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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 March 31, 2005                
|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                                                       |  | 84-0273800                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)
|1801 California Street, Denver, Colorado                       |  | 80202                               
|(Address of principal executive offices)                       |  | (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 REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL INSTRUCTION H(2.)

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

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

On April 30, 2005, one share of Qwest Corporation common stock was outstanding.



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QWEST CORPORATION
FORM 10-Q

TABLE OF CONTENTS



|Item                         |  |                                                                                                       
|---------------------------- |  | ------------------------------------------------------------------------------------------------------
|                             |  | Glossary of Terms                                                                                     
|PART IFINANCIAL INFORMATION
|1.                           |  | Financial Statements                                                                                  
|                             |  | Condensed Consolidated Statements of OperationsThree months ended March 31, 2005 and 2004 (unaudited)
|                             |  | Condensed Consolidated Balance SheetsMarch 31, 2005 and December 31, 2004 (unaudited)                
|                             |  | Condensed Consolidated Statements of Cash FlowsThree months ended March 31, 2005 and 2004 (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                                                                                              
|                             |  | Signature Page                                                                                        

2

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GLOSSARY OF TERMS

Our industry uses many terms and acronyms that may not be familiar to you. To assist you in reading this document, we have provided below definitions of some of
these terms.



3

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4

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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 March 31, |      
|------------------------------------------------------------------------- | ---------------------------------------------------------- | ---------------------------- | -----
|
|Operating revenue                                                         |                                                            | $                            | 2,268
|Operating revenueaffiliates                                              |                                                            |                              | 283  
|                                                                          |                                                            |                              |      
|Total operating revenue                                                   |                                                            |                              | 2,551
|Operating expenses:                                                       |                                                            |                              |      
|                                                                          | Cost of sales (exclusive of depreciation and amortization) |                              |      
|                                                                          | Cost of salesaffiliates                                   |                              |      
|                                                                          | Selling, general and administrative                        |                              |      
|                                                                          | Selling, general and administrativeaffiliates             |                              |      
|                                                                          | Depreciation                                               |                              |      
|                                                                          | Intangible assets amortization                             |                              |      
|                                                                          |                                                            |                              |      
|                                                                          |                                                            | Total operating expenses     |      
|Operating income                                                          |                                                            |                              | 585  
|Other expense (income):                                                   |                                                            |                              |      
|                                                                          | Interest expensenet                                       |                              |      
|                                                                          | Other expense (income)net                                 |                              |      
|                                                                          |                                                            |                              |      
|                                                                          |                                                            | Total other expensenet      |      
|                                                                          |                                                            |                              |      
|Income before income taxes, and discontinued operations                   |                                                            |                              | 423  
|Income tax (expense)                                                      |                                                            |                              | (161 
|                                                                          |                                                            |                              |      
|Income from continuing operations                                         |                                                            |                              | 262  
|Loss from discontinued operations, net of tax of $0 and $27, respectively |                                                            |                              |     
|                                                                          |                                                            |                              |      
|Net income                                                                |                                                            | $                            | 262  
|                                                                          |                                                            |                              |      

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

5

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QWEST CORPORATION        CONDENSED CONSOLIDATED BALANCE SHEETS  (DOLLARS IN MILLIONS)  (UNAUDITED)

|                                                                                       |                                                                                   | March 31,
2005                             |        | December 31,
2004 |       
|-------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------ | ------ | ----------------- | ------
|ASSETS                                                                                 |                                                                                   |                                            |        |                   |       
|Current assets:                                                                        |                                                                                   |                                            |        |                   |       
|                                                                                       | Cash and cash equivalents                                                         |                                            | $      | 389               |       
|                                                                                       | Short-term investments                                                            |                                            |        | 250               |       
|                                                                                       | Accounts receivable (less allowance of $72 million and $72 million, respectively) |                                            |        | 1,032             |       
|                                                                                       | Accounts receivableaffiliates                                                    |                                            |        | 151               |       
|                                                                                       | Deferred income taxes                                                             |                                            |        | 88                |       
|                                                                                       | Prepaid expenses and other current assets                                         |                                            |        | 290               |       
|                                                                                       |                                                                                   |                                            |        |                   |       
|Total current assets                                                                   |                                                                                   |                                            | 2,200  |                   |       
|Property, plant and equipmentnet                                                      |                                                                                   |                                            | 14,888 |                   |       
|Capitalized software and other intangible assetsnet                                   |                                                                                   |                                            | 738    |                   |       
|Prepaid pension asset                                                                  |                                                                                   |                                            | 1,018  |                   |       
|Other assets                                                                           |                                                                                   |                                            | 341    |                   |       
|                                                                                       |                                                                                   |                                            |        |                   |       
|                                                                                       | Total assets                                                                      |                                            | $      | 19,185            |       
|                                                                                       |                                                                                   |                                            |        |                   |       
|LIABILITIES AND STOCKHOLDER'S EQUITY                                                   |                                                                                   |                                            |        |                   |       
|Current liabilities:                                                                   |                                                                                   |                                            |        |                   |       
|                                                                                       | Current borrowings                                                                |                                            | $      | 404               |       
|                                                                                       | Accounts payable                                                                  |                                            |        | 363               |       
|                                                                                       | Accounts payableaffiliates                                                       |                                            |        | 822               |       
|                                                                                       | Dividends payableQSC                                                             |                                            |        | 250               |       
|                                                                                       | Accrued expenses and other current liabilities                                    |                                            |        | 735               |       
|                                                                                       | Deferred revenue and advanced billings                                            |                                            |        | 497               |       
|                                                                                       |                                                                                   |                                            |        |                   |       
|Total current liabilities                                                              |                                                                                   |                                            | 3,071  |                   |       
|Long-term borrowings (net of unamortized debt discount of $137 and $138, respectively) |                                                                                   |                                            | 7,256  |                   |       
|Post-retirement and other post-employment benefit obligations                          |                                                                                   |                                            | 2,846  |                   |       
|Deferred income taxes                                                                  |                                                                                   |                                            | 2,222  |                   |       
|Other long-term liabilities                                                            |                                                                                   |                                            | 530    |                   |       
|                                                                                       |                                                                                   |                                            |        |                   |       
|                                                                                       | Total liabilities                                                                 |                                            |        | 15,925            |       
|                                                                                       |                                                                                   |                                            |        |                   |       
|Commitments and contingencies (Note 6)                                                 |                                                                                   |                                            |        |                   |       
|Stockholder's equity:                                                                  |                                                                                   |                                            |        |                   |       
|                                                                                       | Common stockone share without par, owned by QSC                                  |                                            |        | 10,146            |       
|                                                                                       | Accumulated deficit                                                               |                                            |        | (6,884            | )     
|                                                                                       | Accumulated other comprehensive loss                                              |                                            |        | (2                | )     
|                                                                                       |                                                                                   |                                            |        |                   |       
|                                                                                       |                                                                                   | Total stockholder's equity                 |        |                   | 3,260 
|                                                                                       |                                                                                   |                                            |        |                   |       
|                                                                                       |                                                                                   | Total liabilities and stockholder's equity |        | $                 | 19,185
|                                                                                       |                                                                                   |                                            |        |                   |       

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

6

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QWEST CORPORATION        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (DOLLARS IN MILLIONS)  (UNAUDITED)

|                          |                                                            | Three Months Ended March 31,                                     |                                      
|------------------------- | ---------------------------------------------------------- | ---------------------------------------------------------------- | -------------------------------------
|
|OPERATING ACTIVITIES      |                                                            |                                                                  |                                      
|                          | Net income                                                 |                                                                  | $                                    
|                          | Adjustments to net income:                                 |                                                                  |                                      
|                          |                                                            | Loss from discontinued operations, net of taxes                  |                                      
|                          |                                                            | Depreciation and amortization                                    |                                      
|                          |                                                            | Provision for bad debts                                          |                                      
|                          |                                                            | Deferred income taxes                                            |                                      
|                          |                                                            | Income tax benefit distributed to QSC                            |                                      
|                          |                                                            | Other non-cash chargesnet                                       |                                      
|                          | Changes in operating assets and liabilities                |                                                                  |                                      
|                          |                                                            | Accounts receivable                                              |                                      
|                          |                                                            | Accounts receivableaffiliates                                   |                                      
|                          |                                                            | Prepaid and other current assets                                 |                                      
|                          |                                                            | Accounts payable, accrued expenses and other current liabilities |                                      
|                          |                                                            | Accounts payableaffiliates                                      |                                      
|                          |                                                            | Deferred revenue and advance billings                            |                                      
|                          |                                                            | Other long-term assets and liabilities                           |                                      
|                          |                                                            |                                                                  |                                      
|                          |                                                            |                                                                  | Cash provided by operating activities
|                          |                                                            |                                                                  |                                      
|INVESTING ACTIVITIES      |                                                            |                                                                  |                                      
|                          | Expenditures for property, plant and equipment             |                                                                  |                                      
|                          | Interest in net purchases of investments managed by parent |                                                                  |                                      
|                          | Other                                                      |                                                                  |                                      
|                          |                                                            |                                                                  |                                      
|                          |                                                            |                                                                  | Cash used for investing activities   
|                          |                                                            |                                                                  |                                      
|FINANCING ACTIVITIES      |                                                            |                                                                  |                                      
|                          | Repayments of current portion of long-term borrowings      |                                                                  |                                      
|                          | Dividends paid to QSC                                      |                                                                  |                                      
|                          |                                                            |                                                                  |                                      
|                          |                                                            |                                                                  | 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.

7

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QWEST CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2005
(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

These condensed consolidated interim financial statements are unaudited and are prepared in accordance with the instructions for Form 10-Q. In
compliance with those instructions, certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting
principles in the United States of America ("GAAP") have been condensed or omitted.

In
the opinion of management, these statements include all the adjustments necessary to fairly present our condensed consolidated results of operations, financial position and cash flows
as of March 31, 2005 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, 2004 (the "2004 Form 10-K"). The condensed consolidated results of operations and the
condensed consolidated statement of cash flows for the three month period ended March 31, 2005 are not necessarily indicative of the results or cash flows expected for the full year.

Until
May 1, 2004, we provided wireless services through our wholly owned subsidiary, Qwest Wireless LLC ("Qwest Wireless"). On May 1, 2004, we transferred ownership of
Qwest Wireless to an affiliate. As a consequence, we no longer have wireless operations, and the results of Qwest Wireless are reported as a loss from discontinued operations in our condensed
consolidated statements of operations for the three months ended March 31, 2004. See Note 2Transfer of Qwest Wireless Operations, for additional information on the results
of Qwest Wireless.

Stock-based compensation

Some of our employees participate in QCII's stock option plans. These plans 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. 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 Financial Accounting Standards Board
("FASB") Interpretation ("FIN") 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 to our employees.

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 Statement of

8

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Financial
Accounting Standards ("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
March 31,2005

2004(Dollars in millions)Net income:As reported

$
262

$
253Add: Stock-option-based employee compensation expense included in reported net income, net of related tax effects





1Deduct: Total stock-option-based employee compensation expense determined under fair-value-based method for all awards, net of related tax effects


(6
)

(5
)Pro forma income

$
256

$
249


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. See "Recently Issued Accounting Pronouncements" below for further discussion of SFAS 123R.

Recently issued accounting pronouncements

In March 2005, the FASB issued FIN 47, "Accounting for Conditional Asset Retirement Obligations." FIN 47 will be effective for Qwest on December 31,
2005 and requires us to recognize asset retirement obligations which are conditional on a future event, such as the obligation to safely dispose of asbestos when a building is remodeled. Uncertainty
about the timing or settlement of the obligation is factored into the measurement of the liability. We are in the process of quantifying the impact FIN 47 will have on our financial position and
results of operations.

In
April 2005, the Securities and Exchange Commission ("SEC") delayed the effective date of SFAS No. 123R, "Share-Based Payments." SFAS No. 123R will now be
effective for Qwest as of the interim
reporting period beginning January 1, 2006. SFAS 123R requires that compensation cost relating to share-based payment transactions be recognized in financial statements based on the fair
value of the equity or liability instruments issued. SFAS No. 123R covers a wide range of share-based compensation arrangements including share options, restricted share plans,
performance-based awards, share appreciation rights and employee share purchase plans. We do not anticipate that the adoption of SFAS No. 123R will have a material impact on our financial
position or results of operations.

In
December 2004, the FASB issued SFAS No. 153, "Exchanges of Non-Monetary Assets" which is effective for us starting July 1, 2005. In the past, we were frequently
required to measure the value of assets exchanged in non-monetary transactions by using the net book value of the asset relinquished. Under SFAS No. 153, we will measure assets
exchanged at fair value, as long as the transaction has commercial substance and the fair value of the assets exchanged is determinable within reasonable limits. A non-monetary exchange
has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The adoption of SFAS No. 153 is not anticipated to have a
material effect on our financial position or results of operations.

Reclassifications

We utilize the cash management services of Qwest Services Corporation, our direct parent ("QSC"). QSC concentrates our cash with that of all other QSC
subsidiaries and manages and invests the cash on our behalf. We previously reported as cash and cash equivalents on our balance sheets the

9

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amount
of cash held by QSC on our behalf for cash management. QSC's cash management portfolio includes cash, money market funds, commercial paper, investments in auction rate securities and U.S.
government agency and corporate notes. In March 2005, QCII reclassified its investment in auction rate securities from cash and cash equivalents into short-term investments in its
consolidated balance sheets. Following QCII's reclassification of these investments, we decided that our proportionate share of the QSC portfolio of invested cash and our agency relationship with QSC
is more appropriately reflected by reclassifying out of cash and cash equivalents into short-term and long-term investments our proportionate share of the investment in auction
rate securities and U.S. government agency and corporate notes. This reclassification has no impact on previously reported total assets or results of operations, or on our debt covenants and it does
not affect previously reported cash flows from operating or financing activities.

Certain
other prior period balances have been reclassified to conform to the current presentation.

Cash and cash equivalents, short-term investments and long-term investments

As noted above, we utilize the cash management services of QSC. QSC concentrates our cash with that of all other QSC subsidiaries and manages and invests the cash
on our behalf in accordance with its cash investment policy. The policy restricts investments to ensure preservation of principal and maintenance of liquidity. The cash balances we report on our
balance sheets represent our portion of the QSC portfolio of invested cash.

We
consider cash on hand, deposits in banks and investments purchased with original maturities of three months or less to be cash and cash equivalents. Although cash and cash
equivalents balances are generally unsecured, our balances are maintained with financial institutions that QSC and we believe are creditworthy. QSC's 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 particular financial institution.

The
QSC portfolio of short-term investments has historically consisted primarily of auction rate securities. Auction rate securities are highly liquid,
variable-rate debt securities. While the underlying security has a stated maturity of typically 20 to 30 years, the interest rate is reset through dutch auctions that are typically
held every 7, 28 or 35 days, creating a highly liquid, short-term instrument. The securities trade at par and are callable at par on any interest payment date at the option of the
issuer. Interest is paid at the end of each auction period. The QSC portfolio of short-term investments also includes U.S. government agency notes and corporate notes with current
maturities of less than twelve months.

The
QSC portfolio of long-term investments consists of U.S. government agency notes and corporate notes with current maturities greater than twelve months, but less than
eighteen months.

Note 2: Transfer of Qwest Wireless Operations

On May 1, 2004, we transferred ownership of Qwest Wireless to an affiliate. The transfer was made in the form of a dividend to QSC, and, as a result, no
consideration was exchanged. Due to this transfer, we no longer have wireless operations, and the results of Qwest Wireless operations are presented as discontinued operations in these financial
statements. Qwest Wireless purchases services from us that previously were eliminated in our consolidation. We now recognize revenue from affiliate wireless operations in our consolidated statements
of operations.

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The
following table presents the summarized results of operations related to our discontinued operations for the three months ended March 31, 2004:

Three months ended
March 31, 2004(Dollars in millions)Revenue:Wireless operating revenue

$
126Qwest revenue from affiliate wireless operations


(33
)Total revenue


93Costs and expenses:Costs of sales


45Selling, general and administrative


70Depreciation and amortization


6Loss from operations


(28
)Other expense


(40
)Loss before income taxes


(68
)Income tax benefit


27Loss from discontinued operations

$
(41
)


Note 3: Borrowings

As
of March 31, 2005 and December 31, 2004, our borrowings, net of discounts and premiums, consisted of the following:

March 31,
2005

December 31,
2004(Dollars in millions)Current borrowings:Current portion of long-term borrowings

$
400

$
400Current portion of capital lease obligations and real estate notes


4


5Total current borrowings

$
404

$
405Long-term borrowings:Long-term notes

$
7,251

$
7,250Long-term capital lease obligations and real estate notes


5


5Total long-term borrowings

$
7,256

$
7,255


To
manage exposure to interest rate movements and to optimize our mixture of floating and fixed-rate debt, in 2004 we entered into interest rate swap agreements with
notational amounts totaling $575 million. We previously disclosed that all these interest rate swap agreements were designated as fair-value hedges, which effectively converted the
related fixed-rate debt to floating rate through the receipt of fixed-rate amounts in exchange for floating-rate interest payments. While the structure of the swaps
has not changed, we determined in the period ended March 31, 2005, that these agreements do not meet all the requirements to be treated as fair-value hedges. As a result of this
change, the decrease in the fair value of the swap agreements since we entered into these swap agreements is recorded as a $16 million non-operating loss for the three months ended
March 31, 2005, which is included in other expense (income)net in our results of operations. Had we applied this same

11

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accounting
treatment to the swap agreements in 2004, the impact would have been immaterial to our 2004 financial statements.

Note 4: Restructuring Charges

The restructuring reserve balances discussed below are included in our condensed consolidated balance sheets in the category of accrued expenses and other current
liabilities for the current portion and other long-term liabilities for the long-term portion. As of March 31, 2005 and December 31, 2004, the amounts included as
current liabilities were $41 million and $49 million, respectively, and the long-term portions were $12 million for each period.

An
analysis of activity associated with the existing restructuring reserves for the three months ended March 31, 2005 is as follows:

2004
Restructuring
Plan

2003 and Prior
Restructuring
Plans

Totals(Dollars in millions)Balance at December 31, 2004

$
37

$
24

$
61Provisions








Utilizations


6


2


8Reversals








Balance at March 31, 2005

$
31

$
22

$
53


We,
as part of QCII's 2004 and prior restructuring plans, identified specific employee reductions in various functional areas to balance our workload with business demands. As of
March 31, 2005, approximately 1,940 of the 2,090 planned employee reductions associated with QCII's 2004 employee reductions had been completed. During the three months ended March 31,
2005, we utilized $6 million of the 2004 restructuring reserves for severance payments pursuant to established severance policies.

In
prior periods, as a part of the 2003 and prior restructuring plans, we permanently abandoned 25 leased facilities with lease terms up to five years and planned employee reductions.
For the three months ended March 31, 2005, we utilized $2 million of the previously established restructuring provisions mainly for real estate payments and exit costs associated with
terminated leases. The 1,600 planned employee reductions under QCII's 2003 restructuring plan are complete. We anticipate using the balance of the 2003 and prior reserve balances primarily for
on-going outplacement services and remaining lease payment provided by the plans.

Note 5: Contributions to QCII Segments and Revenue Information

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 QCII's annual report on
Form 10-K for the year ended December 31, 2004. Our business contributes to the segments reported by QCII, but the QCII CODM reviews our financial information only in
connection with our quarterly and annual reports that we file with the SEC. Consequently, we do not provide our discrete financial information to the CODM on a regular basis.

Due
to the May 1, 2004 transfer of our wireless operations to one of our affiliates, we no longer include wireless revenue and expenses in our continuing operations. Wireless
revenue and expense are included in our discontinued operations. See Note 2Transfer of Qwest Wireless Operations. Following the transfer of the wireless operations, essentially all
of our operations contribute to QCII's wireline services segment. As such, we no longer report our contribution to QCII's segments, as this information

12

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does
not differ materially from our consolidated statements of operations. However, we continue to provide the following enterprise-wide information on revenues from external customers for
each group of similar products and services.

Three Months Ended
March 31,2005

2004(Dollars in millions)Voice services

$
1,708

$
1,849Data and Internet services


555


532Other services


5


7Total operating revenue

$
2,268

$
2,388


Voice
services revenue includes local voice services, IntraLATA long-distance voice services and access services. Local voice services revenue includes revenue from basic
local exchange services, switching services, custom calling features, enhanced voice services, operator services, collocation services and CPE. Local voice services revenue also includes revenue from
the provision of, on a wholesale basis, network transport, billing services and access to our local network. IntraLATA long-distance voice services revenue includes revenue from IntraLATA
long-distance voice services within our local service area. Access services revenue includes fees charged to other long-distance providers to connect to our network.

Data
and Internet services revenue includes data services (such as traditional private lines, wholesale private lines, frame relay, integrated services digital network, asynchronous
transfer mode and related CPE) and Internet services (such as DSL, Internet dial access and related CPE.)

Other
services revenue is predominately derived from the sublease of some of our unused real estate assets, such as space in our office buildings, warehouses and other properties.

Note 6: Commitments and Contingencies

QCII is involved in several legal proceedings to which we are not a party that, if resolved against QCII, could have a material adverse effect on our business and
financial condition. We have included below a discussion of these matters, together with a discussion of those matters to which we are a party (primarily those discussed below under the "Regulatory
Matters" subheading, as well as the "Colorado action" described below). Only those matters to which we are a party represent contingencies for which we have recorded, or could reasonably anticipate
recording, an accrual.

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

DOJ Investigation and Securities Actions

The Department of Justice ("DOJ") investigation and the securities actions described below present material and significant risks to QCII. The size, scope and
nature of the restatements of QCII's consolidated financial statements for 2001 and 2000, which are described in QCII's previously issued consolidated financial statements for the year ended
December 31, 2002 ("QCII's 2002 Financial Statements"), affect the risks presented by this investigation and these actions, as these matters involve, among other things, QCII's prior accounting
practices and related disclosures. Plaintiffs in certain of the securities actions have alleged QCII's restatement of items in support of their claims. We can give no assurance as to the impacts on
our and QCII's financial results or financial condition that may ultimately result from all of these matters. During 2003 and 2004, QCII recorded reserves in its financial statements totaling
$750 million in connection with these matters. On October 21, 2004, QCII

13

---



entered
into a settlement with the SEC concluding a formal investigation concerning QCII's accounting and disclosures, among other subjects, that began in April 2002. The $750 million
reserve was reduced by $125 million in December 2004 as a result of a payment in that amount in connection with QCII's SEC settlement. The remaining reserve amount represents a final
payment to be made in connection with the SEC settlement in the amount of $125 million and the minimum estimated amount of loss QCII believes is probable with respect to the securities actions
described below.

QCII
has recorded its estimate of the minimum liability because no estimate of probable loss for these matters is a better estimate than any other amount. If the recorded reserve that
will remain after QCII has paid the amount owed under the SEC settlement is insufficient to cover these other matters, QCII will need to record additional charges to its statement of operations in
future periods. Additionally, QCII is unable at this time to provide a reasonable estimate of the upper end of the range of loss associated with these remaining matters due to their preliminary and
complex nature, and, as a result, the amount QCII has reserved for these matters is its estimate of the lowest end of the possible range of loss. The ultimate outcomes of these matters are still
uncertain and there is a significant possibility that the amount of loss QCII may ultimately incur could be substantially more than the reserve it has provided.

At
this time, QCII believes that it is probable that a portion of the recorded reserve for the securities actions will be recoverable from a portion of the insurance proceeds that were
placed in a trust to cover its losses and the losses of individual insureds following its November 12, 2003 settlement of disputes with certain of its insurance carriers related to, among other
things, the investigation and securities actions described below. The insurance proceeds are subject to claims by QCII and other insureds for, among other things, the costs of defending certain
matters and, as a result, such proceeds are being depleted over time. In any event, the terms and conditions of applicable bylaws, certificates or articles of incorporation, or agreements or
applicable laws may obligate QCII or us to indemnify its or our current and former directors, officers and employees with respect to certain liabilities, and QCII and we have been advancing legal fees
and costs to many current and former directors, officers and employees in connection with the investigation, securities actions and certain other litigation.

QCII
continues to defend against the securities actions vigorously and is currently unable to provide any estimate as to the timing of the resolution of these actions. Any settlement of
or judgment in one or more of these actions substantially in excess of QCII's recorded reserves could have a significant impact on QCII, and QCII can give no assurance that it will have the resources
available to pay any such judgment. The magnitude of any settlement or judgment resulting from these actions could materially and adversely affect QCII's ability to meet its debt obligations and its
financial condition, potentially impacting its credit ratings, its ability to access capital markets and its compliance with debt covenants. In addition, the magnitude of any such settlement or
judgment may cause QCII to draw down significantly on its cash balances, which might force QCII to obtain additional financing or explore other methods to generate cash. Such methods could include
issuing additional securities or selling assets. As a wholly owned subsidiary of QCII, our business operations and financial condition would be similarly affected.



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's business. QCII believes
the U.S. Attorney's Office is investigating various matters that include the transactions related to the various adjustments and restatements described in QCII's 2002 Financial Statements,
transactions between QCII and certain of its vendors and certain investments in the securities of those vendors by individuals associated with QCII, and prior disclosures made by QCII. QCII is
continuing in its efforts to cooperate fully with the U.S. Attorney's Office in its investigation. However, QCII cannot predict the outcome of this investigation or the timing of its resolution.

14

---





QCII is a defendant in the securities actions described below. Plaintiffs in these actions have variously alleged, among other things, that QCII violated federal
and state securities laws, engaged in fraud, civil conspiracy and negligent misrepresentation, and breached fiduciary duties owed to investors and current and former employees. Other defendants in one
or more of these actions include current and former directors of QCII, former officers and employees of QCII, Arthur Andersen LLP, certain investment banks and others.



15

---





KPNQwest Litigation

A putative class action is pending in the federal district court for the Southern District of New York against QCII, certain of its former executives who were
also on the supervisory board of KPNQwest (in which QCII was a major shareholder), and others. This lawsuit was initially filed on October 4, 2002. The current complaint alleges, on behalf of
certain purchasers of KPNQwest securities, that, among other things, defendants engaged in a fraudulent scheme and deceptive course of business in order to inflate KPNQwest's revenue and the value of
KPNQwest securities. Plaintiffs seek compensatory damages and/or rescission as appropriate against defendants, as well as an award of plaintiffs' attorneys' fees and costs.

16

---



On
October 31, 2002, Richard and Marcia Grand, co-trustees of the R.M. Grand Revocable Living Trust, dated January 25, 1991, filed a lawsuit in Arizona Superior
Court which, as amended, alleges, among other things, that the defendants violated state and federal securities laws and breached their fiduciary duty in connection with investments by plaintiffs in
securities of KPNQwest. QCII is a defendant in this lawsuit along with Qwest B.V. (a subsidiary of Qwest), Joseph Nacchio, QCII's former Chairman and Chief Executive Officer, and John McMaster, the
former President and Chief Executive Officer of KPNQwest. Plaintiffs claim to have lost approximately $10 million in their investments in KPNQwest.

On
June 25, 2004, J.C. van Apeldoorn and E.T. Meijer, in their capacities as trustees in the Dutch bankruptcy proceeding for KPNQwest, filed a complaint in the federal district
court for the District of New Jersey alleging violations of the Racketeer Influenced and Corrupt Organizations Act, and breach of fiduciary duty and mismanagement under Dutch law. QCII is a defendant
in this lawsuit along with Joseph Nacchio, Robert S. Woodruff, QCII's former Chief Financial Officer, and John McMaster. Plaintiffs allege, among other things, that defendants' actions were a cause of
the bankruptcy of KPNQwest and the bankruptcy deficit of KPNQwest was in excess of $3 billion. Plaintiffs seek compensatory and punitive damages, as well as an award of plaintiffs' attorneys'
fees and costs.

On
January 20, 2005, Citibank, N.A., Deutsche Bank AG London, ABN AMRO Bank N.V. and others notified QCII of their intent to file a complaint in the District Court for the
City and County of Denver, State of Colorado, that would allege, among other things, fraud, misrepresentation, breach of fiduciary duty and related aiding and abetting claims, in connection with the
origination of a credit facility and subsequent borrowings made by KPNQwest of approximately €300 million under that facility. They have indicated that QCII would be a defendant
in this threatened lawsuit along with Joseph Nacchio, John McMaster, Drake Tempest, QCII's former General Counsel, and other former employees of QCII or KPNQwest. Plaintiffs have indicated their
intention to seek compensatory damages (including interest), statutory and punitive damages and an award of plaintiffs' attorneys' fees and costs.

The
four KPNQwest litigation matters described above are in preliminary phases and QCII continues to defend against the three filed cases vigorously and will likewise defend against the
fourth matter if it is filed. QCII has not yet conducted discovery on plaintiffs' possible recoverable damages and other relevant issues. Thus, QCII is unable at this time to estimate reasonably a
range of loss that it would incur if the plaintiffs in one or more of these matters were to prevail. Any settlement or judgment in certain of these matters could be significant, and QCII can give no
assurance that it will have the resources available to pay any such judgment. In the event of an adverse outcome in certain of these matters, QCII's financial condition and its ability to meet its
debt obligations could be materially and adversely affected. As a wholly owned subsidiary of QCII, our business operations and financial condition would be similarly affected.

17

---



Regulatory Matters

As described below, formal proceedings against us have been initiated with the public utilities commissions in several states alleging, among other things, that
we, in contravention of federal and state law, failed to file interconnection agreements with the state commissions and that we therefore allegedly discriminated against various CLECs. The
complainants seek fines, penalties and/or carrier credits.



Also,
some telecommunications providers have filed private actions based on facts similar to those underlying these administrative proceedings. These private actions, together with any similar, future
actions, could result in additional damages and awards that could be significant.

On
July 15, 2004, the New Mexico state regulatory commission opened a proceeding to investigate whether we are in compliance with or are likely to meet a commitment that we made
in 2001 to invest in communications infrastructure in New Mexico through March of 2006 pursuant to an Alternative Form of Regulation plan ("AFOR"). The AFOR says, in part, that "Qwest commits to
devote a substantial budget to infrastructure investment, with the goal of achieving the purposes of this Plan. Specifically, Qwest will make capital expenditures of not less than $788 million
over the term of this Plan. This level of investment is necessary to meet the commitments made in this Plan to increase Qwest's investment and improve its service quality in New Mexico." Multiple
parties filed comments in that proceeding and variously argued that we should be subject to a range of requirements including an

18

---



escrow
account for capital spending, new investment obligations, and customer credits or price reductions.

On
April 14, 2005, the Commission issued its Final Order in connection with this investigation. In this Final Order, the Commission ruled that the evidence in the record indicates
Qwest will not be in compliance with the investment commitment at the conclusion of the AFOR in March, 2006, and if the current trend in Qwest's capital expenditures continues, there will be a
shortfall of $200 million or more by the end of the AFOR. The Commission also concluded that Qwest has an unconditional commitment to invest $788 million over the life of the AFOR.
Finally, the Commission ruled that if Qwest fails to satisfy this investment commitment, any shortfall must be credited or refunded to Qwest's New Mexico customers. The Commission also opened an
enforcement and implementation docket to review Qwest's investments and consider the structure and size of any refunds or credits to be issued to customers.

Qwest
has vigorously argued, and will continue to argue, among other things, that the underlying purpose of the investment commitment set forth in the AFOR has been met in that Qwest has
met all service quality and service deployment obligations under the AFOR; that, in light of this, it should not be held to a specific amount of investment; and that the Commission has failed to
include all eligible investments in the calculation of how much Qwest has actually invested. Nevertheless, Qwest believes it is unlikely the Commission will reverse its determination that Qwest has an
unconditional obligation to invest $788 million over the term of the AFOR. In addition, Qwest has argued, and will continue to argue, that customer credits or refunds are an impermissible and
illegal form of relief for the Commission to order in the event there is an investment shortfall.

Qwest
believes there is a substantial likelihood that the ultimate outcome of this matter will result in it having to make expenditures or payments beyond those it would otherwise make
in the normal course of business. These expenditures or payments could take the form of one or more of the following: penalties, capital investment, basic service rate reductions and customer refunds
or credits. At this time, however, Qwest is not able to reasonably estimate the amount of these expenditures or payments and, accordingly, has not reserved any amount for such potential liability. Any
final resolution of this matter could be material.

To
the extent appropriate, we have provided reserves for the above matters. 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.

Other Matters

In January 2001, an amended class action complaint was filed in Denver District Court on behalf of a class of U S WEST stockholders of record as of
June 30, 2000, the day of the U S WEST/QCII merger, alleging that QCII had a duty to pay a quarterly dividend that had been declared by the U S WEST Board of Directors on June 2, 2000.
The complaint named as defendants QCII, the individuals who served on the U S WEST Board of Directors in June 2000, and Joseph Nacchio. Plaintiffs claim that the defendants attempted to avoid
paying the dividend by changing the record date from June 30, 2000 to July 10, 2000, a claim QCII denies. Plaintiffs seek damages of approximately $273 million plus interest, a
constructive trust upon QCII's assets in the amount of the dividend, costs, and attorneys' fees on behalf of the class, which was certified by the court in January 2005. The case is expected to go to
trial in June 2005.

Several
putative class actions relating to the installation of fiber optic cable in certain rights-of-way were filed against QCII on behalf of landowners on
various dates and in various courts in California, Colorado, Georgia, Illinois, Indiana, Kansas, Mississippi, Missouri, North Carolina, Oregon, South Carolina, Tennessee and Texas. For the most part,
the complaints challenge QCII's right to install its fiber optic cable in railroad rights-of-way. Complaints in Colorado, Illinois and Texas also challenge

19

---



QCII's
right to install fiber optic cable in utility and pipeline rights-of-way. The complaints allege that the railroads, utilities and pipeline companies own a limited
property right-of-way that did not include the right to permit QCII to install QCII's fiber optic cable in the right-of-way without the Plaintiffs'
consent. Most actions (California, Colorado, Georgia, Kansas, Louisiana, Mississippi, Missouri, North Carolina, Oregon, South Carolina, Tennessee and Texas) purport to be brought on behalf of
state-wide classes in the named plaintiffs' respective states. Several actions purport to be brought on behalf of multi-state classes. The Illinois state court action purports to be on
behalf of landowners in Illinois, Iowa, Kentucky, Michigan, Minnesota, Nebraska, Ohio and Wisconsin. A newly filed Illinois federal court action purports to be on behalf of landowners in Arkansas,
California, Florida, Illinois, Indiana, Missouri, Nevada, New Mexico, Montana and Oregon. The Indiana action purports to be on behalf of a national class of landowners adjacent to railroad
rights-of-way over which QCII's network passes. The complaints seek damages on theories of trespass and unjust enrichment, as well as punitive damages. District court approval
of a proposed nationwide settlement of all these matters was vacated by the Seventh Circuit Court of Appeals in October 2004. This ruling is subject to discretionary review by the Supreme Court
of the United States.

On
January 20, 2004, QCII filed a complaint in the District Court for the City and County of Denver against KMC Telecom LLC and several of its related parent or subsidiary
companies (collectively, "KMC.") Subsequently, QCII filed an amended complaint to name additional defendants, including General Electric Capital Corporation ("GECC"), one of KMC's lenders, and GECC
filed a complaint in intervention. QCII is seeking a declaration that a series of agreements with KMC and its lenders are not effective because conditions precedent were not satisfied and to recoup
other damages and attorneys' fees and costs. These agreements would obligate QCII to pay a net incremental amount of approximately $105 million if determined to be effective. GECC and KMC have
asserted counterclaims for declaratory judgment and anticipatory breach of contract. GECC and KMC seek a declaration that the relevant agreements are in effect and claim monetary damages for
anticipatory breach of the agreements and their attorneys' fees and costs. QCII has not reserved any amount for this matter.

The
Internal Revenue Service, or IRS, proposed a tax adjustment for tax years 1994 through 1996. The principal issue involves QCII's allocation of costs between long-term
contracts with customers for the installation of conduit or fiber optic cable and additional conduit or fiber optic cable retained by QCII. The IRS disputes QCII's allocation of the costs between it
and third parties. Similar claims have been asserted against QCII with respect to the 1997 to 1998 and the 1998 to 2001 audit periods. The 1994-1996 claim is currently being litigated in
the Tax Court and QCII does not believe the IRS will be successful, although the ultimate outcome is uncertain. If QCII were to lose this issue for the tax years 1994 through 1998, QCII estimates it
would have to pay $57 million plus interest pursuant to tax sharing agreements with the Anschutz Company relating to those time periods.

In
2004, QCII recorded income tax expense of $158 million related to a change in the expected timing of deductions related to its tax strategy, referred to as the Contested
Liability Acceleration Strategy ("CLAS"), which it implemented in 2000. CLAS is a strategy that sets aside assets to provide for the satisfaction of asserted liabilities associated with litigation in
a tax efficient manner. CLAS accelerated deductions for contested liabilities by placing assets for potential litigation liabilities out of the control of the company and into trusts managed by a
third party trustee. In July 2004, QCII was formally notified by the IRS that it was contesting the CLAS tax strategy. Also in July 2004, in connection with the preparation of its
financial statements for the fiscal quarter ended June 30, 2004, and as a result of a series of notices on CLAS strategies issued by the IRS and the receipt of legal advice with respect
thereto, QCII adjusted its accounting for CLAS as required by SFAS No. 109 "Accounting for Income Taxes." The change in expected timing of deductions caused an increase in QCII's liability for
uncertain tax positions and a corresponding increase in its net operating loss carry-forwards ("NOLs"). Because QCII is not currently forecasting future taxable income sufficient to

20

---



realize
the benefits of this increase in its NOLs it recorded an increase in its valuation allowance on deferred tax assets as required by SFAS No. 109. Additionally, in September 2004
the IRS proposed a penalty of $37 million on this strategy. QCII believes that the imposition of a penalty is not appropriate as it acted in good faith in implementing this tax strategy in
reliance on two contemporaneous tax opinions and adequately disclosed this transaction to the IRS in its initial and subsequent tax returns. QCII intends to vigorously defend its position on this and
other tax matters.

QCII
has other tax related matters pending against it. To the extent appropriate, QCII has provided for these matters.

Note 7: Subsequent Events

During February, March and April 2005, QCII submitted several proposals to the Board of Directors of MCI, Inc. proposing the acquisition of MCI by QCII,
notwithstanding the fact that MCI had entered into an agreement to be acquired by Verizon Communications Inc. On May 2, 2005, QCII announced that it is no longer in the best interests of
shareowners, customers and employees to continue to pursue a business combination with MCI.

21

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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. 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 and Presentation

We provide local telecommunications and related services, IntraLATA long-distance services and data 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. Our
operations are included in the consolidated operations of our ultimate parent, QCII, and generally account for the majority of QCII's consolidated revenue. Our telecommunications products and services
are provided through our traditional telephone network located within our local service area. In addition to our operations, QCII maintains a wireless business (comprised of the wireless operations we
transferred to an affiliate in May 2004) and a national fiber optic network. Through its fiber optic network, QCII provides the following wireline products and services that we do not provide:



For
certain other products and services we provide and for a variety of internal communications functions, we utilize QCII's fiber optic network to transport voice and data traffic.
Also, through its fiber optic network, QCII provides nationally some data and Internet access services, including private line, ATM and Frame Relay, which are similar to what we provide within our
local service area.

Our
analysis presented below is organized to provide the information we believe will be instructive for understanding the relevant trends going forward. However, this discussion should
be read in conjunction with our condensed consolidated financial statements in Item 1 of Part I of this report, including the footnotes thereto. Certain prior year revenue and expense amounts have
been reclassified to conform to the current year presentations.

Our
operations are integrated into and are part of the segments of the QCII consolidated group. The chief operating decision maker, or CODM, for us is the same as that for the
consolidated group. The CODM 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, 2004. Our business contributes to the segments reported by
QCII, but the QCII CODM reviews our financial information only in connection with our quarterly and annual reports. See further discussion in Note 5Contributions to QCII Segments
and Revenue Information to our condensed consolidated financial statements in Item 1 of Part I of this report.

22

---



Business Trends

Our results continue to be impacted by a number of factors influencing the telecommunications industry as follows:



Results of Operations

Overview

We generate revenue from the provision of voice services, data and Internet services, other services and services to our affiliates. Certain prior period revenue
and expense amounts have been reclassified to conform to the current period presentation. 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. The following is a description of the sources of our revenue:



23

---





The
following table summarizes our results of operations for the three months ended March 31, 2005 and 2004:

Three Months Ended March 31,Increase/
(Decrease)

% Change2005

2004(Dollars in millions)Operating revenues

$
2,551

$
2,617

$
(66
)
(3
)%Operating expenses


1,966


1,993


(27
)
(1
)%Operating income


585


624


(39
)
(6
)%Other expensenet


162


144


18

13
%Income before income taxes and discontinued operations


423


480


(57
)
(12
)%Income tax expense


(161
)

(186
)

25

13
%Income from continuing operations


262


294


(32
)
(11
)%Loss from discontinued operations, net of tax of $0 and $27, respectively





(41
)

41

nmNet income

$
262

$
253

$
9

4
%


---

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

Operating Revenue

The following table compares operating revenue including detail of customer channels for the three months ended March 31, 2005 and 2004:

Three Months ended March 31,Increase/
(Decrease)

Percentage
Change2005

2004(Dollars in millions)Voice services

$
1,708

$
1,849

$
(141
)
(8
)%Data and Internet


555


532


23

4
%Affiliate


283


229


54

24
%Other services


5


7


(2
)
(29
)%Total operating revenue

$
2,551

$
2,617

$
(66
)
(3
)%


Voice Services

The decrease in voice services was primarily due to business and consumer access line losses from competitive pressures and technology substitution. The following
table shows our access lines by channel as of March 31, 2005 and 2004:

Access LinesMarch 31,Increase/
(Decrease)

Percentage
Change2005

2004(in thousands)Consumer

9,131

9,744

(613
)
(6
)%Business

4,360

4,520

(160
)
(4
)%Wholesale

1,848

1,786

62

3
%Total

15,339

16,050

(711
)
(4
)%


---

24

---



Data and Internet Services

The increase in data and Internet services was primarily due to subscriber growth across the suite of product offered in our consumer and business channels as a
result of our expanded service availability.

Affiliate Services

The increase in affiliate services revenue was primarily caused by increases in switched access, private line and billing and collection services provided to our
long-distance affiliate. The increase in these services is offset by a reduction in service revenues from external customers and was
associated with growth in the affiliate's long-distance business as it re-entered this business in our local service area.

Operating Expenses

The following table provides further detail regarding our operating expenses for the three months ended March 31, 2005 and 2004.

Three Months ended March 31,Increase/
(Decrease)

Percentage Change2005

2004(Dollars in millions)Operating expenses:Cost of sales:Affiliate costs

$
53

$
69

$
(16
)
(23
)%Network expenses


47


39


8

21
%Employee-related costs


361


382


(21
)
(5
)%Other non-employee related costs


125


109


16

15
%Total cost of sales


586


599


(13
)
(2
)%Selling, general and administrative:Affiliate costs


300


279


21

8
%Property and other taxes


87


67


20

30
%Bad debt


23


37


(14
)
(38
)%Restructuring and severance related costs


5


2


3

150
%Employee-related costs


141


162


(21
)
(13
)%Other non-employee related costs


154


181


(27
)
(15
)%Total selling, general and administrative


710


728


(18
)
(2
)%Depreciation


579


574


5

1
%Intangible assets amortization


91


92


(1
)
(1
)%Total operating expenses

$
1,966

$
1,993

$
(27
)
(1
)%


Cost of Sales

Cost of sales includes network costs, salaries and wages, benefits, materials and supplies, Universal Service Fund, or USF, charges, contracted engineering
services and computer systems support. Cost of sales remained flat at 23% of revenue for the three months ended March 31, 2005 and 2004. The overall decrease in cost of sales was primarily
attributed to the following:

The
decrease in employee related costs was primarily due to employee reductions associated with our 2004 restructuring plans and the sale of our payphone operations.

25

---



Non-employee
related costs increased primarily due to a favorable bankruptcy settlement of $16 million in the three months ended March 31, 2004, increased
maintenance costs and a 2% increase to the Universal Service Fund rate partially offset by lower volumes for the three months ended March 31, 2005.

The
decrease in affiliate costs was primarily due to a realignment of expenses and reduced employees partially offset by an increase in allocated costs due to changes in the nature and
timing of costs incurred.

Selling, General and Administrative Expenses

Selling, General and Administrative, or 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. SG&A was flat at 28% of revenue
for the three months ended March 31, 2005 and 2004. The overall decrease in SG&A was primarily attributed to the following:

Employee-related
cost decreases were primarily due to employee reductions associated with our restructuring plans and the sale of our payphone operations.

Property
and other taxes increased primarily due to a one-time expense reduction from a successful property tax settlement of $28 million for the quarter ended March 31,
2005. The increase was partially offset by a one-time adjustment in the quarter ended March 31, 2005.

Bad
debt expense decreased from 1.5% of non-affiliated revenue to 1.0% of non-affiliated revenue for the first quarter of 2005 compared to the first quarter of
2004. Bad debt expense decreased due to a continuing trend of improved collection practices and tighter credit policies.

Other
non-employee related costs, such as real estate, insurance, marketing and advertising, net of amounts capitalized, decreased primarily due to a one-time
adjustment in the quarter ended March 31, 2004.

Affiliate
expenses include services for corporate administration, information technology, sales, advertising and technical support. Affiliate expenses increased primarily as a result of
changes in the nature and timing of costs incurred by our parent as a result of its outsourcing of certain information technology services offset by employee reductions and a re-alignment of expenses.

Combined Pension and Post-Retirement Benefits

Our employees participate in the QCII pension and other post-employment benefit plans. We refer to the combined pension and
post-retirement benefit costs as net pension expense. Our results include net pension expenses allocated to us by QCII of $55 million in the first quarter of 2005 and
$55 million in the first quarter of 2004. The net pension expense 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 is allocated to cost of sales and
SG&A.

26

---



Total Other ExpenseNet

Other expensenet generally includes interest expense, net of capitalized interest, and other incomenet, which includes interest income.
Components of other expensenet were as follows:

Three Months ended March 31,Increase/
(Decrease)

Percentage Change2005

2004(Dollars in millions)Interest expensenet

$
149

$
148

$
1

1
%Other expense (income)net


13


(4
)

17

nmTotal other expensenet

$
162

$
144

$
18

13
%


---

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

Other expense (income)net.For the three months ended March 31, 2005, the other expensenet
of $13 million is primarily the result of a $16 million decrease in fair value of interest rate swap agreements. For further discussion of our interest rate swap agreements, please see
Note 3Borrowings to our condensed consolidated financial statements in Item 1 of this report. Small changes in either current interest rates or the interest rate yield curve can
cause substantial changes in the value of the swaps, which can materially impact our other non-operating income or expense for those interest rate swaps that do not receive hedge
accounting treatment. Furthermore, due to the inherent volatility in the value of these swaps, significant fluctuations in our other non-operating income or expense could occur from period
to period.

Income Taxes

The effective income tax rate is the provision for income taxes as a percentage of income before income tax. The effective income tax rate for the three months
ended March 31, 2005 decreased to 38.1% as compared to 38.7% for the three months ended March 31, 2004. The decrease was primarily due to the non-taxable income associated
with the subsidy under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.

Liquidity and Capital Resources

We are a wholly owned subsidiary of Qwest Services Corporation, or 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, impacts on our credit ratings and access to capital markets.

QCII
and its consolidated subsidiaries had total borrowings of $17.3 billion at March 31, 2005 and December 31, 2004. Some of the borrowings of QCII and QSC are
secured by liens on our stock. As a result, ownership of our stock could transfer if either QCII or QSC were to default on its debt obligations.

QCII
has cash management arrangements between certain of its subsidiaries that include lines of credit, inter-company 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 inter-company obligations vary from time to time and
are classified as short-term borrowings.

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Near-Term View

We had $389 million in cash and cash equivalents and $250 million of short-term investments available at March 31, 2005. For the quarter
ended March 31, 2005, our primary source of funds was cash provided by operating activities. During 2005, we expect to use our available excess cash primarily to pay dividends to our parent, to
make additional investment to our network or pay down debt maturities. For the three months ended March 31, 2005 we declared dividends of $600 million to our parent.

Our
working capital deficit as of March 31, 2005 decreased $158 million since December 31, 2004. This reduction of our working capital deficit was attributable to
the cash provided by operating activities exceeding the cash we used for debt service, dividend payments and capital expenditures.

The
current working capital deficit was primarily due to accounts payable owed to our affiliates and dividends that we declare to QSC. The timing of cash payments for declared dividends
to QSC is at our discretion in consultation with QSC. We continue to produce significant cash from operating activities, and we believe that our cash on hand together with our cash flows from
operations should be sufficient to meet our cash needs through the next twelve months. However, if we or QCII become subject to significant judgments, settlements or tax payments, such as the
potential CLAS obligation, as further discussed in Note 6Commitments and Contingencies to our condensed consolidated financial statements in Item 1 of Part I of this report, we or
QCII could be required to make significant payments that we or QCII do not have the resources to make. The magnitude of any settlements or judgments resulting from these actions could materially and
adversely affect QCII's ability to meet its debt obligations and its financial condition, potentially impacting its credit ratings, its ability to access capital markets and its compliance with debt
covenants. In addition, the magnitude of any settlement or judgment may cause QCII to draw down significantly on its cash balances, which might force it to obtain additional financing or explore other
methods to generate cash. Such methods could include issuing additional securities or selling assets.

To
the extent that QCII's EBITDA (as defined in QCII's debt covenants) is reduced by cash judgments or settlements, its debt to consolidated EBITDA ratios under certain debt agreements
will be adversely affected, which could reduce QCII's liquidity and flexibility due to potential restrictions on drawing on their line of credit and potential restrictions on incurring additional debt
under certain provisions of
their debt agreements. As a wholly owned subsidiary of QCII, our business operations and financial condition could be similarly affected, potentially impacting our credit ratings and access to capital
markets. In addition, a three-year revolving credit facility established by QSC in 2004 (the "2004 QSC Credit Facility") contains various limitations, including a restriction on using any
proceeds from the facility to pay settlements or judgments relating to investigation and securities actions discussed in Note 6Commitments and Contingencies to our condensed
consolidated financial statements in Item 1 of Part I of this report.

We
expect our 2005 capital expenditures will approximate the 2004 levels.

Long-Term View

We have historically operated with a working capital deficit as a result of the issues discussed above and due to our practice of declaring regular cash
dividends. We expect this trend to continue. As discussed below, we continue to generate substantial cash from operations. We believe that cash provided by operations, combined with our current cash
position and continued access to capital markets to refinance our current portion of debt, should allow us to meet our cash requirements, for the foreseeable future.

In
addition to our periodic need to obtain financing in order to meet our debt obligations as they come due, we may also need to obtain additional financing or investigate other methods
to generate

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cash
(such as further cost reductions or the sale of assets) if cash provided by our and QCII's operations does not improve, if revenue and cash provided by operations continue to decline, if economic
conditions weaken, if competitive pressures increase or if we or QCII become subject to significant judgments, settlements or tax payments as further discussed in Note 6Commitments
and Contingencies to our condensed consolidated financial statements in Item 1 of Part I of this report. In the event of an adverse outcome in one or more of these matters, we or QCII could be
required to make significant payments that we do not have the resources to make. The magnitude of any settlements or judgments resulting from these actions could materially and adversely affect QCII's
ability to meet its debt obligations and its financial condition, potentially impacting its credits ratings, its ability to access capital markets and its compliance with debt covenants. In addition,
the magnitude of any settlements or judgments may cause QCII to draw down significantly on its cash balances, which might force it to obtain additional financing or explore other methods to generate
cash. Such methods could include issuing additional securities or selling assets. As a wholly owned subsidiary of QCII, our business operations and financial condition could be similarly affected,
potentially impacting our credit ratings and access to the capital markets.

The
2004 QSC Credit Facility makes available to QSC $750 million of additional credit. This facility has a cross payment default provision, and this facility and certain other
debt issues of QCII and its other subsidiaries also have cross acceleration provisions. When present, such provisions could have a wider impact on liquidity than might otherwise arise from a default
or acceleration of a single debt instrument. These provisions generally provide that a cross default under these debt instruments will occur if:



Upon
such a cross default, the creditors of a material amount of QCII's debt may elect to declare that a default has occurred under their debt instruments and to accelerate the principal
amounts due such creditors. Cross acceleration provisions are similar to cross default provisions, but permit a default in a second debt instrument to be declared only if in addition to a default
occurring under the first debt instrument, the indebtedness due under the first debt instrument is actually accelerated. As a wholly owned subsidiary of QCII, our business operations and financial
condition could be affected, potentially impacting our credit ratings and access to the capital markets. In addition, the 2004 QSC Credit Facility contains various limitations, including a restriction
on using any proceeds from the facility to pay settlements or judgments relating to the investigation and securities actions discussed in Note 6Commitments and Contingencies to our
condensed consolidated financial statements in Item 1 of Part I of this report.

Historical View

Operating Activities

We generated cash from operating activities of $1.102 billion and $1.126 billion for the three months ended March 31, 2005 and 2004,
respectively. The decrease in cash provided by operating activities was primarily attributable to a $35 million decrease in income from continuing operations after adjusting for depreciation
and amortization.

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Our
employees participate in the QCII pension, post-retirement and other post-employment benefit plans. QCII does not anticipate a requirement to make any
significant contribution to the QCII retirement plans in 2005.

Investing Activities

Our capital expenditures totaled $250 million for the quarter ended March 31, 2005 and $387 million for the quarter ended March 31,
2004.

We
expect that our 2005 capital expenditures will approximate 2004 levels.

Financing Activities

Cash used for financing activities was $764 million for the quarter ended March 31, 2005 and $508 million for the same period ended 2004. The
increase in cash used for financing activities was primarily attributable to increased dividend payments made to QSC during the first quarter of 2005 as compared to the first quarter of 2004. Our
existing debt covenants do not limit the amount of dividends we can pay to our parent. At March 31, 2005, we were in compliance with all provisions or covenants of our borrowings.

Credit ratings

The table below summarizes our long-term debt ratings at March 31, 2005 and December 31, 2004:

S&P

BB-Fitch

BBMoody's

Ba3


Debt
ratings by the various rating agencies reflect each agency's opinion of the ability of the issuers to repay debt obligations as they come due. In general, lower ratings result in
higher borrowing costs and/or impaired ability to borrow. A security rating is not a recommendation to buy, sell, or hold securities and may be subject to revision or withdrawal at any time by the
assigning rating organization.

Given
our current credit ratings, as noted above, our ability to raise additional capital under acceptable terms and conditions may be negatively impacted.

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
currently have interest rate swap agreements with notational amounts totaling $575 million to manage exposure to interest rate movements and optimize our mixture of floating
and fixed-rate debt while minimizing liquidity risk. The effective floating interest rate on the agreements is LIBOR plus 3.43%. A hypothetical increase of 100 basis points in the LIBOR
rate would increase annual pre-tax interest expense by approximately $6 million related to these swap agreements. Changes in interest rates also impact the valuation of these swaps,
which impact our other non-operating income or expense for these interest rate swaps that do not receive hedge accounting treatment. Small changes in either current interest rates or the
interest rate yield curve can cause substantial changes in the value of the swaps, which can materially impact our other non-operating income or expense for those interest rate swaps that do not
receive hedge accounting treatment. Furthermore, due to the inherent volatility in the value of these swaps, significant fluctuations in our other non-operating income or expense could occur from
period to period.

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As
of March 31, 2005 and December 31, 2004, approximately $1.25 billion of our floating-rate debt was exposed to changes in interest rates. As of
March 31, 2005 and December 31, 2004, we had approximately $400 million of long-term fixed rate debt obligations maturing in the following 12 months. We are
exposed to changes in interest rates at any time that we choose to refinance this debt. A hypothetical 100 or 200 basis point increase in the interest rates on this debt would not have a material
effect on our earnings.

As
of March 31, 2005, our proportionate share of QCII's investments was $348 million of cash invested in money market instruments and $210 million invested in
auction rate securities. As interest rates change, so will the interest income derived from these instruments. Assuming that the investment balance was to remain constant, a hypothetical increase of
100 basis points in money market rates would increase annual interest income by $6 million. As of March 31, 2005 our share of short-term investments were $40 million and long-term
investments were $9 million. These investments were at fixed interest rates and thus were not subject to interest rate volatility.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q contains or incorporates by reference forward-looking statements 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 ("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

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 our affiliate), 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 November 2003 decision of the Federal Communications Commission
("FCC") allowing for number portability from wireline to wireless phones.

Due
to these and other factors, we believe competitive telecommunications providers are no longer hindered by historical barriers to entry. As a result, we are seeking to distinguish
ourselves from our competitors through a number of customer service initiatives. These initiatives include expanded product bundling, simplified billing, improved customer support and other ongoing
measures. However, these initiatives are new and unproven. We may not have sufficient resources to distinguish our service levels from those of our competitors, and we may not be successful in
integrating our product offerings, especially products for which we act as a reseller. Even if we are successful, these initiatives may not be sufficient to offset our continuing loss of access lines.
Please see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 2 of Part I of this report for more information regarding trends affecting our access lines.

We
have also begun to experience and expect further increased competitive pressure from telecommunications providers either consolidating with other providers 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 in an effort to retain and attract customers. These pressures could adversely affect our operating results and financial performance.

Rapid changes in technology and markets could require substantial expenditure of financial and other resources in excess of contemplated levels, and any
inability to respond to those changes could reduce our market share.

The telecommunications industry is experiencing significant technological changes, and our ability to execute 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 and video 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.

If we are not able to stem the loss of our access lines or grow other areas of our business to compensate for these losses, our revenue will continue to
decline.

Our revenue decline over the past few years is largely attributable to our continued loss of access lines, which is a result of increased competition and
technology substitution (such as wireless and cable substitution for wireline telephony). We are seeking to improve our competitive position through product bundling and other sales and marketing
initiatives. However, we may not be successful in these

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efforts.
If we are not successful and our revenue declines materially without corresponding cost reductions, this will cause a material deterioration to our results of operations and financial
condition and adversely affect our ability to service debt and pay other obligations.

Risks Relating to Legal and Regulatory Matters

Any adverse outcome of the major lawsuits pending against QCII and us or the investigation of QCII currently being conducted by the U.S. Attorney's
Office could have a material adverse impact on our financial condition and operating results, on the trading price of our debt securities and on our ability to access the capital markets.

The DOJ investigation and the securities actions described in Note 6Commitments and Contingencies to our condensed consolidated financial
statements in Item 1 of Part I of this report present material and significant risks to QCII and us. In many of the securities actions, the plaintiffs seek tens of millions of dollars in damages or
more, and in one putative class action lawsuit, lead counsel for the plaintiffs has indicated that plaintiffs will seek damages in the tens of billions of dollars. The outcomes in any cases which have
been or may be brought by the U.S. Attorney's Office or the SEC against former officers or employees of QCII may have a negative impact on the outcome of certain of these legal actions.

Further,
the size, scope and nature of the restatements of QCII's consolidated financial statements for 2001 and 2000, which are described in its Annual Report on
Form 10-K/A for the fiscal year ended December 31, 2002 ("QCII's 2002 Form 10-K/A"), affect the risks presented by these investigations and actions, as
these matters involve, among other things, QCII's prior accounting practices and related disclosures. Plaintiffs in certain of the securities actions have alleged QCII's restatement of items in
support of their claims. We can give no assurance as to the impacts on QCII's or our financial results or financial condition that may ultimately result from all of these matters. During 2003 and
2004, QCII recorded reserves in its financial statements totaling $750 million in connection with the investigations and securities actions. The $750 million reserve was reduced by
$125 million in December 2004 as a result of a payment in that amount in connection with a settlement in October 2004 of the SEC's investigation of QCII. The remaining reserve
amount represents a final payment to be made in connection with the SEC settlement in the amount of $125 million and the minimum estimated amount of loss QCII believes is probable with respect
to the securities actions. However, the ultimate outcomes of these matters are still uncertain and there is a significant possibility that the amount of loss QCII ultimately incurs could be
substantially more than the reserve QCII has provided. If the recorded reserve that will remain after QCII has paid the amount owed under the SEC settlement is insufficient to cover these matters,
QCII will need to record additional charges to its statement of operations in future periods.

An
adverse outcome with respect to the U.S. Attorney's Office investigation could have a material and significant adverse impact upon QCII and us. Additionally, QCII continues to defend
against the securities actions vigorously and is currently unable to provide any estimate as to the timing of the resolution of these actions. Any settlement of or judgment in one or more of these
actions substantially in excess of QCII's recorded reserves could have a significant impact on QCII and us, and we can give no assurance that QCII or we will have the resources available to pay any
such judgment. The magnitude of any settlement or judgment resulting from these actions could materially and adversely affect QCII's and our ability to meet our debt obligations and our financial
condition, potentially impacting our credit ratings, our ability to access capital markets and our compliance with debt covenants. In addition, the magnitude of any settlement or judgment may cause
QCII or us to draw down significantly on our cash balances, which might force us to obtain additional financing or explore other methods to generate cash. Such methods could include issuing additional
securities or selling assets.

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Further,
given the size and nature of 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 QCII's and our financial position. Thus, QCII and we can give no assurances as to the impacts on our financial results or financial condition as a result of these matters.

Continued scrutiny of QCII's financial disclosures could reduce investor confidence and cause the trading price for our debt securities to decline.

As a result of QCII's past accounting issues and the increased scrutiny of financial disclosures, investor confidence in QCII has suffered and could suffer
further. As discussed earlier, the U.S. Attorney's Office is currently conducting an investigation of, without limitation, transactions related to the various adjustments and restatements described in
QCII's 2002 Form 10-K/A and transactions between QCII and certain of its vendors and certain investments in the securities of those vendors by individuals associated with QCII, and
certain prior disclosures made by QCII. Although, as described above, QCII has entered into a settlement with the SEC concerning the SEC's investigation of QCII, in March 2005, the SEC filed
suit against QCII's former Chief Executive Officer, Joseph Nacchio, two of its former Chief Financial Officers, Robert Woodruff and Robin Szeliga, and other former officers and employees. In February
2005, a criminal indictment was returned against Marc Weisberg, a former QCII executive, in federal district court in Colorado. The indictment alleges that Mr. Weisberg violated federal laws by
seeking and obtaining investment opportunities for himself and others in vendors that did or sought to do business with QCII. Civil and criminal trials in these and other matters could take place in
the future. Evidence that is introduced at such trials may result in further scrutiny by governmental authorities and others.

The
existence of this heightened scrutiny could adversely affect investor confidence and cause the trading price for our debt securities to decline.

We operate in a highly regulated industry, and are therefore exposed to restrictions on our manner of doing business and a variety of claims relating to
such regulation.

Our operations are subject to extensive federal regulation, including the Communications Act of 1934, as amended, and FCC regulations thereunder. We are also
subject to the applicable laws and regulations of various states, including regulation by PUCs and other state agencies. Federal laws and FCC regulations generally apply to regulated interstate
telecommunications (including international telecommunications that originate or terminate in the United States), while state regulatory authorities generally have jurisdiction over regulated
telecommunications services that are intrastate in nature. The local competition aspects of the Telecommunications Act of 1996 are subject to FCC rulemaking, but the state regulatory authorities play
a significant role in implementing those FCC rules. Generally, we must obtain and maintain certificates of authority from regulatory bodies in most states where we offer regulated services and must
obtain prior regulatory approval of rates, terms and conditions for our intrastate services, where required. Our businesses are subject to numerous, and often quite detailed, requirements under
federal, state and local laws, rules and regulations. Accordingly, we cannot ensure that we are always in compliance with all these requirements at any single point in time. The agencies responsible
for the enforcement of these laws, rules and regulations may initiate inquiries or actions based on their own perceptions of our conduct, or based on customer complaints.

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 regulators or third parties will not raise material issues with regard to our compliance or noncompliance with applicable regulations.

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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, the restrictive terms of its debt instruments and the substantial litigation pending against it 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 March 31, 2005, our consolidated debt was $7.7 billion, which is
included in QCII's total consolidated debt of $17.3 billion as of such date. A considerable amount of our and QCII's debt obligations comes due over the next few years. While we currently
believe we will have the financial resources 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.

In
addition to our periodic need to obtain financing in order to meet our debt obligations as they come due, we may also need to obtain additional financing or investigate other methods
to generate cash (such as further cost reductions or the sale of assets) if cash provided by our and QCII's operations does not improve, if revenue and cash provided by operations continue to decline,
if economic conditions weaken, if competitive pressures increase or if we or QCII become subject to significant judgments and/or settlements as further discussed in
Note 6Commitments and Contingencies to our condensed consolidated financial statements in Item 1 of Part I of this report and in "Liquidity and Capital Resources" above. We can
give no assurance that such additional financing will be available on terms that are acceptable. 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. The 2004 QSC Credit Facility
has a cross payment default provision, and the 2004 QSC Credit Facility and certain other debt issues of QCII and its other subsidiaries have cross acceleration provisions. When present, such
provisions could have a wider impact on liquidity than might otherwise arise from a default or acceleration of a single debt instrument. As a wholly owned subsidiary of QCII and QSC, any such event
could adversely affect our ability to conduct business or access the capital markets and could adversely impact our credit ratings.

In
addition, the 2004 QSC Credit Facility contains various limitations, including a restriction on using any proceeds from the facility to pay settlements or judgments relating to the
investigation and securities actions discussed in Note 6Commitments and Contingencies to our condensed consolidated financial statements in Item 1 of Part I of this report.

Our
high debt levels could adversely impact our credit ratings. Additionally, the degree to which we, together with QCII, are leveraged may have other important limiting consequences,
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
may be unable to further significantly reduce our capital requirements or operating expenses even if revenue is decreasing. 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. Such non-discretionary capital outlays and
operating expenses may lessen our ability to compete with other providers who face less significant spending requirements. While we believe that our current level of capital expenditures will meet
both our maintenance and our core growth requirements going forward, this may not be the case if circumstances underlying our expectations change.

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

We have declared and paid dividends to our direct parent, QSC, based on the earnings of our wireline operations. In July 2004, we modified our dividend
practice to balance our financial needs, cash position and credit profile with those of our parent. As a result, going forward, we may declare and pay dividends in excess of our earnings to the extent
permitted by applicable law, which may consume a
significant amount of the cash we generate. Our debt covenants do not limit the amount of dividends we can pay to our parent.

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
maturity on terms 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 Relating to Qwest

If conditions or assumptions differ from the judgments, assumptions or estimates used in our critical accounting policies, the accuracy of our financial
statements and related disclosures could be affected.

The preparation of financial statements and related disclosures in conformity with generally accepted accounting principles in the United States of America, or
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 Annual Report on Form 10-K for the year ended December 31, 2004, or our 2004 Form 10-K, describe those significant accounting policies
and methods used in the preparation of our consolidated financial statements that are considered "critical" because they require judgments, assumptions and estimates that materially impact our
consolidated financial statements and related disclosures. As a result, if future events 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.

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

As a significant taxpayer, QCII is subject to frequent and regular audits from the IRS, as well as from state and local tax authorities. These audits could
subject us to risks due to adverse positions that may be taken by these tax authorities. Please see Note 6Commitments and ContingenciesOther Matters to our condensed
consolidated financial statements in Item 1 of Part I of this report for examples of legal proceedings involving some of these adverse positions. For example, in the fourth quarter of 2004, QCII
received notices of proposed adjustments on several significant issues for the 1998-2001 audit cycle. Additionally, the IRS indicated in January 2005, that it is reviewing QCII's
tax treatment of the DEX sale in the 2002-2003 audit cycle.

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

While
QCII believes its tax reserves adequately provide for the associated tax contingencies under current accounting literature, QCII's tax audits and examinations may result in tax
liabilities that differ materially from those it has recorded in its consolidated financial statements. Also, the ultimate outcomes of all of these matters are uncertain, and QCII can give no
assurance as to whether an adverse result from one or more of them will have a material effect on its financial results, including potentially offsetting a significant portion of its existing net
operating losses, which could affect our financial condition and operating results to the extent the matters affect us.

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. In August 2003, we reached agreements with the
Communications Workers of America, or CWA, and the
International Brotherhood of Electrical Workers, or IBEW, on two-year labor contracts. Each of these agreements was ratified by union members and expires on August 13, 2005. The
impact of 2005 and future negotiations, including changes in wages and benefit levels that are collectively bargained for as part of the overall contracts with the unions, could have a material impact
on our financial results. As an example, if we are not able to negotiate for certain key contractual terms such as caps on reimbursable post-retirement healthcare costs, we could be
required to recognize materially higher employee costs.

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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information under the caption "Risk Management" in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 2 of Part I
of this report is incorporated herein by reference.

ITEM 4.    CONTROLS AND PROCEDURES

The effectiveness of our or any system of disclosure controls and procedures is subject to certain limitations, including the exercise of judgment in designing,
implementing and evaluating the controls and procedures, the assumptions used in identifying the likelihood of future events, and the inability to eliminate misconduct completely. As a result, there
can be no assurance that our disclosure controls and procedures will detect all errors or fraud. By their nature, our or any system of disclosure controls and procedures can provide only reasonable
assurance regarding management's control objectives.

Under
the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the design and operation of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, or the "Exchange Act") as of March 31,
2005. On the basis of this review, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures are designed, and are
effective, to give reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the SEC and to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is accumulated and
communicated to our management, including
our Chief Executive Officer and Chief Financial Officer, in a manner that allows timely decisions regarding required disclosure.

There
were no changes in our internal control over financial reporting that occurred in the first quarter of 2005 that materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.

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PART IIOTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

The information contained in Note 6Commitments and Contingencies to our condensed consolidated financial statements in Item 1 of Part I of
this report is hereby incorporated by reference.

Matters Resolved in the First Quarter of 2005

The General Services Administration, or GSA, announced in July 2002 that it was conducting a review of all contracts with QCII for purposes of determining
QCII's present responsibility to be a contractor to the Federal government. On September 12, 2003, QCII was informed that the Inspector General of the GSA had referred to the GSA
Suspension/Debarment Official the question of whether QCII should be considered for debarment. QCII was informed that the basis for the referral was the February 2003 indictment against four
former QCII employees in connection with a transaction with the Arizona School Facilities Board in June 2001 and a civil complaint also filed in February 2003 by the SEC against the same
former employees and others relating to the Arizona School Facilities Board transaction and a transaction with Genuity Inc. in 2000. On February 2, 2005, QCII was informed that the
Inspector General had made a second referral regarding whether QCII should be considered for debarment, this one based generally on the matters that are the subject of the complaint filed against QCII
in connection with its settlement with the SEC and on SEC actions against and settlements with three former QCII employees in 2003 and 2004 and a fourth action filed against a former QCII employee in
2004. On February 22, 2005, QCII was notified by the GSA that the GSA had determined not to pursue any administrative action against QCII based on the information contained in the
administrative record. Accordingly, QCII remains a presently responsible contractor eligible to compete for Federal government business.

As
described more fully in Note 6Commitments and Contingencies to our condensed consolidated financial statements in Item 1 of Part I of this report, formal
proceedings against us have been initiated with the public utilities commissions in several states alleging, among other things, that we, in contravention of federal and state law, failed to file
interconnection agreements with the state commissions and that we therefore allegedly discriminated against various CLECs. The complainants seek fines, penalties and/or carrier credits. On
November 9, 2004, Qwest and the Staff of the Washington Commission entered into a settlement under which Qwest agreed to pay a penalty of $7.8 million. This settlement does not require
Qwest to provide any credits to CLECs. On February 28, 2005, the Washington Commission entered an order approving the settlement and closing the proceeding. No party appealed by the
March 31, 2005 deadline, and Qwest made the agreed to payment of $7.8 million in April 2005.

ITEM 6.    EXHIBITS

Exhibits filed for Qwest through the filing of this Form 10-Q:

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, File No. 1-3040.)
|               |   |                                                                                                                                                                                           

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|(3.3  | ) | Amended and Restated Bylaws of Qwest (incorporated by reference to Qwest's Annual Report on Form 10-K/A for the year ended December 31, 2002, File No. 1-3040.)                                                                                                                                  
|----- | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4.1  | ) | Indenture, dated as of April 15, 1990, by and between Mountain States Telephone and Telegraph Company and The First National Bank of Chicago (incorporated by reference to Qwest's Annual Report on Form 10-K/A for the year ended
December 31, 2002, File No. 1-3040.)                          
|(4.2  | ) | First Supplemental Indenture, dated as of April 16, 1991, by and between U S WEST Communications, Inc. and The First National Bank of Chicago (incorporated by reference to Qwest's Annual Report on Form 10-K/A for the year
ended December 31, 2002, File No. 1-3040.)                         
|(4.3  | ) | Indenture, dated as of October 15, 1999, by and between U S WEST Communications, Inc. and Bank One Trust Company, N.A. (incorporated by reference to Qwest's Annual Report on Form 10-K for the year ended December 31, 1999, File
No. 1-3040.)                                                  
|(4.4  | ) | Officer's Certificate of Qwest, dated March 12, 2002 (including forms of 87/8% notes due March 15, 2012) (incorporated by reference to Qwest's Form S-4, File No. 333-115119.)                                                                                                                   
|(4.5  | ) | First Supplemental Indenture, dated as of August 19, 2004, by and between Qwest and U.S. Bank N.A. (incorporated by reference to Qwest Communications International Inc.'s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2004, File No. 1-15577.)                            
|(4.6  | ) | Second Supplemental Indenture, dated as of November 23, 2004, by and between Qwest and U.S. Bank N.A. (incorporated by reference to Qwest's Current Report on Form 8-K filed November 23, 2004, File No. 001-03040.)                                                                             
|(10.1 | ) | Registration Rights Agreement, dated March 12, 2002, by and among Qwest and the initial purchasers named therein (incorporated by reference to Qwest's Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, File
No. 1-3040.)                                                     
|(10.2 | ) | Registration Rights Agreement, dated August 19, 2004, by and among Qwest Corporation and the initial purchasers listed therein (incorporated by reference to Qwest Communications International Inc.'s Quarterly Report on Form 10-Q for
the quarter ended September 30, 2004, File No. 1-15577.)
|(10.3 | ) | Registration Rights Agreement, dated November 23, 2004, by and among Qwest and the initial purchasers listed therein (incorporated by reference to Qwest's Current Report on Form 8-K filed November 18, 2004, File No. 001-03040.)                                                              
|12    |   | Statement of Computation of Ratio of Earnings to Fixed Charges.                                                                                                                                                                                                                                  
|31.1  |   | Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                 
|31.2  |   | Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                 
|32    |   | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                          

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

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

| | QWEST CORPORATION
| | -----------------
| | By:              
| |                  

May
3, 2005

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