes interest income. Components
of other expensenet for the three months and nine months ended September 30 are as follows:

|                           |                         | Three Months Ended
September 30, |     | Nine Months Ended
September 30, |  
|-------------------------- | ----------------------- | -------------------------------- | --- | ------------------------------- | -
|
|
|Interest expensenet       |                         | $                                | 187 |                                 | $
|Other expense (income)net |                         |                                  |    |                                 |  
|                           |                         |                                  |     |                                 |  
|                           | Total other expensenet |                                  | $   | 187                             |  
|                           |                         |                                  |     |                                 |  

---

nmnot meaningful

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Interest expensenet.Interest expensenet, was $187 million and $175 million for the
three months ended September 30, 2003 and 2002 respectively. Interest expensenet, was $537 million and $526 million for the nine months ended September 30,
2003 and 2002 respectively. The increase in expense was the result of a decrease in the amount of interest that was capitalized for the nine months ended September 30, 2003. This decrease in
capitalized interest was due primarily to a decrease in network buildout for the nine months ended September 30, 2003 as compared to the same period ended 2002.

Other expense (income)net.Other expense (income)net was $0 for the three months ended
September 30, 2003 compared to ($11) million for the same period ended September 30 2002. Other expense (income)net was $2 million for the nine months ended
September 30, 2003 compared to $(6) million the same period ended September 30, 2002. These increases were primarily the result of an increase in abandoned projects in 2003.

Income Tax Expense

The effective income tax rate is the provision for income taxes as a percentage of pre-tax income. Our effective income tax rate has remained
relatively flat for all comparative periods.

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 changes in the market's perception of us and impacts on our credit ratings.

Financial Position

QCII has cash management arrangements between certain of its subsidiaries that includes lines of credit, intercompany 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.

Our
working capital deficit, or current assets less current liabilities, was $1.8 billion and $3.8 billion as of September 30, 2003 and December 2002, respectively.
Our current working capital deficit is primarily due to borrowings from affiliates, by our wholly owned subsidiary, Qwest Wireless, amounting to $2.079 billion as of September 30, 2003.
These borrowings mature on January 15, 2005. We expect that the maturities of these borrowings will be extended by our affiliates as necessary.

The
improvement of $2.0 billion in working capital deficit during 2003 was due to a combination of an increase in cash and cash equivalents, our decision to reduce capital
expenditures and our refinancing of current borrowings with long-term debt. The increase in cash was primarily due to a $1.75 billion
senior term loan that we entered into in June of 2003, of which a significant portion was used to refinance our short-term borrowings to long-term.

As
of September 30, 2003 and December 31, 2002, our consolidated debt was approximately $9.8 billion and $9.2 billion, respectively, including borrowings from
affiliates. In addition, our unrestricted cash balances were approximately $1.4 billion and $232 million, as of the same dates. We expect to use our cash primarily to invest in
telecommunications assets, redeem indebtedness and pay dividends to QSC. To preserve capital and maintain liquidity, we invest with financial institutions deemed to be of sound financial condition and
in high quality and relatively risk-free investment products. Our cash investment policy limits the concentration of investments with specific financial institutions or among certain products and
includes criteria related to credit worthiness of any

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particular
investment. Recently we have taken the following measures to improve our near-term liquidity and our capital structure and generally reduce financial risk:



We
believe that cash flows from operations, our current cash position and continued access to capital markets will allow us to meet our business requirements, including debt service,
dividends and capital expenditures for the foreseeable future.

Operating activities.We generated cash from operating activities of $3.698 billion and $3.456 billion, for the
nine months ended September 30, 2003 and September 30, 2002, respectively.

The
$242 million increase in cash provided by operating activities for the nine months ended September 30, 2003 as compared to the same period in 2002 was primarily the
result of cash management improvements of approximately $600 million offset by reduced cash flows related to a $499 million decrease in revenues. The cash management improvements between
these periods were primarily a result of increases in collections of revenues and reductions in cash outlays for operating expenses, offset by increased cash payments for prepaid taxes. Revenue
decreased as a result of access line losses, pricing declines and a reduction in access services revenue.

Investing activities.Cash used in investing activities decreased $187 million to $1.231 billion for the nine
months ended September 30, 2003, from $1.418 billion, for the nine months ended September 30, 2002. The decrease was primarily due to a decrease in capital expenditures of
$226 million. This decrease in capital expenditures was the result of our decision to reduce our expansion efforts as a result of the general economic downturn and the completion of many of our
major capital projects.

Capital
expenditures for the nine months ended September 30, 2003 and 2002 were $1.199 billion and $1.425 billion, respectively.

Financing activities.Cash used for financing activities was $1.291 billion through September 30, 2003 and
$1.993 billion for the same period ended 2002. At September 30, 2003, we were in compliance with all provisions and covenants of our borrowings. Some of QSC's loan documents contain
financial reporting covenants that require delivery of our annual and quarterly periodic reports. A waiver has been obtained for non-compliance to provide certain annual and quarterly financial
information to the lenders. The waiver extended the compliance date to provide the financial information to January 31, 2004.

Financing Activities for the Nine Months Ended September 30, 2003

On June 9, 2003, we entered into a senior term loan with two tranches for a total of $1.75 billion principal amount of indebtedness. The term loan
consists of a $1.25 billion floating rate tranche, due in 2007, and a $500 million fixed rate tranche, due in 2010. The term loan is unsecured and ranks equally with all of our current
indebtedness. The floating rate tranche cannot be prepaid for two years and thereafter is subject to prepayment premiums through 2006. There are no mandatory prepayment requirements. The covenant and
default terms are substantially the same as those associated with our other long-term debt. The net proceeds were used to refinance debt due in 2003 and fund or refinance our investment in
telecommunications assets.

The
floating rate tranche bears interest at London Interbank Offered Rates plus 4.75% (with a minimum interest rate of 6.50%) and the fixed rate tranche bears interest at 6.95% per
annum. The interest rate on the floating rate tranche was 6.50% at September 30, 2003. The lenders funded the

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entire
principal amount of the loan subject to the original issue discount for the floating rate tranche of 1.00% and for the fixed rate tranche of 1.652%.

Affiliate
borrowings of our wholly owned subsidiary, Qwest Wireless, in the form of short-term unsecured lines of credit, were $2.079 billion and $1.888 billion at
September 30, 2003 and December 31,
2002, respectively. These affiliate borrowings fluctuate based on operating needs of Qwest Wireless and mature on January 15, 2005.

Our
dividends during 2003 were $1.930 billion, which were paid to QSC, our parent.

Recent Developments Impacting Liquidity and Capital Resources

For the nine months ended September 30, 2003 we have declared regular dividends amounting to $1.034 billion. In addition, in August and November of
2003, we declared and paid dividends in the amount of $360 million and $719 million, respectively, relating to net income from prior periods that had not been declared or paid as
dividends in those periods. We plan to declare and make additional dividend payments in the future until all net income from wireline entities from prior periods has been declared and remitted as
dividends. We estimate that the incremental amount (in addition to the $1.079 billion declared in 2003) of such dividends will be approximately $1.3 billion.

On
December 18, 2003, QCII entered into an agreement to purchase certain telecommunications assets from Allegiance Telecom, Inc. for a purchase price consisting of
$300 million in cash, a convertible promissory note in the amount of $90 million and the assumption of certain liabilities. The agreement is subject to approval by the U.S. Bankruptcy
Court and certain other government regulatory agencies. Allegiance has filed a motion with the Bankruptcy Court to begin a sale process in which QCII will be designated as the stalking horse bidder
and other interested potential bidders will have an opportunity to offer higher bids for the assets of Allegiance. If QCII is successful in the bidding process, it expects to consummate the
transaction sometime in 2004. In that event, it is likely that some portion of the Allegiance assets will be transferred to or purchased by us, although we have not yet determined the amount or the
price we would pay for them.

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 may employ derivative financial instruments to manage our interest rate risk exposure. We may also employ financial derivatives to hedge foreign currency
exposures associated with particular debt.

As
of September 30, 2003 and December 31, 2002, approximately $1.25 billion and $0, respectively, of floating rate debt was exposed to changes in interest rates.
This exposure is linked to LIBOR after LIBOR equals 1.75%. A hypothetical increase of one percentage point in LIBOR rates would increase annual pre-tax interest expense by
$12.5 million. As of September 30, 2003 and December 31, 2002, we also had $0 and $1.2 billion, respectively, of long-term fixed rate debt obligations maturing
in the following twelve months. Any new debt obtained to refinance this debt would be exposed to changes in interest rates. A hypothetical 10% change in the interest rates on this
debt would not have had a material effect on our earnings. We had $6.6 billion and $6.1 billion of long-term fixed-rate debt at September 30, 2003 and
December 31, 2002, respectively. A 100 basis point increase in the interest rates on this debt would result in a decrease in the fair value of these instruments of approximately
$400 million and $300 million at September 30, 2003 and December 31, 2002, respectively. A 100 basis point decrease in the interest rates on this debt would result in an
increase in the fair value of these instruments of approximately $500 million and $400 million as of September 30, 2003 and December 31, 2002, respectively.

As
of September 30, 2003, we had $1.408 billion of cash invested in money market and other short-term investments. Most cash investments are invested at
floating rates. As interest rates change, so will the interest income derived from these accounts.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q contains or incorporates by reference "forward-looking statements," as that term is used in federal securities laws, about our
financial condition, results of operations 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 will file with the Securities and Exchange Commission, or SEC. You can
find many of these statements by looking for words such as "believes," "expects," "anticipates," "estimates," or similar expressions used in this report or incorporated by reference in this report.

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 below under "Risk Factors". These risk factors should be considered in connection with any subsequent written or oral
forward-looking statements that we or persons acting on our behalf may issue. 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 report or to reflect the occurrence of unanticipated events. Further, the information contained in
this document is a statement of our intention as of the date of this filing 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.

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RISK FACTORS

Risks Affecting Our Business

Continued downturn in the economy in our local service area could affect our operating results.

Our operations in our local service area of Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah,
Washington and Wyoming have been impacted by the continuing weakness in that region's economy. Because customers have less discretionary income, demand for second lines or additional services has
declined. This economic downturn in our local service area has also led to an increased customer disconnection rate. In addition, several of the companies with which we do business appear to be in
financial difficulty or have filed for bankruptcy protection. Some of these have requested renegotiation of long-term agreements with us because of their financial circumstances and
because they believe the terms of these agreements are no longer appropriate for their needs. Our revenue has been and is likely to continue to be adversely affected by the loss or reduction of
business with many of our customers as a result of this downturn and our continued efforts to accommodate our customers' needs in this changing business environment.

We
believe that our local service area's economy lagged the national economy in entering the downturn and may follow the national economy in recovery by an indeterminate period. This
continued economic slowdown will affect demand for our products and services within our local service area.

We face pressure on profit margins as a result of increasing competition, including product substitution, which could adversely affect our operating results and financial
performance.

We compete in a rapidly evolving and highly competitive market, and we expect competition to intensify. We have faced greater competition in our core local
business from cable companies, wireless providers (including ourselves), facilities-based providers using their own networks as well as those leasing parts of our network (unbundled network elements)
and resellers. Regulatory developments have generally increased competitive pressures on our business, such as the recent decision allowing for number portability from wireline to wireless phones.

One
of the primary reasons we continue to experience loss of access lines is the intense competition from cable and wireless providers offering a substitute for our traditional voice and
data services. We are implementing new strategies for enhancing our video and wireless offerings. However, it will be difficult to effectively execute our strategy in the face of increasing
competition. For example, our recently announced wireless strategy of reselling Sprint wireless services to our customers is untested. We may not be able to effectively integrate Sprint's services
into our product offerings and it may require greater resources than we anticipate to operate as a wireless reseller. Also, while we recently entered into strategic marketing arrangements with
Echostar and DIRECTV to bundle their satellite television products and services with our traditional telecommunications, data and Internet offerings, our video offering remains limited to select
markets in our local service area. If we are unable to effectively implement our strategy for improving video and wireless solutions, both our wireless and our traditional telephone businesses may be
adversely affected.

We
have also begun to experience and expect further increased competitive pressure from telecommunications providers either emerging from bankruptcy protection or reorganizing their
capital structure to more effectively compete against us. As a result of these increased competitive pressures, we have been and may continue to be forced to respond with lower profit margin product
offerings and pricing schemes that allow us to retain and attract customers. These pressures could adversely affect our operating results and financial performance.

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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.

The telecommunications industry is experiencing significant technological changes, and our ability to execute on our business plans and compete depends upon our
ability to develop new products and accelerate the deployment of advanced new services, such as broadband data, wireless and video services and Voice over Internet Protocol, services. The development
and deployment of new products could require substantial expenditure of financial and other resources in excess of contemplated levels. If we are not able to develop new products to keep pace with
technological advances, or if such products 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 the trading price of our securities and our ability to service our debt.

Risks Relating to Legal and Regulatory Matters

Any adverse outcome of investigations of QCII currently being conducted by the SEC and the U.S. Attorney's Office or the assessment being undertaken by the General Services
Administration, or GSA, could have a material adverse impact on us, on the trading price for our debt and on our ability to access the capital markets.

On April 3, 2002, the SEC issued an order of investigation that made formal an informal investigation of QCII initiated on March 8, 2002. QCII is
continuing in its efforts to cooperate fully with the SEC in its investigation. The investigation includes, without limitation, inquiry into several specifically identified QCII accounting practices
and transactions and related disclosures that are the subject of the various adjustments and restatements described in the QCII 2002 Form 10-K. The investigation also includes
inquiry into disclosure and other issues related to transactions between QCII and certain of its vendors and certain investments in the securities of those vendors by individuals associated with QCII.

On
July 9, 2002, QCII was informed by the U.S. Attorney's Office for the District of Colorado of a criminal investigation of QCII. QCII believes the U.S. Attorney's Office is
investigating various matters that include the subjects of the investigation by the SEC.

While
QCII is continuing in its efforts to cooperate fully with the SEC and the U.S. Attorney's Office in each of their respective investigations, QCII cannot predict the outcome of
those investigations. QCII has engaged in discussions with the SEC staff in an effort to resolve the issues raised in the SEC's investigation of it. Such discussions are preliminary and QCII cannot
predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. However, settlements typically involve, among other things, the SEC making
claims under the federal securities laws in a complaint filed in United States District Court that, for purposes of the settlement, the defendant neither admits nor denies. Were such a settlement to
occur, QCII would expect such claims to address many of the accounting practices and transactions and related disclosures that are the subject of the various restatements QCII has made as well as
additional transactions. In addition, any settlement with the SEC may also involve, among other things, the imposition of a civil penalty, the amount of which could be material, and the entry of a
court order that would require, among other things, that QCII and its officers and directors comply with provisions of the federal securities laws as to which there have been allegations of prior
violations.

In
addition, as previously reported, the SEC has conducted an investigation concerning QCII's earnings release for the fourth quarter and full year 2000 issued on January 24,
2001. The release provided pro forma normalized earnings information that excluded certain nonrecurring expense and income items resulting primarily from QCII's merger with U S WEST. On
November 21, 2001, the SEC staff informed QCII of its intent to recommend that the SEC authorize an action against QCII that would allege it should have included in the earnings release a
statement of its earnings in accordance

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with
GAAP. At the date of this filing, no action has been taken by the SEC. However, QCII expects that if its current discussions with the staff of the SEC result in a settlement, such settlement
would include allegations concerning the January 24, 2001 earnings release.

Also,
the GSA is conducting a review of all contracts with QCII for purposes of determining present responsibility. On September 12, 2003, we were informed that the Inspector
General of the GSA had referred to the GSA Suspension/Debarment Official the question of whether QCII (including us and its other subsidiaries) should be considered for debarment. QCII is cooperating
fully with the GSA and believes that it and we will remain suppliers of the government, although QCII cannot predict the outcome of this referral.

An
adverse outcome with respect to one or more of the SEC investigations, the U.S. Attorney's Office investigation or the GSA evaluation could have material and significant adverse
impact upon us.

The breadth of QCII's internal analysis of its accounting policies, practices and procedures, the passage of time and the turnover in accounting personnel or further review by
the SEC could result in additional adjustments.

QCII continues to discuss its periodic filings with the staff of the SEC's Division of Corporation Finance. They have reviewed QCII's 2001
Form 10-K and its Form 10-Q for the three months ended March 31, 2002. As appropriate, QCII has attempted to address the Staff's comments in its current
filings and has provided responses to those other comments that it could address. Following their review of QCII's 2002 Form 10-K, and Form 10-Qs for the three,
six and nine months ended March 31, 2003, June 30, 2003 and September 30, 2003, QCII may receive additional comments from the staff of the Division of Corporation Finance and may
be required to make further adjustments or additional disclosures. It is possible that these comments may lead to further investigations from the SEC's Division of Enforcement.

While
QCII has attempted to address all the matters identified in its internal analysis of its accounting policies, practices and procedures, due to the breadth of this analysis, the
passage of time and the turnover in accounting personnel employed by QCII, QCII may have overlooked some matters in its internal analysis.

Major lawsuits have been brought against QCII involving its accounting practices and other matters. The outcomes of these lawsuits and other lawsuits affecting us may have a
material adverse effect on our business, financial condition and operating results.

Several lawsuits have been filed against QCII as well as certain of QCII's past and present officers and directors. These lawsuits include putative class action
lawsuits in which the plaintiffs allege numerous violations of securities laws. In one of these actions, lead counsel for the plaintiffs has indicated that plaintiffs will seek damages in the billions
of dollars. For a description of these legal actions, please see Note 7Commitments and Contingencies to our condensed consolidated financial statements in Item 1 of this report.

The
consolidated securities action, the consolidated ERISA action and the California State Teachers' Retirement System, State of New Jersey (Treasury Department, Division of Investment)
and State Universities Retirement System of Illinois actions described in Note 7Commitments and Contingencies to our condensed consolidated financial statements in Item 1 of this
report present material and significant risk to QCII. Some of the allegations in these lawsuits include many of the same subjects that the SEC and U.S. Attorney's Office are investigating. Moreover,
the size, scope and nature of QCII's recent restatements of its financial statements for fiscal 2001 and 2000 affect the risk presented by these cases. While QCII intends to defend against these
matters vigorously, the ultimate outcomes of these cases are very uncertain, and QCII can give no assurance as to the impacts on its financial results or financial condition as a result of these
matters. Each of these cases is in a preliminary phase. None of the plaintiffs or the defendants has advanced evidence concerning possible recoverable damages, and QCII has not yet conducted discovery
on these and other relevant issues.

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QCII
has disclosed that it is unable to estimate reasonably a range of loss that it would incur if the plaintiffs in one or more of these lawsuits were to prevail. QCII has engaged in discussions for
the purpose of resolving these matters and continues to evaluate any possible range of loss. Any settlement of or judgment on one or more of these claims could be material, and QCII cannot give any
assurance that it would have the resources available to pay such judgments. Also, in the event of an adverse outcome of one or more of these matters, QCII's ability to meet its debt service
obligations and its financial condition could be materially and adversely affected. As a wholly owned subsidiary of QCII, our business operations and financial condition would be similarly affected.

Further,
given the size and nature of QCII's and our business, QCII and we are subject from time to time to various other lawsuits which, depending on their outcome, may have a material
adverse effect on our financial position. Thus, we can give no assurances as to the impacts on our financial results or financial condition as a result of these matters.

Increased scrutiny of financial disclosure, particularly in the telecommunications industry in which we operate, could reduce investor confidence and affect our business
opportunities, and any restatement of our
earnings as stated in this filing could limit our ability to access the capital markets and could increase litigation risks.

As a result of our and QCII's accounting issues and the increased scrutiny of financial disclosure, investor confidence in us has suffered and could suffer
further. Congress, the SEC, other government authorities and the media are intensely scrutinizing a number of financial reporting issues and practices.

In
addition to the SEC investigation discussed earlier, QCII has reported that the SEC has investigated QCII's earnings release for the fourth quarter and full year 2000 and that the
staff of the SEC has decided to recommend an action against QCII alleging that it should also have included in the earnings release a statement of its GAAP earnings. Although all businesses face
uncertainty with respect to how the U.S. financial disclosure regime may impact their financial statements, particular attention has been focused recently on the telecommunications industry.
Congressional hearings held in 2002, for example, related to the telecommunications industry practice of accounting for indefeasible rights of use, or IRUs, as well as the appropriateness and
consistency of pro forma financial information disclosure. Some of our former and current officers and directors have testified at these hearings concerning IRUs and other matters.

The
existence of this heightened scrutiny and these pending investigations could adversely affect investor confidence and cause the trading price for our securities to decline. In
addition, we cannot assure you that we will not have to further restate earnings for prior periods as a result of any formal actions, the SEC's review of QCII's filings or because of our own periodic
internal investigations. Any such restatement could further impact our ability to access the capital markets and the trading price of our securities.

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.

Our operations are subject to extensive federal regulation, including the Communications Act of 1934, as amended, and Federal Communications Commission, or FCC,
regulations thereunder. We are also subject to the applicable laws and regulations of various states, including regulation by Public Utility Commissions and other state agencies. Federal laws and FCC
regulations apply to interstate telecommunications (including international telecommunications that originate or terminate in the United States), while state regulatory authorities have jurisdiction
over telecommunications that originate and terminate within the same state. Generally, we must obtain and maintain certificates of authority from regulatory bodies in most states where we offer
intrastate services and must obtain prior regulatory approval of tariffs for our intrastate services in most of these jurisdictions. Our business is subject to numerous, and often quite detailed,
requirements under federal, state and local laws, rules

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and
regulations. Accordingly, we cannot ensure that we are always in compliance with all of these requirements at any single point in time.

Regulation
of the telecommunications industry is changing rapidly, and the regulatory environment varies substantially from state to state. All of our operations are also subject to a
variety of environmental, safety, health and other governmental regulations. There can be no assurance that future regulatory, judicial or legislative activities will not have a material adverse
effect on our operations, or that domestic or international regulators or third parties will not raise material issues with regard to our compliance or noncompliance with applicable regulations.

We
monitor our compliance with federal, state and local regulations governing the discharge and disposal of hazardous and environmentally sensitive materials, including the emission of
electromagnetic radiation. Although we believe that we are in compliance with such regulations, any such discharge, disposal or emission 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 and the restrictive terms of their debt instruments 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, is highly leveraged on a consolidated basis. As of September 30, 2003, our consolidated debt was $9.8 billion which is
included in QCII's total consolidated debt of $21.3 billion. A significant amount of our and QCII's debt obligations come due over the next few years. While we currently believe we, together
with QCII, will have the financial resources and access to capital markets
to meet our obligations when they come due, we cannot anticipate what our or QCII's future condition will be. We may have unexpected costs and liabilities and we may have limited access to financing.

We
will likely need to obtain additional financing to meet our debt service and dividend obligations if our and QCII's operations do not improve, if revenue and operating cash flow
declines are worse than expected, if economic conditions do not improve or if we or QCII become subject to significant judgments and/or settlements in connection with the resolution of one or more
matters described in Note 7Commitments and Contingencies to our condensed consolidated financial statements in Item 1 of this report. Also, we may be impacted by factors
relating to or affecting QCII's liquidity and capital resources due to perception in the market, impacts on credit ratings or provisions in our and QCII's financing agreements that may restrict our
flexibility under certain conditions.

Additionally,
the degree to which we, together with QCII are leveraged may have important limiting consequences on us, including the following:



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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.

We anticipate that our capital requirements relating to maintaining and routinely upgrading our network will continue to be significant in the coming years. We
also may be unable to significantly reduce the operating expenses associated with our future contractual cash obligations, including future purchase commitments, which may in turn affect our operating
results. As we will need to maintain the quality of our products and services in the future, we may be unable to further significantly reduce such capital requirements or operating expenses, even if
revenue is decreasing. Such nondiscretionary capital outlays may lessen our ability to compete with other providers who face less significant spending requirements.

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

Our current practice is to distribute to QSC cash dividends in an amount equal to our net income from wireline entities, generally during the same period in which
the net income is earned. We expect to continue this practice for the foreseeable future.

The debt agreements of QCII and Qwest will allow each to incur significantly more debt, which could exacerbate the other risks described herein.

The terms of QCII's and our debt instruments permit both QCII and us to incur additional indebtedness. Such debt may be necessary to comply with regulatory
obligations to maintain QCII's or our assets, to satisfy regulatory service obligations, to adequately respond to competition or for financial reasons alone. Incremental borrowings or borrowings at
maturities that impose additional financial risks to our various efforts to improve our financial condition and results of operations could exacerbate the other risks described herein.

Other Risks Affecting 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 GAAP 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 2002 Form 10-K, describe
the significant accounting policies and methods used in the preparation of our condensed consolidated financial statements. These accounting policies 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 differ significantly from the judgments,
assumptions and estimates in our critical accounting policies or different assumptions are used in the future, such events or assumptions could have a material impact on our consolidated financial
statements and related disclosures.

If we fail to extend or renegotiate our collective bargaining contracts 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 contracts with our labor unions, which represent a significant number of our employees. Although we believe that our
relations with our employees 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. If we fail to extend or renegotiate our collective bargaining agreements, if 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. We recently reached agreements with the Communications
Workers of America and the International

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Brotherhood
of Electrical Workers on new two-year labor contracts. Each of these agreements was ratified by union members, went into effect on August 17, 2003 and expires on
August 13, 2005.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information under the caption of "Risk Management" in "Management's Discussion and Analysis of Financial Condition and Results of Operations" 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 eliminate misconduct completely. As a result, there
can be no assurance that our disclosure controls and procedures will prevent all errors or fraud or ensure that all material information will be made known to appropriate management in a timely
fashion.

As
reported more fully in our 2002 Form 10-K, we learned of certain deficiencies in our internal controls that existed in 2002 and prior years. These deficiencies
related to each of the following:



As
reported in our 2002 Form 10-K, we have taken many measures to improve the effectiveness of our internal controls. Though it may take some time to realize all of
the benefits from the measures we have taken, we believe that our internal controls are improving and that there is no reason to believe that the financial statements included in this report are not
fairly stated in all material respects. Nonetheless, we can give no assurance that all internal control deficiencies have been entirely corrected. The inherent limitations of any system of controls
preclude the possibility of preventing all errors and all fraud. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because
of simple error or mistake. In addition, controls can be circumvented by the individual acts of some persons or by collusion of two or more people. Owing to these limitations, error or fraud may occur
and not be detected.

We
recently evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on that
evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that these procedures and controls were effective, given the inherent limitations stated above,
to provide reasonable assurances that the controls and procedures met their objectives. Except for certain of the measures to improve internal controls described in our 2002
Form 10-K, there have been no significant changes during the quarterly period covered by this report in our internal controls or in other factors that could significantly affect
internal controls.

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PART IIOTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information set forth above under Note 7Commitments and Contingencies contained in the "Notes to Condensed Consolidated Financial
Statements" included in this Quarterly Report on Form 10-Q is hereby incorporated by reference.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



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 (incorporated by reference to Qwest's Annual Report on Form 10-K for the year ended December 31, 1997, File No. 1-3040).                                                                                                                                                                                                                        
|(3.2)          |  | Articles of Amendment to the Articles of Incorporation of Qwest (incorporated by reference to Qwest's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).                                                                                                                                                                                                                   
|(3.3)          |  | Amended and Restated Bylaws of Qwest (incorporated by reference to Qwest's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-3040).                                                                                                                                                                                                                               
|(4.1)          |  | No instrument which defines the rights of holders of Qwest's long and intermediate term debt is filed herewith pursuant to Regulation S-K, Item 601(b)(4)(iii)(A). Pursuant to this regulation, Qwest hereby agrees to furnish a copy of any such
instrument to the SEC upon request.                                                                                                       
|(4.2)          |  | 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's Annual Report on Form 10-K for the year ended
December 31, 2002, File No. 1-3040).                                                                                                                       
|(4.3)          |  | First Supplemental Indenture, dated as of April 16, 1991, by and between US WEST Communications, Inc. and The First National Bank of Chicago (incorporated by reference to Qwest's Annual Report on Form 10-K for the year ended
December 31, 2002, File No. 1-3040).                                                                                                                       
|(4.4)          |  | Indenture, dated as of October 15, 1999, by and between U S WEST Communications, Inc. and Bank One Trust Company, NA, as Trustee (incorporated by reference to Qwest's Annual Report on Form 10-K for the year ended December 31, 1999,
 File No. 1-3040).                                                                                                                                  
|(10.1)         |  | Purchase Agreement, dated as of June 5, 2000, among U S WEST Communications, Inc. and Lehman Brothers Inc., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc of America Securities LLC, and
J.P. Morgan Securities Inc., as Representatives of the Initial Purchasers listed therein (incorporated by reference to Qwest's Form S-4 filed on October 11, 2000).
|               |  |                                                                                                                                                                                                                                                                                                                                                                                             

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|(10.2) |  | Term Loan Agreement, dated as of June 9, 2003, by and among Qwest, the Lenders listed therein, and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, as sole book-runner, joint lead arranger and
syndication agent, and Credit Suisse First Boston, acting through its Cayman Islands branch as joint lead arranger and administrative agent, and Deutsche Bank Trust Company Americas, as documentation agent and Deutsche Bank Securities, Inc. as
arranger. (incorporated by reference to Qwest's Current Report on Form 8-K, dated June 10, 2003, File No. 1-15577).
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

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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 Corporation
| |  | -----------------
| |  | By:              

January 12,
2004

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