10-K

Use these links to rapidly review the document
PART IV
TABLE OF CONTENTS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the fiscal year ended December 31, 2003
Or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from                             to

Commission File No. 001-15577

QWEST COMMUNICATIONS INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	84-1339282 (I.R.S. Employer Identification No.)
1801 California Street, Denver, Colorado (Address of principal executive offices)	80202 (Zip Code)
(303) 992-1400 (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Qwest Common Stock ($0.01 per share, par value)	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

        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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K o.

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

        On January 31, 2004, 1,771,801,427 shares of Qwest common stock were outstanding. The aggregate market value of the Qwest voting stock held by non-affiliates as of June 30, 2003 was approximately $4.8 billion.

DOCUMENTS INCORPORATED BY REFERENCE

        Information required by Part III (Items 10, 11, 12, 13 and 14) is incorporated by reference to portions of Qwest's definitive proxy statement for its 2004 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days of December 31, 2003.

TABLE OF CONTENTS

Item	Description
	PART I
1.	Business
2.	Properties
3.	Legal Proceedings
4.	Submission of Matters to a Vote of Security Holders
	PART II
5.	Market for Registrant's Common Equity and Related Stockholder Matters
6.	Selected Financial Data
7.	Management's Discussion and Analysis of Financial Condition and Results of Operations
7A.	Quantitative and Qualitative Disclosures About Market Risk
8.	Consolidated Financial Statements and Supplementary Data
9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
9A.	Controls and Procedures
	PART III
10.	Directors and Executive Officers of the Registrant
11.	Executive Compensation
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
13.	Certain Relationships and Related Transactions
14.	Principal Accounting Fees and Services
	PART IV
15.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K
	Signatures

2

Unless the context requires otherwise, references in this report to "Qwest," "we," "us" and "our" refer to Qwest Communications International Inc. and its consolidated subsidiaries.

PART I

ITEM 1. BUSINESS

        We provide local telecommunications and related services, IntraLATA and InterLATA long-distance services and wireless, data and video services within our local service area, which consists of the 14-state region of Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming. We also provide long-distance services and reliable, scalable and secure broadband data, voice and video communications outside our local service area as well as globally. We also provided, until September 2003, directory publishing services in our local service area. In November 2002, we completed the first half of the sale of our directory publishing business; and in September 2003 we completed the sale of the remaining portion. As a consequence, the results of operations of our directory publishing business are included in income from discontinued operations in our consolidated statements of operations.

        We were incorporated under the laws of the State of Delaware in 1997. Pursuant to a merger with U S WEST, Inc. on June 30, 2000, which we refer to as the Merger, we acquired all the operations of U S WEST and its subsidiaries. The Merger has been accounted for as a reverse acquisition under the purchase method of accounting with U S WEST being deemed the accounting acquirer and Qwest (prior to the Merger, "pre-Merger Qwest") the acquired entity. Our principal executive offices are located at 1801 California Street, Denver, Colorado 80202, telephone number (303) 992-1400.

        For a discussion of certain risks applicable to our business, financial condition and results of operations, including risks associated with our outstanding legal matters, see the risk factors described in "Special Note Regarding Forward-Looking Statements" in Part II, Item 7 below.

Recent Developments

        As we have previously disclosed, we have engaged in preliminary discussions for purposes of resolving certain of the investigations and securities matters to which we are subject. These matters are described in detail in Item 3—Legal Proceedings. We most recently engaged in these preliminary discussions after we announced our 2003 financial results on February 19, 2004. These most recent discussions and further analysis have led us to conclude that a reserve should be provided. Accordingly, we have recorded a reserve in our consolidated financial statements for the estimated minimum liability associated with these matters. However, the ultimate outcomes of these matters are still uncertain and there is a significant possibility that the amount of loss we ultimately incur could be substantially more than the reserve we have provided. At this time, we believe that it is probable that all but $100 million of the recorded reserve will be recoverable out of a portion of the insurance proceeds, but the use and allocation of these proceeds has yet to be resolved between us and individual insureds. See Item 3—Legal Proceedings—Matters Resolved in the Fourth Quarter of 2003 and Note 10—Other Financial Information in Item 8 of this report.

        The securities actions are in a preliminary phase and we continue to defend against these matters vigorously. None of the plaintiffs or the defendants in the securities actions has advanced evidence concerning possible recoverable damages and we have not yet conducted discovery on these and other relevant issues. We are currently unable to provide any estimate as to the timing of the resolution of any of these matters. Any settlement of or judgment on one or more of these matters in excess of our recorded reserves could be significant, and we can give no assurance that we will have the resources available to pay any such judgment. In the event of an adverse outcome in one or more of these matters, our ability to meet our debt service obligations and our financial condition could be materially and adversely affected.

3

Operations

        We currently operate in three segments: (1) wireline services; (2) wireless services; and (3) other services. We also maintained, until September 2003, a fourth segment consisting of our directory publishing business. Our remaining directory publishing business was sold in September 2003 to a group of private equity investors. As a result, for purposes of calculating the percentages of revenue of our segments provided below, we have excluded the impact of revenue from our directory publishing business. For additional financial information about our segments see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of this report and Note 15—Segment Information to our consolidated financial statements in Item 8 of this report. The segment revenue percentages contained in this section are based upon financial results prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP.

        We market and sell our products and services to consumer and business customers. In general, our business customers fall into the following categories: (1) small businesses; (2) national and global businesses; (3) governmental entities; and (4) public and private educational institutions. We also provide our products and services to other telecommunications providers on a wholesale basis. We seek to distinguish ourselves from our competitors through our recent and continuing customer service initiatives.

Wireline Services

        We offer a wide variety of wireline products and services in a variety of categories that help people and businesses communicate. Our wireline products and services are offered through our telecommunications network, which consists of both our traditional telephone network and our fiber optic broadband network. The traditional telephone network is defined as all equipment used in processing telecommunications transactions within our local service area and forms a portion of the public switched telephone network, or PSTN. The PSTN refers to the worldwide voice telephone network that is accessible to every person with a telephone and a dial tone. Our traditional telephone network is made up of both copper cables and fiber optic broadband cables and serves approximately 16.2 million access lines. Access lines are telephone lines reaching from a central office to customers' premises.

        Our fiber optic broadband network extends over 180,000 miles to major cities worldwide and enables long-distance voice services and data and Internet services. We rely on our completed metropolitan area network, or MAN rings, and in-building rights-of-way to expand service to existing customers and provide service to new customers who have locations on or near a ring or in a building where we have a right-of-way or a physical presence. The MAN fiber rings allow us to provide these customers with end-to-end connectivity for our broadband data services to large and multi-location enterprises and other telecommunications carriers in key United States metropolitan markets. End-to-end connectivity provides customers with the ability to transmit and receive information at high speed through the entire connection path rather than be limited by dial-up connection speeds.

Wireline Products and Services

        The following reflects the key categories of our wireline products and services.

        Local voice services—consumer, business and wholesale.    Through our traditional telephone network, we originate and terminate local voice services within local exchange service territories as defined by the state Public Utility Commissions, or PUCs. These local voice services include:

•

basic local exchange services provided through access lines connected to our portion of the PSTN;



•

switching services for customers' internal communications through facilities that we own;

4

•

various custom calling features such as Caller ID, Call Waiting, Call Return and 3-Way Calling;



•

enhanced voice services, such as voice mail;



•

operator services, including directory assistance;



•

public telephone service;



•

voice customer premises equipment, or CPE; and



•

collocation services (i.e. hosting of another provider's telecommunications equipment in our facilities).

        Recently, we also began to offer Internet protocol telephony (sometimes referred to as voice over Internet protocol, or VoIP) in Minnesota on a limited basis. This technology allows us to offer more features at reduced costs to customers. We do not expect to recognize a material amount of revenue from our VoIP offerings in 2004.

        On a wholesale basis, we provide network transport, billing services and access to our local network within our local service area to competitive local exchange carriers, or CLECs, and wireless carriers. These services allow CLECs to provide telecommunications services using our local network. CLECs are communications companies certified by a state PUC or similar agency that provide local exchange service within a local access transport area, or LATA, including LATAs within our local service area. At times, we sell unbundled network elements, or UNEs, that allow our wholesale customers to build their own networks and interconnect with our network.

        Long-distance voice services—consumer, business and wholesale.    We provide three types of long-distance communications services to our consumer, business and wholesale customers.

•

We provide IntraLATA long-distance service to our customers nationwide including within our local service area. IntraLATA long-distance service refers to services that cross local exchange area boundaries but originate and terminate within the same geographic LATA. These services include calls that terminate outside a caller's local calling area but within their LATA and wide area telecommunications service or "800" services for customers with highly concentrated demand;



•

We provide InterLATA long-distance services nationwide. These services include originating long-distance services for communications that cross LATA boundaries and "800" services. Beginning in the fourth quarter of 2003, we satisfied certain Federal Communications Commission, or FCC, requirements that allowed us to begin providing these services throughout our local service area using our proprietary network assets; and



•

We also provide international long-distance services for voice calls that terminate or originate with our customers in the United States.

        Access services—wholesale.    We provide access services primarily to interexchange carriers, or IXCs, for the use of our local network to connect their customers to their data and Internet protocol, or IP, networks. IXCs provide long-distance services to end-users by handling calls that are made from a phone exchange in one LATA to an exchange in another LATA or between exchanges within a LATA. Competitive communications companies often operate as both CLECs and IXCs.

        For the years ended December 31, 2003, 2002 and 2001, revenue from voice services (i.e. local voice services, long-distance voice services and access services) accounted for approximately 69%, 71% and 72%, respectively, of our total revenue from continuing operations.

        Data and Internet services—consumer, business and wholesale.    We offer a broad range of products and professional services to enable our customers to transport voice, data and video

5

telecommunications at speeds ranging from 14.4 kilobits per second to 10 gigabits per second. Our customers use these products and services in a variety of ways. Our business customers use them to facilitate internal and external data transmissions, such as transferring files from one location to another. Our consumer customers use them to access email and the Internet under a variety of connection speeds and pricing packages. We provide our data and Internet services in our local service area, nationally and internationally.

        Some of our data and Internet services are described below.

•

Digital subscriber line, or DSL, which permits existing consumer and business customer telephone lines to operate at higher speeds necessary for video and high-speed data communications to the Internet or private networks. Substantially all of our DSL customers are currently located within our local service area;



•

Asynchronous transfer mode, or ATM, which is a broadband, network transport service that provides a fast, efficient way to move large quantities of information over our highly reliable, scalable and secure fiber optic broadband network;



•

Frame relay, which is a switching technology that allows data to travel in individual packets of variable length. The key advantage to this approach is that a frame relay network can accommodate data packets of various sizes associated with virtually any data protocol;



•

Private lines, which are direct circuits or channels specifically dedicated to the use of an end-user organization for the purpose of directly connecting two or more sites. Private lines offer a secure solution for frequent communication of large amounts of data between sites;



•

Integrated services digital network, or ISDN, is a comprehensive digital network architecture allowing users to transmit voice, data, video and images—separately or simultaneously—over standard telephone lines or fiber optics;



•

Dedicated Internet access, or DIA, which offers customers Internet access ranging from 128 kilobits per second to 2.4 gigabits per second;



•

Virtual private network, or VPN, which allows businesses with multiple locations to create a private network accessible only by their various offices. VPN provides businesses with a cost-effective alternative to meet their communication needs;



•

Internet dial access, which provides Internet service providers, or ISPs, and business customers with a comprehensive, reliable and cost-effective dial-up network infrastructure;



•

Web hosting, which provides data center services. In its most basic form, web hosting includes space, power and bandwidth. We also offer a variety of server and application management and professional web design services. We currently operate ten web hosting centers, or CyberCenters^SM; and



•

Professional services, which include network management, the sale, installation and maintenance of data CPE and the building of proprietary fiber-optic broadband networks for our governmental and other business customers.

        On a wholesale basis, we provide collocation services, or hosting of other providers' telecommunications equipment in our facilities. We also provide wholesale private line services primarily to IXCs to allow them use of our local network to connect their customers to their networks.

        For the years ended December 31, 2003, 2002 and 2001, revenue from data and Internet services accounted for approximately 27%, 25% and 24%, respectively, of our total revenue from continuing operations.

6

Distribution Channels

        We sell our retail wireline products and services through a variety of channels, including direct-sales marketing, telemarketing and arrangements with third-party agents. We also provide the use of similar products and services, and the use of our network assets on a wholesale basis, as described above.

Wireline Services Revenue

        For the years ended December 31, 2003, 2002 and 2001, revenue from wireline services accounted for approximately 96%, 95% and 96%, respectively, of our total revenue from continuing operations.

Wireless Services

        We operate our wireless services segment primarily through our indirect wholly owned subsidiary, Qwest Wireless LLC. In August 2003, Qwest Wireless entered into a service agreement with a subsidiary of Sprint Corporation that allows us to resell Sprint wireless services, including access to Sprint's nationwide personal communication service, or PCS, wireless network, to consumer and business customers, primarily within our local service area. We began offering these Sprint services under our brand name in March 2004. Under the service agreement, we retain control of all sales and marketing, customer service, billing and collection, pricing, promotion and product offerings relating to the Sprint services that we resell. The service agreement provides that Sprint will be our exclusive wireless provider and has an initial term of five years (with automatic renewal for successive one-year terms until either party provides notice of non-renewal). Through Qwest Wireless, we also continue to operate a PCS wireless network that serves select markets within our local service area, including Denver, Seattle, Phoenix, Minneapolis, Portland, Salt Lake City and other smaller markets. Our wireless customers who are currently being serviced through our proprietary wireless network will be transitioned onto Sprint's network over time.

        We market our wireless products and services through our website, partnership relationships and our sales/call centers. We offer consumer and business customers a broad range of wireless plans, as well as a variety of custom and enhanced features, such as Call Waiting, Caller ID, 3-Way Calling, Voice Messaging, Enhanced Voice Calling and Two-Way Text Messaging. We also offer integrated service, which enables customers to use the same telephone number and voice mail box for their wireless phone as for their home or business phone.

        For the years ended December 31, 2003, 2002 and 2001, revenue from wireless services accounted for approximately 4%, 5% and 4%, respectively, of our total revenue from continuing operations.

Other Services

        We provide other services that primarily involve the sublease of some of our unused real estate assets, such as space in our office buildings, warehouses and other properties. The majority of these properties are located in our local service area.

Directory Publishing

        Through our wholly owned subsidiary, Qwest Dex, Inc., or Dex, we have historically published telephone directories in our local service area. During 2003, we completed the sale of our directory publishing business.

        For the years ended December 31, 2003, 2002 and 2001, revenue from directory publishing was included in income from discontinued operations. For additional information see Note 6—Assets Held for Sale including Discontinued Operations to our consolidated financial statements in Item 8 of this report.

7

Customer Service Initiatives

        With increased levels of competition in the telecommunications industry resulting from statutory and regulatory developments and technology advancements, we believe competitive 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 supporting our Qwest Spirit of Service™ brand commitment. These initiatives include expanded product bundling, simplified billing, improved customer support and other ongoing measures. For example, we have entered into strategic relationships with providers of wireless and video communications to improve our product offerings, we are restructuring our pricing packages and we are investing in improved billing and customer communication systems.

Importance, Duration and Effect of Patents, Trademarks and Copyrights

        Either directly or through our subsidiaries, we own or have licenses to various patents, trademarks, trade names, copyrights and other intellectual property necessary to the conduct of our business. We do not believe that the expiration of any of our intellectual property rights, or the non-renewal of those rights, would materially affect our results of operations.

Competition

Wireline Services

        Local voice services.    In providing local voice services to our consumer and business customers within our local service area, we compete with CLECs, including some owned by national carriers, smaller regional providers, competitive access providers, independent telephone companies, Internet telephony providers, wireless providers and cable companies. Technology substitution, such as wireless substitution for wireline, cable telephony substitution for wireline and cable modem substitution for dial-up modem lines and DSL, has been a significant cause for a decrease in our total access lines in 2003. Competition is based primarily on pricing, packaging of services and features, quality of service and increasingly on meeting customer care needs such as simplified billing and timely response to service calls.

        The obligation to make number portability available from wireline to wireless service, which was recently mandated by the FCC, is another competitive factor that may increase access line losses. Also, revenue for local voice services may be affected adversely should providers of VoIP services attract a sizable base of customers who use VoIP to bypass traditional local exchange carriers. A related concern is the risk that access charge fees we receive from either IXCs or CLECs will be reduced if phone-to-phone VoIP calls remain unregulated and are not to be subject to intercarrier compensation obligations that apply to traditional telephony.

        Our existing infrastructure and long-standing customer relationships make us the market leader in providing local voice services in our local service area. Although our status as an incumbent local exchange carrier, or ILEC, helps make us the leader in providing wireline services within our local service area, increased competition has resulted in recent declines in billable access lines.

        Our competitors, mainly CLECs and CLEC/IXC combinations, have accelerated their use of unbundled network element-platforms, or UNE-P. This service, which we are required to provide at wholesale rates as a matter of current federal and state laws and regulations, allows our competitors to purchase all of the elements they need to provide competitive local services to our customers. Bell Operating Companies, or BOCs such as Qwest Communications, are required to make their network elements available to the competitors, which allows CLECs and CLEC/IXC combinations an alternative to building their own telecommunications facilities. Consequently, we believe these competitors are able to provide local service at a cost advantage, allowing them to gain market share. Meanwhile, the

8

obligation to provide UNEs reduces our revenue and margin. We believe the offering of UNE services will continue to cause downward pressure on our margins and result in incremental retail access line losses.

        Long-distance voice services.    National carriers, CLECs and other resellers, such as AT&T Corporation, Sprint and MCI Inc. (formerly known as Worldcom, Inc.) compete with us in providing InterLATA and IntraLATA long-distance services both inside and outside our local service area. Other BOCs, such as BellSouth Corporation, Verizon Communications and SBC Communications, Inc., also compete in the InterLATA market nationally and, as they have gained FCC approval, within the states in their respective local service areas. Wireless providers also market both IntraLATA and InterLATA long-distance services as a substitute to traditional wireline service.

        Competition in the long-distance consumer market is based primarily on price, customer service, quality and reliability. We are the market share leader in providing IntraLATA long-distance service within our local service area, but face increasing competition from national carriers, which have substantial financial and technical resources. Competition in the business market is based on similar factors, as well as the ability to offer a ubiquitous solution nationwide.

        In addition, the emergence of certain competitors, such as MCI, XO Communications, Inc. and McLeodUSA, Inc., from bankruptcy proceedings with substantially reduced debt could precipitate an industry-wide reduction in prices, thereby causing a decline in our revenues.

        Access services.    Within our local service area, we compete primarily with smaller regional providers, including CLECs, competitive access providers and independent telephone companies. Outside our local service area, we compete primarily with other BOCs and with IXCs. We compete on network quality, customer service, product features, the speed with which we can provide a customer with requested services and price. Although our status as an ILEC helps make us the leader in providing these services within our local service area, increased competition has resulted in a reduction in access minutes of use billed to IXCs and wireless carriers. Also, we earn certain revenues when we originate or terminate calls that are carried by IXCs and wireless carriers that generate carrier access charges for the use of our network. To the extent that VoIP networks or VoIP service providers seek to bypass the traditional methods and obligations to pay this form of intercarrier compensation, or the related "reciprocal compensation" which we earn for use of our network in terminating local calls, these providers could enjoy a competitive advantage versus traditional carriers who must factor the costs of carrier access charges and reciprocal compensation into their charges.

        Data and Internet services.    Business customers are the primary market for these network-related services, although we are increasing our DSL offerings to both consumer and business customers in several markets in our local service area. In providing these services, we compete with national long-distance carriers (such as AT&T, Sprint and MCI), cable operators, BOCs, CLECs and large integrators (International Business Machines Corporation and Electronic Data Systems Corporation). Large integrators are also competing in a new manner, providing customers with managed network services, which takes inter-site traffic off our network. Customers are particularly concerned with network reach, but are also sensitive to quality, reliability, customer service and price. We also compete with cable operators who offer high-speed broadband facilities over cable modem, a technology directly competitive with the DSL modems that we employ. Cable operators who sell data or Internet services via broadband enjoy a regulatory advantage in that they are not presently subject, at least in the jurisdictions in which we operate, to regulation as "telecommunications" providers which imposes many costs and obligations, such as that to make UNE-P available to competitors or to provide competitive access and interconnect rights.

        Outside of our local service area, our investment in improving the reach and quality of our network has helped our competitive position. With regards to our hosting business, while many of our

9

competitors, such as Global Crossing Ltd. and Sprint, have abandoned or largely reduced their hosting businesses, competition remains high due to over-capacity from large providers such as Cable & Wireless PLC.

Wireless Services

        The market for wireless services within our local service area remains highly competitive. We compete with AT&T Wireless Services, Inc., Verizon Communications Inc., T-Mobile International, Cingular Wireless LLC, Sprint and Nextel Communications, among others. Although we expect our competitive position to improve through offering Sprint's nationwide wireless service under our brand name to customers in our local service area, we continue to face heavy competition from national, and some regional, wireless carriers. Competition may increase as additional spectrum is made available within our local service area, both to new competitors and to current wireless providers who may acquire additional spectrum in order to increase their coverage areas and service quality. Competition in the wireless market is based primarily on price, coverage area, services, features, handsets, technical quality and customer service. Our future competitive position will depend on our ability to successfully integrate Sprint services into our branded service offerings and our ability to offer new features and services in packages that meet our customers' needs.

Regulation

        As a general matter, we are subject to extensive state and federal regulation, including requirements and restrictions arising under the Federal Communications Act, as modified in part by the Telecommunications Act of 1996, or the Telecommunications Act, state utility laws, and the rules and policies of the FCC, state PUCs and other governmental entities. Federal laws and FCC regulations apply to regulated interstate telecommunications (including international telecommunications that originate or terminate in the United States), while state regulatory authorities have jurisdiction over regulated telecommunications services that are intrastate in nature. 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.

        This structure of public utility regulation generally prescribes the rates, terms and conditions of our regulated wholesale and retail products and services (including those sold or leased to CLECs). While there is some commonality among the regulatory frameworks from jurisdiction to jurisdiction, each state has its own unique set of constitutional provisions, statutes, regulations, stipulations and practices that impose restrictions or limitations on the regulated entities' activities. For example, in varying degrees, jurisdictions may provide limited restrictions on the manner in which a regulated entity can interact with affiliates, transfer assets, issue debt and engage in other business activities.

Interconnection

        The FCC is continuing to interpret the obligations of ILECs under the Telecommunications Act to interconnect their networks with, and make UNEs available to, CLECs. These decisions establish our obligations in our local service area and affect our ability to compete outside of our local service area. In May 2002, the U.S. Supreme Court issued its opinion in the appeal of the FCC's rules on pricing of UNEs. The Court affirmed the FCC's rules. Since we were following the FCC's then current UNE pricing rules, this decision did not impact the pricing of our UNEs.

        In May 2002, the D.C. Circuit Court of Appeals issued an order on the FCC's rules that determined the UNEs are required to be made available to competitors. The court reversed the FCC, finding that the agency had not given adequate consideration to or properly applied the "necessary and impair" standard of the Telecommunications Act. The court also ruled that the FCC impermissibly

10

failed to take into account the relevance of competition by other types of service providers, including cable and satellite companies. Finally, the court overturned a separate order of the FCC that had authorized "line sharing" where a CLEC purchases only a portion of the copper line connecting the end-user. This enables the CLEC to provide high-speed broadband services utilizing DSL technology. The D. C. Circuit stayed its order vacating the FCC's rules to permit the FCC to complete an ongoing rulemaking to determine what elements should be unbundled.

        On August 21, 2003, the FCC issued the triennial review order in response to the court's decision. The triennial review order addressed the regulatory status of a number of UNEs and the obligations of ILECs with respect to them. Among the more significant determinations made by the FCC in the triennial review order were: (i) CLECs are not impaired without access to unbundled switching when serving medium-to-large business and government customers using DS-1 switching capacity and above, but state PUCs are allowed to initiate and conclude proceedings within 90 days of October 2, 2003, to rebut this presumption of no impairment and petition the FCC for a waiver; the Colorado, Minnesota and Oregon PUCs initiated such proceedings but did not petition the FCC for a waiver of the no impairment finding; (ii) CLECs are impaired without access to switching and, concomitantly, the UNE-P, to serve mass market customers, as well as most high capacity loops and dedicated transport services (the transmission facilities between an ILEC's central offices); proceedings before state PUCs to rebut these presumptions of impairment may be initiated and concluded within nine months of October 2, 2003; (iii) state PUCs must initiate and conclude within nine months of October 2, 2003, proceedings to approve a "batch hot cut migration process" (a process by which a CLEC's customers served by the UNE-P would be moved to the CLEC's own switch in the event switching is eliminated from UNE-P) to be implemented by ILECs to address the costs and timeliness of the hot cut process; (iv) ILECs are no longer required to provide other carriers with access to the high frequency portion of a loop that is used by CLECs to provide competing DSL services (referred to as line sharing); however, current line sharing customers are "grandfathered," and the requirement to allow line sharing will be phased out over a three-year period; (v) ILECs are not required to provide CLECs with access to "next generation" networks and facilities used to provide broadband services; and (vi) the FCC modified the prohibition against CLECs using enhanced, extended links, or combinations of unbundled loops, multiplexing and dedicated transport, (referred to as EELs) to provide both local and long-distance services; the FCC established requirements designed to prevent the substitution of EELs for special access services needed by a carrier for the provision of its long-distance services.

        We joined with other ILECs in requesting that the D.C. Circuit Court of Appeals invalidate the rules that accompanied and were described in the triennial review order. We argued that the FCC did not comply with the May 2002 ruling by the D.C. Circuit because it failed to properly apply the "necessary and impair" standard and that the FCC impermissibly, and without adequate guidance, delegated to state PUCs its responsibilities under the Telecommunications Act. Other parties challenged various aspects of the triennial review order. On March 2, 2004, consistent with the ILEC's arguments, a three-judge panel of the D.C. Circuit issued a decision vacating and remanding back to the FCC significant portions of the triennial review order. By its terms, the court's mandate will be stayed for 60 days. If the FCC seeks further review of the decision by the D. C. Circuit or the U. S. Supreme Court, the decision may be stayed for a longer period of time.

        In addition to proceedings before the D.C. Circuit relating to the triennial review order, we are also participating in proceedings in all of our in-region states, except Wyoming, Montana, Idaho and South Dakota, that were authorized by the FCC's triennial review order. In these proceedings, we are attempting to demonstrate both the adequacy of our batch hot cut migration process as well as that CLECs would not be impaired in their attempts to compete in the mass market if switching were removed as a UNE. The continued viability and necessity for these state proceedings will likely be affected by the ruling of the D.C. Circuit on the matters pending before it. In light of the D.C. Circuit

11

appeal, Arizona, Colorado, Minnesota, Nebraska, North Dakota, Oregon, Utah and Washington have temporarily suspended their triennial review proceedings.

        On September 15, 2003, the FCC released a Notice of Proposed Rulemaking, instituting a comprehensive review of the rules pursuant to which UNEs are priced and on how the discounts to CLECs are established for their intended resale of our services. In particular, the FCC indicated that it will re-evaluate the rules and principles surrounding Total Element Long Run Incremental Cost which is the basis upon which UNE prices are set.

Access Pricing

        The FCC has initiated a number of proceedings that could affect the rates and charges for access services that we sell or purchase. These proceedings and related implementation of resulting FCC decisions have not yet been completed. Because there are a number of such proceedings that are inter-related, and because new technologies (such as VoIP) are emerging that pose further complications, it may take some time for the rulemaking to be completed. It is possible that the FCC will recommend a major restructuring of the current system of intercarrier compensation for use of local networks, and this would affect our rights to claim payment for carrier access charges. There has been a national trend towards reducing the amounts charged for "reciprocal compensation" for use of our networks to terminate local, IntraLATA and other intrastate calls, in preference for a "bill and keep" approach, but this is subject to varying decisions and interests by the state agencies that govern these intrastate rates. From time to time, the state PUCs which regulate intrastate access charges conduct proceedings that may affect the rates and charges for those services.

        On May 31, 2000, the FCC adopted the access reform and universal service plan developed by the Coalition for Affordable Local and Long-Distance Service, or CALLS. The adoption of the CALLS proposal resolved a number of outstanding issues before the FCC. The CALLS plan has a five-year life and provides for the following: (i) elimination of the residential pre-subscribed IXC charge; (ii) increases in subscriber line charges; (iii) reductions in switched access usage rates; (iv) the removal of certain implicit universal service support from access charges and direct recovery from end-users; and (v) commitments from participating IXCs to pass through access charge reductions to end-users. We have opted into the five-year CALLS plan.

Advanced Telecommunications Services

        The FCC has ruled that advanced services provided by an ILEC are covered by those provisions of the Telecommunications Act that govern telephone exchange and exchange access services. In January 2002, the FCC released a Notice of Proposed Rulemaking regarding the Regulatory Requirements for ILEC Broadband Telecommunications Services. In this proceeding the FCC has sought comment on what changes should be made in traditional regulatory requirements to reflect the competitive market and create incentives for broadband services growth and investment. The FCC has not yet issued final rules.

Intercarrier Compensation

        On April 27, 2001, the FCC released a Notice of Proposed Rulemaking that commenced a broad inquiry into, and initiated a fundamental re-examination of, all forms of compensation flowing between carriers as a result of their networks being interconnected. There are two primary forms of intercarrier compensation: (i) reciprocal compensation that applies to local traffic; and (ii) access charges that apply to long-distance traffic. The purpose of this FCC proceeding is to examine existing forms of intercarrier compensation and explore alternatives. One form of compensation that is being examined is "bill and keep" under which carriers freely exchange traffic and collect charges from their end-user customers in lieu of the present system in which carriers are obligated to compensate one another for network

12

utilization. The rules emanating from this rulemaking could result in fundamental changes in the charges we collect from other carriers and our end-users.

        On April 27, 2001, the FCC issued an Order with regard to intercarrier compensation for ISP-bound traffic. The Order required carriers serving ISP-bound traffic to reduce reciprocal compensation rates over a 36-month period beginning with an initial reduction to $0.0015 per minute of use and ending with a rate of $0.0007 per minute of use. In addition, a cap was placed on the number of minutes of use on which the terminating carrier may charge such rates. This reduction lowered costs that we paid CLECs for delivering such traffic to other carriers, but has not had, and is not likely to have, a material effect on our results of operations.

        On May 3, 2002, the D.C. Circuit Court of Appeals remanded the matter to the FCC to implement a rate methodology that is consistent with the court's ruling. The rules promulgated by the FCC remain in effect while the agency contemplates further action. Modifications in the FCC's rules or prescribed rates could increase our expenses.

Wireless Local Number Portability

        On November 10, 2003, the FCC issued an order and further notice of proposed rulemaking on local number portability, or LNP, mandating that wireline carriers must port telephone numbers to wireless carriers. The LNP order provided guidance to both the wireline and wireless industries on matters related to "intermodal" LNP, or the ability of customers to switch from a wireline carrier to a wireless carrier or from a wireless to a wireline carrier without changing telephone numbers.

        In the LNP order, the FCC prescribed that porting from a wireline carrier to a wireless carrier is required where the requesting wireless carrier's coverage area overlaps the geographic location in which the wireline number is provisioned, including cases where the wireless carrier does not have point of interconnection or numbering resources in the rate center to which the phone number is assigned. The FCC also sought comment on, and will issue further rules regarding, the facilitation of wireless to wireline porting in cases where the rate center associated with the wireless number is different from the rate center in which the wireline carrier seeks to serve the customer. The LNP order was preceded by an FCC order, dated October 7, 2003, that dealt with issues related to implementation of wireless-to-wireless LNP.

        The FCC's rules, particularly those related to wireline-to-wireless LNP, may result in an acceleration of our access-line losses.

Voice Over Internet Protocol

        On December 1, 2003, the FCC conducted a public forum hearing to gather information concerning advancements, innovations, and regulatory issues related to VoIP services. Chairman Powell of the FCC has announced an intention to make VoIP a higher priority on the FCC's agenda in the next year. Furthermore, on February 12, 2004, the FCC issued a press release announcing that it would shortly institute a formal rulemaking proceeding addressing many issues related to VoIP. This rulemaking will likely raise issues that overlap, to a degree, with the rulemaking concerning ILEC Broadband Telecommunications Services and the Intercarrier Compensation proceeding. There are a number of issues that have been presented to the FCC that concern VoIP and that could affect our business. One is whether VoIP, and/or other forms of VoIP, should be subject to ordinary intercarrier compensation requirements and other federal or state requirements such as those that impose a fee to support "universal service" and support the extension of telecommunications and Internet facilities to rural areas and to public schools and facilities in inner cities. Another issue is whether VoIP providers should have any exemption or immunity from either federal or state regulation and, if so, what should be the parameters of this exemption or immunity. We are following these developments closely, as our network is capable of VoIP transport and similarly can be used to carry combinations of voice and

13

other forms of data in an IP-addressed packet format. We are committed to development of VoIP for our customers, and our VoIP offerings are likely to grow as the technology matures and the regulatory situation is clarified.

Employees

        As of December 31, 2003, we employed approximately 47,000 people. This does not include approximately 1,450 of our former employees who were transferred to a new company in September 2003 in connection with the completion of our sale of Dex.

        Approximately 27,000 of our employees are represented by collective bargaining agreements with the Communications Workers of America, or CWA, and the International Brotherhood of Electrical Workers, or IBEW. In August 2003, we entered into new two-year collective bargaining agreements with the CWA and the IBEW. Each of these agreements was ratified by union members and expires on August 13, 2005. Among other things, these agreements provide for guaranteed wage levels and continuing employment-related benefits.

Financial Information about Geographic Areas

        We provide a variety of telecommunications services on a national and international basis to global and national business, small business, government, consumer and wholesale customers. It is impractical for us to provide financial information about geographic areas.

Website Access

        Our website address is www.qwest.com. You may obtain free electronic copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports at our investor relations website, www.qwest.com/about/investor/, under the heading "SEC Filings." These reports are available on our investor relations' website as soon as reasonably practicable after we electronically file them with the Securities and Exchange Commission, or SEC.

        We have adopted written codes of ethics that apply to our directors, officers and employees, including our principal executive officer and senior financial officers, in accordance with Section 406 of the Sarbanes-Oxley Act of 2002, the rules of the SEC promulgated thereunder and the New York Stock Exchange rules. These codes of ethics are available on our website at www.qwest.com/about/investor/governance or in print to any stockholder who requests them. In the event that we make any changes to, or provide any waivers from, the provisions of our codes of ethics, we intend to disclose these events on our website or in a report on Form 8-K within five business days of such event.

        In addition, copies of our guidelines on significant governance issues and the charters of our audit committee, compensation and human resources committee and nominating and governance committee are available on our website at www.qwest.com/about/investor/governance or in print to any stockholder who requests them.

14

ITEM 2. PROPERTIES

        Our principal properties do not lend themselves to simple description by character and location. The percentage allocation of our gross investment in property, plant and equipment consisted of the following:

		December 31,
		2003		2002
Land and buildings		8	%	8	%
Communications equipment		42	%	42	%
Other network equipment		43	%	42	%
General-purpose computers and other		6	%	7	%
Construction in progress		1	%	1	%
	Total	100	%	100	%

        Land and buildings consist of land, land improvements, central office and certain administrative office buildings. Communications equipment primarily consists of switches, routers and transmission electronics. Other network equipment primarily includes conduit and cable. General-purpose computers and other consists principally of computers, office equipment, vehicles and other general support equipment. We own substantially all of our telecommunications equipment required for our business. Total gross investment in plant, property and equipment was approximately $45.1 billion and $44.6 billion at December 31, 2003 and 2002, respectively, before deducting accumulated depreciation.

        We own and lease sales offices in major metropolitan locations both in the United States and internationally. Our network management centers are located primarily in buildings that we own at various locations in geographic areas that we serve. Substantially all of the installations of central office equipment for our local service business are located in buildings and on land that we own. Our fiber optic broadband network is generally located in real property pursuant to an agreement with the property owner or another person with rights to the property. It is possible that we may lose our rights under one or more of such agreements, due to their termination or their expiration. If we lose any such rights of way and are unable to renew them, we may find it necessary to move or replace the affected portions of the network. However, we do not expect any material adverse impacts as a result of the loss of any such rights.

ITEM 3. LEGAL PROCEEDINGS

Investigations, Securities Actions and Derivative Actions

        The investigations and securities actions described below present material and significant risks to us. The size, scope and nature of the recent restatements of our consolidated financial statements for fiscal 2001 and 2000 affect the risks presented by these matters, and we can give no assurance as to the impacts on our financial results or financial condition that may ultimately result from these matters. As we have previously disclosed, we have engaged in preliminary discussions for purposes of resolving certain of these matters. We most recently engaged in these preliminary discussions after we announced our 2003 financial results on February 19, 2004. These most recent discussions and further analysis have led us to conclude that a reserve should be provided. Accordingly, we have recorded a reserve in our consolidated financial statements for the estimated minimum liability associated with these matters. However, the ultimate outcomes of these matters are still uncertain and there is a significant possibility that the amount of loss we ultimately incur could be substantially more than the reserve we have provided.

        At this time, we believe that it is probable that all but $100 million of the recorded reserve will be recoverable out of a portion of the insurance proceeds, consisting of cash and letters of credit, which

15

were placed in a trust to cover our losses and the losses of individual insureds. However, the use and allocation of these proceeds has yet to be resolved between us and individual insureds. See Matters Resolved in the Fourth Quarter of 2003 below and Note 10—Other Financial Information in Item 8 of this report.

        The securities actions are in a preliminary phase and we continue to defend against these matters vigorously. None of the plaintiffs or the defendants in the securities actions has advanced evidence concerning possible recoverable damages and we have not yet conducted discovery on these and other relevant issues. We are currently unable to provide any estimate as to the timing of the resolution of any of these matters. Any settlement of or judgment in one or more of these matters in excess of our recorded reserves could be significant, and we can give no assurance that we will have the resources available to pay any such judgment. In the event of an adverse outcome in one or more of these matters, our ability to meet our debt service obligations and our financial condition could be materially and adversely affected.

Investigations

        On April 3, 2002, the SEC issued an order of investigation that made formal an informal investigation of Qwest initiated on March 8, 2002. We are continuing in our efforts to cooperate fully with the SEC in its investigation. The investigation includes, without limitation, inquiry into several specifically identified Qwest accounting practices and transactions and related disclosures that are the subject of the various adjustments and restatements described in our annual report on Form 10-K for the year ended December 31, 2002, or the 2002 Form 10-K. The investigation also includes inquiry into disclosure and other issues related to transactions between us and certain of our vendors and certain investments in the securities of those vendors by individuals associated with us.

        On July 9, 2002, we were informed by the U.S. Attorney's Office for the District of Colorado of a criminal investigation of Qwest's business. We believe the U.S. Attorney's Office is investigating various matters that include the subjects of the investigation by the SEC. We are continuing in our efforts to cooperate fully with the U.S. Attorney's Office in its investigation.

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

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

        In addition, as previously reported, the SEC has conducted an investigation concerning our earnings release for the fourth quarter and full year 2000 issued on January 24, 2001. The release provided pro forma normalized earnings information that excluded certain nonrecurring expense and income items resulting primarily from the Merger. On November 21, 2001, the SEC staff informed us

16

of its intent to recommend that the SEC authorize an action against us that would allege we should have included in the earnings release a statement of our earnings in accordance with GAAP. At the date of this filing, no action has been taken by the SEC. However, we expect that if our current discussions with the staff of the SEC result in a settlement, such settlement will include allegations concerning the January 24, 2001 earnings release.

        Also, as previously announced in July 2002 by the General Services Administration, or GSA, the GSA is conducting a review of all contracts with Qwest for purposes of determining present responsibility. On September 12, 2003, we were informed that the Inspector General of the GSA had referred to the GSA Suspension/Debarment Official the question of whether Qwest and its subsidiaries should be considered for debarment. We have been informed that the basis for the referral was the February 2003 indictment against four former Qwest 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. We are cooperating fully with the GSA and believe that Qwest and its subsidiaries will remain suppliers of the government, although we cannot predict the outcome of this referral.

Securities Actions and Derivative Actions

        Since July 27, 2001, 13 putative class action complaints have been filed in federal district court in Colorado against Qwest alleging violations of the federal securities laws. One of those cases has been dismissed. By court order, the remaining actions have been consolidated into a consolidated securities action, which we refer to herein as the "consolidated securities action".

        On August 21, 2002, plaintiffs in the consolidated securities action filed their Fourth Consolidated Amended Class Action Complaint, or the Fourth Consolidated Complaint, which defendants moved to dismiss. On January 13, 2004, the United States District Court for the District of Colorado granted the defendants' motions to dismiss in part and denied them in part. In that order, the court allowed plaintiffs to file a proposed amended complaint seeking to remedy the pleading defects addressed in the court's dismissal order and ordered that discovery, which previously had been stayed during the pendency of the motions to dismiss, proceed regarding the surviving claims. On February 6, 2004, plaintiffs filed a Fifth Consolidated Amended Class Complaint, or the Fifth Consolidated Complaint. The Fifth Consolidated Complaint attempts to expand the putative class period previously alleged in the Fourth Consolidated Complaint, seeks to restore the claims dismissed by the court, including claims against certain individual defendants who were dismissed as defendants by the court's dismissal order, and to add additional individual defendants who have not been named as defendants in plaintiffs' previous complaints. The Fifth Consolidated Complaint also advances allegations related to a number of matters and transactions that were not pleaded in the earlier complaints. The Fifth Consolidated Complaint is purportedly brought on behalf of purchasers of publicly traded securities of Qwest between May 24, 1999 and July 28, 2002, and names as defendants Qwest, Qwest's former Chairman and Chief Executive Officer, Joseph P. Nacchio, Qwest's former Chief Financial Officers, Robin R. Szeliga and Robert S. Woodruff, other of Qwest's former officers and current directors and Arthur Andersen LLP. The Fifth Consolidated Complaint alleges, among other things, that during the putative class period, Qwest and certain of the individual defendants made materially false statements regarding the results of Qwest's operations in violation of section 10(b) of the Securities Exchange Act of 1934, or the Exchange Act, that certain of the individual defendants are liable as control persons under section 20(a) of the Exchange Act and that certain of the individual defendants sold some of their shares of Qwest's common stock in violation of section 20(a) of the Exchange Act. The Fifth Consolidated Complaint further alleges that Qwest and certain other defendants violated section 11 of the Securities Act of 1933, as amended, or the Securities Act, by preparing and disseminating false registration statements and prospectuses for the registration of Qwest common stock to be issued to

17

U S WEST shareholders in connection with the merger of the two companies, and for the exchange of $3 billion of Qwest's notes pursuant to a registration statement dated January 17, 2001, $3.25 billion of Qwest's notes pursuant to a registration statement dated July 12, 2001, and $3.75 billion of Qwest's notes pursuant to a registration statement dated October 30, 2001. Additionally, the Fifth Consolidated Complaint alleges that certain of the individual defendants are liable as control persons under section 15 of the Securities Act by reason of their stock ownership, management positions and/or membership or representation on the Company's Board of Directors, or the Board. The Fifth Consolidated Complaint seeks unspecified compensatory damages and other relief. However, counsel for plaintiffs has indicated that the purported class will seek damages in the tens of billions of dollars. On March 8, 2004, Qwest and other defendants filed motions to dismiss the Fifth Consolidated Complaint.

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

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

18

        On December 10, 2002, the, California State Teachers' Retirement System, or CalSTRS, filed suit against Qwest, certain of Qwest's former officers and certain of Qwest's current directors and several other defendants, including Arthur Andersen LLP and several investment banks, in the Superior Court of the State of California in and for the County of San Francisco. CalSTRS alleged that the defendants engaged in fraudulent conduct that caused CalSTRS to lose in excess of $150 million invested in Qwest's equity and debt securities. The complaint alleges, among other things, that defendants engaged in a scheme to falsely inflate Qwest's revenue and decrease its expenses so that Qwest would appear more successful than it actually was during the period in which CalSTRS purchased and sold Qwest securities. The complaint purported to state causes of action against Qwest for (i) violation of California Corporations Code section 25400 et seq. (securities laws); (ii) violation of California Corporations Code section 17200 et seq. (unfair competition); (iii) fraud, deceit and concealment; and (iv) breach of fiduciary duty. Among other requested relief, CalSTRS sought compensatory, special and punitive damages, restitution, pre-judgment interest and costs. Qwest and the individual defendants filed a demurrer, seeking dismissal of all claims. In response, CalSTRS voluntarily dismissed the unfair competition claim but maintained the balance of the complaint. The court denied the demurrer as to the California securities law and fraud claims, but dismissed the breach of fiduciary duty claim against Qwest with leave to amend. The court also dismissed the claims against Robert S. Woodruff and Robin R. Szeliga on jurisdictional grounds. On or about July 25, 2003, plaintiff filed a First Amended Complaint. The material allegations and the relief sought remain largely the same, but plaintiff no longer alleges claims against Mr. Woodruff and Ms. Szeliga following the court's dismissal of the claims against them. CalSTRS reasserted its claim against Qwest for breach of fiduciary duty as a claim of aiding and abetting breach of fiduciary duty. Qwest filed a second demurrer to that claim, and on November 17, 2003, the court dismissed that claim without leave to amend. Discovery is proceeding in the CalSTRS litigation.

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

        On January 10, 2003, the State Universities Retirement System of Illinois, or SURSI, filed a lawsuit similar to the CalSTRS and New Jersey lawsuits in the Circuit Court of Cook County, Illinois. SURSI filed suit against Qwest, certain of Qwest's former officers and certain current directors and several other defendants, including Arthur Andersen LLP and several investment banks. On October 29, 2003, SURSI filed a second amended complaint which alleges, among other things, that defendants engaged in fraudulent conduct that caused it to lose in excess of $12.5 million invested in Qwest's common stock and debt and equity securities and that defendants engaged in a scheme to falsely inflate Qwest's revenues and decrease its expenses by improper conduct related to transactions with the Arizona School Facilities Board, Genuity, Calpoint LLC, KMC Telecom Holdings, Inc., KPNQwest N.V., and Koninklijke KPN, N.V. The second amended complaint purports to state the following causes of action against Qwest: (i) violation of the Illinois Securities Act; (ii) common law fraud; (iii) common law negligent misrepresentation; and (iv) violation of section 11 of the Securities Act. SURSI seeks, among other relief, punitive and exemplary damages, costs, equitable relief, including an injunction to freeze or prevent disposition of the defendants' assets, and disgorgement. All the individual defendants moved to dismiss the action against them for lack of personal jurisdiction. To

19

date, neither Qwest nor the individual defendants have filed a response to the second amended complaint, and the Illinois' court's schedule does not contemplate that answers or motions to dismiss be filed until after the challenges to jurisdiction have been resolved.

        On February 9, 2004, the Stichting Pensioenfonds ABP, or SPA, filed suit against us, certain of our current and former directors, officers, and employees, as well as several other defendants, including Arthur Andersen LLP, Citigroup Inc. and various affiliated corporations of Citigroup Inc., in the United States District Court for the District of Colorado. SPA alleges that the defendants engaged in fraudulent conduct that caused SPA to lose more than $100 million related to SPA's investments in Qwest's equity securities purchased between July 5, 2000 and March 11, 2002. The complaint alleges, among other things, that defendants created a false perception of Qwest's revenues and growth prospects. SPA alleges claims against Qwest and certain of the individual defendants for violations of sections 18 and 10(b) of the Exchange Act and SEC Rule 10b-5, violations of the Colorado Securities Act and common law fraud, misrepresentation and conspiracy. The complaint also contends that certain of the individual defendants are liable as "control persons" because they had the power to cause Qwest to engage in the unlawful conduct alleged by plaintiffs in violation of section 20(a) of the Exchange Act, and alleges other claims against defendants other than Qwest. SPA seeks, among other things, compensatory and punitive damages, rescission or rescissionary damages, pre-judgment interest, fees and costs.

        On October 22, 2001, a purported derivative lawsuit was filed in the United States District Court for the District of Colorado, or the Federal Derivative Litigation. On February 6, 2004, a third amended complaint was filed in the Federal Derivative Litigation, naming as defendants certain of Qwest's present and former directors and certain former officers and naming Qwest as a nominal defendant. The Federal Derivative Litigation is based upon the allegations made in the consolidated securities action and alleges, among other things, that the defendants breached their fiduciary duties to Qwest by engaging in self-dealing, insider trading, usurpation of corporate opportunities, failing to oversee implementation of securities laws that prohibit insider trading, failing to maintain appropriate financial controls within Qwest, and causing or permitting Qwest to commit alleged securities violations, thus (1) causing Qwest to be sued for such violations and (2) subjecting Qwest to adverse publicity, increasing its cost of raising capital and impairing earnings. The Federal Derivative Litigation has been consolidated with the consolidated securities action. Plaintiff seeks, among other remedies, disgorgement of alleged insider trading profits.

        On August 9, 2002, a purported derivative lawsuit was filed in the Court of Chancery of the State of Delaware. A separate alleged derivative lawsuit was filed in the Court of Chancery of the State of Delaware on or about August 28, 2002. On October 30, 2002, these two alleged derivative lawsuits, or collectively, the Delaware Derivative Litigation, were consolidated. The Second Amended Complaint in the Delaware Derivative Litigation was filed on or about January 23, 2003, naming as defendants certain of Qwest's current and former officers and directors and naming Qwest as a nominal defendant. In the Second Amended Complaint the plaintiffs allege, among other things, that the individual defendants: (i) breached their fiduciary duties by allegedly engaging in illegal insider trading in Qwest's stock: (ii) failed to ensure compliance with federal and state disclosure, anti-fraud and insider trading laws within Qwest, resulting in exposure to it; (iii) appropriated corporate opportunities, wasted corporate assets and self-dealt in connection with investments in initial public offering securities through Qwest's investment bankers; and (iv) improperly awarded severance payments to Qwest's former Chief Executive Officer, Mr. Nacchio and Qwest's former Chief Financial Officer, Mr. Woodruff. The plaintiffs seek recovery of incentive compensation allegedly wrongfully paid to certain defendants, all severance payments made to Messrs. Nacchio and Woodruff, disgorgement, contribution and indemnification, repayment of compensation, injunctive relief, and all costs including legal and accounting fees. On March 17, 2003, defendants moved to dismiss the Second Amended

20

Complaint, or, in the alternative, to stay the action. As described below, a proposed settlement of the Delaware Derivative Litigation has been reached.

        On each of March 6, 2002 and November 22, 2002, a purported derivative action was filed in Denver District Court, which we refer to collectively as the Colorado Derivative Litigation. On February 5, 2004, plaintiffs in one of these cases filed an amended complaint naming as defendants certain of Qwest's current and former officers and directors and Anschutz Company, and naming Qwest as a nominal defendant. The two purported derivative actions were consolidated on February 17, 2004. The amended complaint alleges, among other things, that various of the individual defendants breached their legal duties to Qwest by engaging in various kinds of self-dealings, failing to oversee compliance with laws that prohibit insider trading and self-dealing, and causing or permitting Qwest to commit alleged securities laws violations, thereby causing Qwest to be sued for such violations and subjecting Qwest to adverse publicity, increasing its cost of raising capital and impairing earnings.

        Beginning in May 2003, the parties to the Colorado Derivative Litigation and the Delaware Derivative Litigation participated in a series of mediation sessions with former United States District Judge Layn R. Phillips. On November 14, 2003, as a result of this process, the parties agreed in principle upon a settlement of the claims asserted in the Colorado Derivative Litigation and the Delaware Derivative Litigation, subject to approval and execution of formal settlement documents, approval by the Denver District Court and dismissal with prejudice of the Colorado Derivative Litigation, the Delaware Derivative Litigation and the Federal Derivative Litigation. From November 14, 2003 until February 17, 2004, the parties engaged in complex negotiations to resolve the remaining issues concerning the potential settlement. On February 17, 2004, the parties reached a formal Stipulation of Settlement, which was filed with the Denver District Court. The stipulation of settlement provides, among other things, that if approved by the Denver District Court and upon dismissal with prejudice of the Delaware Derivative Litigation and the Federal Derivative Litigation, $25 million of the $200 million from the insurance settlement with certain of our insurance carriers (described below in Matters Resolved in the Fourth Quarter of 2003) will be designated for the exclusive use of Qwest to pay losses and Qwest will implement a number of corporate governance changes. The Stipulation of Settlement also provides that the Denver District Court may enter awards of attorneys' fees and costs to derivative plaintiffs' counsel from the $25 million in amounts not to exceed $7.5 million and $125,000, respectively. On February 17, 2004, the Denver District Court entered a Preliminary Approval Order and scheduled a hearing to take place on June 15, 2004, to consider final approval of the proposed settlement and derivative plaintiffs' counsels' request for an award of fees and costs. Pursuant to the Preliminary Approval Order, Qwest mailed, on February 27, 2004, notice of the proposed settlement and hearing to stockholders of its Common stock as of February 17, 2004.

        On or about February 23, 2004, plaintiff in the Federal Derivative Litigation filed a motion in the United States District Court for the District of Colorado to enjoin further proceedings relating to the proposed settlement of the Colorado Derivative Litigation, or alternatively, to enjoin the enforcement of a provision in the Preliminary Approval Order of the Denver District Court which plaintiff claims would prevent the Federal Derivative Litigation from being prosecuted pending a final determination of whether the settlement of the Colorado Derivative Litigation shall be approved. On March 8, 2004, the individual defendants in the Federal Derivative Litigation filed a motion to stay all proceedings in that action pending a determination by the Denver District Court whether to approve the proposed settlement of the derivative claims asserted in the Colorado Derivative Litigation, which would resolve the derivative claims asserted in the Federal Derivative Litigation.

Regulatory Matters

        On February 14, 2002, the Minnesota Department of Commerce filed a formal complaint against us with the Minnesota Public Utilities Commission, or the Minnesota Commission, alleging that we, in

21

contravention of federal and state law, failed to file interconnection agreements with the Minnesota Commission relating to certain of our wholesale customers, and thereby allegedly discriminated against other CLECs. On November 1, 2002, the Minnesota Commission issued a written order adopting in full a proposal by an administrative law judge that we committed 26 individual violations of federal law by failing to file, as required under section 252 of the Telecommunications Act, 26 distinct provisions found in 12 separate agreements with individual CLECs for regulated services in Minnesota. The order also found that we agreed to provide and did provide to McLeodUSA and Eschelon Telecom, Inc. discounts on regulated wholesale services of up to 10% that were not made available to other CLECs, thereby unlawfully discriminating against them. The order found we also violated state law, that the harm caused by our conduct extended to both customers and competitors, and that the damages to CLECs would amount to several million dollars for Minnesota alone.

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

•

grant a 10% discount off all intrastate Minnesota wholesale services to all CLECs other than Eschelon and McLeodUSA; this discount would be applicable to purchases made by these CLECs during the period beginning on November 15, 2000 and ending on May 15, 2002;



•

grant all CLECs other than Eschelon and McLeodUSA monthly credits of $13 to $16 per UNE-P line (subject to certain offsets) purchased during the months of November 2000 through February 2001;



•

pay all CLECs other than Eschelon and McLeodUSA monthly credits of $2 per access line (subject to certain offsets) purchased during the months of July 2001 through February 2002; and



•

allow CLECs to opt-in to agreements the Minnesota Commission determined should have been publicly filed.

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

        Arizona, Colorado, New Mexico, Washington, Iowa and South Dakota have also initiated formal proceedings regarding our alleged failure to file required agreements in those states. On July 25, 2003, we entered into a settlement with the staff of the Arizona Corporation Commission, or the Arizona Commission, to settle this and several other proceedings. The proposed settlement, which must be approved by the Arizona Commission, requires that we provide approximately $21 million in consideration in the form of a voluntary contribution to the Arizona State Treasury, contributions to certain organizations and/or infrastructure investments and refunds in the form of bill credits to CLECs. On December 1, 2003, an administrative law judge issued a recommended decision denying the proposed settlement. The judge also recommended final orders requiring us to pay approximately $11 million in penalties and to issue credits to CLECs for a 24-month period from October 2000 to September 2002 equal to 10% of all sales of wholesale intrastate services provided by us. We filed exceptions to the recommended decision with the full Arizona Commission. New Mexico has issued an order providing its interpretation of the standard for filing these agreements, identified certain of our contracts as coming within that standard and opened a separate docket to consider further proceedings. Colorado has also opened an investigation into these matters, and on February 27, 2004, the Staff of the Colorado PUC submitted its Initial Comments. The Colorado Staff's Initial Comments recommended that the PUC open a show cause proceeding based upon the Staff's view that Qwest and CLECs had willfully and intentionally violated federal and state law and Commission rules. The Staff also detailed a range of remedies available to the Commission, including but not limited to an

22

assessment of penalties and an obligation to extend credits to CLECs. On June 26, 2003, we received from the FCC a letter of inquiry seeking information about related matters. We submitted our initial response to this inquiry on July 31, 2003. The proceedings and investigations in New Mexico, Colorado and Washington and at the FCC could result in the imposition of fines and other penalties against us that could be material. Iowa and South Dakota have concluded their inquiries resulting in no imposition of penalties or obligations to issue credits to CLECs in those states. 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.

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

        As a part of the approval by the FCC of the Merger, the FCC required us to engage an independent auditor to perform an attestation review of our compliance with our divestiture of in-region InterLATA services and our ongoing compliance with Section 271 of the Telecommunications Act. In 2001, the FCC began an investigation of our compliance with the divestiture of in-region InterLATA services and our ongoing compliance with Section 271 for the audit years 2000 and 2001. In connection with this investigation, Qwest disclosed certain matters to the FCC that occurred in 2000, 2001, 2002 and 2003. These matters were resolved with the issuance of a consent decree on May 7, 2003, by which the investigation was concluded. As part of the consent decree, Qwest made a voluntary payment to the U.S. Treasury in the amount of $6.5 million, and agreed to a compliance plan for certain future activities. Separate from this investigation, Qwest disclosed matters to the FCC in connection with its 2002 compliance audit, including a change in traffic flow related to wholesale transport for operator services traffic and certain toll-free traffic, certain bill mis-labeling for commercial credit card bills, and certain billing errors for public telephone services originating in South Dakota and for toll free services. The FCC has not yet instituted an investigation into the latter categories of matters. If it does so, an investigation could result in the imposition of fines and other penalties against us. The FCC has also instituted an investigation into whether we may have impermissibly engaged in the marketing of InterLATA services in Arizona prior to receiving FCC approval of our application to provide such services in that state.

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

23

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

        Several purported class actions relating to the installation of fiber optic cable in certain rights-of-way were filed in various courts against Qwest on behalf of landowners in Alabama, California, Colorado, Georgia, Illinois, Indiana, Kansas, Louisiana, Mississippi, Missouri, North Carolina, Oregon, South Carolina, Tennessee and Texas. Class certification was denied in the Louisiana proceeding and, subsequently, summary judgment was granted in Qwest's favor. A new Louisiana class action complaint has recently been filed. Class certification was also denied in the California proceeding, although plaintiffs have filed a motion for reconsideration. Class certification was granted in the Illinois proceeding. Class certification has not been resolved yet in the other proceedings. The complaints challenge Qwest's right to install its fiber optic cable in railroad rights-of-way and, in Colorado, Illinois and Texas, also challenge Qwest's right to install fiber optic cable in utility and pipeline rights-of-way. In Alabama, the complaint challenges Qwest's right to install fiber optic cable in any right-of-way, including public highways. The complaints allege that the railroads, utilities and pipeline companies own a limited property right-of-way that did not include the right to permit Qwest to install Qwest's fiber optic cable on the plaintiffs' property. The Indiana action purports to be on behalf of a national class of landowners adjacent to railroad rights-of-way over which Qwest's network passes. The Alabama, California, Colorado, Georgia, Kansas, Louisiana, Mississippi, Missouri, North Carolina, Oregon, South Carolina, Tennessee and Texas actions purport to be on behalf of a class of such landowners in those states, respectively. The Illinois action purports to be on behalf of landowners adjacent to railroad rights-of-way over which Qwest's network passes in Illinois, Iowa, Kentucky, Michigan, Minnesota, Nebraska, Ohio and Wisconsin. Plaintiffs in the Illinois action have filed a motion to expand the class to a nationwide class. The complaints seek damages on theories of trespass and unjust enrichment, as well as punitive damages. Together with some of the other telecommunication carrier defendants, in September 2002, Qwest filed a proposed settlement of all these matters (except those in Louisiana) in the United States District Court for the Northern District of Illinois. On July 25, 2003, the court granted preliminary approval of the settlement and entered an order enjoining competing class action claims, except those in Louisiana. The settlement and the court's injunction are opposed by some, but not all, of the plaintiffs' counsel and are on appeal before the Seventh Circuit Court of Appeals. At this time, Qwest cannot determine whether such settlement will be ultimately approved or the final cost of the settlement if it is approved.

        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 alleging that the defendants violated state and federal securities laws and breached their fiduciary duty in connection with an investment by the plaintiff in securities of KPNQwest. Qwest is a defendant in this lawsuit along with Qwest B.V., Joseph Nacchio and John McMaster, the former President and Chief Executive Officer of KPNQwest. The plaintiff trust claims to have lost $10 million in its investment in KPNQwest. On January 27, 2004, the Arizona Superior Court granted Qwest's motion to dismiss the state and federal securities law claims. The claim for breach of fiduciary duty remains pending.

        On October 4, 2002, a putative class action was filed in the federal district court for the Southern District of New York against Willem Ackermans, the former Executive Vice President and Chief

24

Financial Officer of KPNQwest, in which we were a major shareholder. The complaint alleges, on behalf of certain purchasers of KPNQwest securities, that Ackermans engaged in a fraudulent scheme and deceptive course of business in order to inflate KPNQwest revenue and securities. Ackermans was the only defendant named in the original complaint. On January 9, 2004, plaintiffs filed an amended complaint adding as defendants us, certain of our former executives who were also on the supervisory board of KPNQwest, and others.

        We have built our international network outside North America primarily by entering into long-term agreements to acquire optical capacity assets. We have also acquired some capacity from other telecommunications service carriers within North America under similar contracts. Several of the companies from which we have acquired capacity appear to be in financial difficulty or have filed for bankruptcy protection. Bankruptcy courts have wide discretion and could deny us the continued use of the assets under the optical capacity agreements without relieving us of our obligation to make payments or requiring the refund of amounts previously paid. If such an event were to occur, we would be required to write-off the cost of the related optical capacity assets and accrue a loss based on the remaining obligation, if any. We believe that we are taking appropriate actions to protect our investments and maintain ongoing use of the acquired optical capacity assets. At this time, it is too early to determine what effect the bankruptcies will have with respect to the acquired capacity or our ability to use this acquired optical capacity.

        The Internal Revenue Service, or the IRS, has proposed a tax adjustment for tax years 1994 through 1996. The principal issue involves our 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 us. The IRS disputes our allocation of the costs between us and third parties for whom we were building similar network assets during the same time period. Similar claims have been asserted against us with respect to 1997 and 1998, and it is possible that claims could be made against us for other periods. We are contesting these claims and do not believe they will be successful. Even if they are, we believe that any significant tax obligations will be substantially offset as a result of available net operating losses and tax sharing arrangements. However, the ultimate outcomes of these matters are uncertain and we can give no assurance as to whether they will have a material effect on our financial results.

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

Matters Resolved in the Fourth Quarter of 2003

        Since August 2001, we have been in several disputes with Touch America, Inc. relating to, among other things, various billing, reimbursement and other commercial disputes and allegations by Touch America that we violated certain state and federal antitrust and other laws. We recently agreed to resolve all of these matters in a settlement agreement with Touch America that was approved by the United States Bankruptcy Court for the District of Delaware on November 13, 2003, and which became a final order on November 24, 2003. The settlement agreement, as approved by the Bankruptcy Court, provides for: (a) the mutual general release of claims, except for bills for services provided after September 1, 2003; (b) the termination of all proceedings pending before the FCC, and all litigation between Touch America and us; (c) Touch America's forgiveness of a $23 million obligation due from us to Touch America; (d) the adjustment to zero by Touch America and us of all accounts payable and receivable for services delivered from one to the other prior to September 1, 2003; (e) our forgiveness of a $10 million loan to Touch America under a debtor in possession financing agreement; (f) Touch America's agreement to continue to provide or contract for the provisioning of services currently provided to us; (g) our agreement to purchase certain fiber assets necessary to our in-region operations

25

from Touch America for a total price of $8 million; (h) our agreement to purchase certain Frame/ATM assets and customers from Touch America; (i) our agreement to give Touch America $3 million in billing credits; and (j) Touch America's agreement to reject and abandon a lit fiber indefeasible rights of use, or IRU, Qwest sold to Touch America in 2000.

        As disclosed in our 2002 Form 10-K, we were involved in discussions to resolve disputes with several of our insurance carriers over their attempts to rescind or otherwise deny coverage under our director and officer, or D&O, liability insurance policies and employee benefit plan fiduciary liability insurance policies. The insurance policies that the carriers sought to rescind or otherwise deny coverage comprised: (i) the Qwest D&O Liability Runoff Program (for the policy period June 30, 2000 to June 30, 2006), which otherwise provided coverage of up to $250 million for claims that at least in part involve conduct pre-dating the U S WEST Merger; (ii) the Qwest D&O Liability Ongoing Program (for the policy period June 30, 2000 to June 30, 2003), which otherwise provided coverage of up to $250 million for claims exclusively involving post-Merger conduct; and (iii) the Qwest Fiduciary Liability Program (for the policy period June 12, 1998 to June 30, 2003), which otherwise provided coverage of up to $100 million for claims in connection with Employee Benefit Plans. The insurance carriers sought to rescind these policies and any coverage that these policies could provide for, among other things, the consolidated securities action, the actions by CalSTRS, New Jersey and SURSI, the Colorado (federal and state) and Delaware derivative actions, the consolidated ERISA action, the SEC investigation and the U.S. Attorney's Office investigation, which are described above. These matters involve conduct that could give rise to coverage under policies with collective limits of $350 million.

        We reached a settlement of these disputes with the carriers on November 12, 2003, which involved, among other things, an additional payment by us of $157.5 million, and in return, the carriers paid into trust $350 million. Of the $350 million, $150 million in cash is available for our benefit and has been used in large part to reimburse us for defense costs incurred by us in connection with, among other matters, the investigations and securities and derivative actions described above. The remaining $200 million in cash and letters of credit is set aside to cover losses we may incur and the losses of current and former directors and officers and others who have released the carriers in connection with the settlement. The $200 million is comprised of $143 million in cash and $57 million in irrevocable letters of credit.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        We held our 2003 Annual Meeting of Stockholders on December 16, 2003. Philip F. Anschutz, Richard C. Notebaert and Frank P. Popoff were each elected as a Class III director for a term of three years. Linda G. Alvarado, Craig R. Barrett, Thomas J. Donohue, Jordan L. Haines, Cannon Y. Harvey, Peter S. Hellman, Vinod Khosla, Craig D. Slater and W. Thomas Stephens continue to serve as directors pursuant to their prior elections. At the meeting, stockholders present in person or by proxy voted on the following matters:

1.

Election of three Class III directors to the Board to hold office until the third succeeding annual meeting after their election or until their successors are elected and qualified

	Votes For	Votes Withheld
Philip F. Anschutz	1,286,519,107	326,452,958
Richard C. Notebaert	1,550,706,146	62,265,919
Frank P. Popoff	1,456,312,378	156,659,687

2.

Approval of our amended and restated Employee Stock Purchase Plan

Votes For	Votes Against	Votes Abstained	Broker Non-Votes
1,317,759,575	45,261,230	14,135,656	235,815,604

26

3.

Stockholder proposal requesting that we exclude as a factor in determining annual or short-term incentive compensation for executive officers any impact on our net income from pension credits

Votes For	Votes Against	Votes Abstained	Broker Non-Votes
1,548,480,762	47,718,100	16,773,203	N/A

4.

Stockholder proposal requesting that we take necessary steps to eliminate the classification of terms of the Board

Votes For	Votes Against	Votes Abstained	Broker Non-Votes
1,562,140,860	37,251,094	13,580,111	N/A

5.

Stockholder proposal requesting that we seek advance stockholder approval of future employment agreements with our executive officers that provide cash and non-standard benefits exceeding three times the sum of a given executive's base salary plus target bonus

Votes For	Votes Against	Votes Abstained	Broker Non-Votes
1,558,396,355	38,918,821	15,656,889	N/A

6.

Stockholder proposal requesting that we adopt a policy of nominating director candidates such that, if elected, a substantial majority of the directors would be "independent"

Votes For	Votes Against	Votes Abstained	Broker Non-Votes
502,150,073	854,704,850	20,301,538	235,815,604

7.

Stockholder proposal requesting that we adopt a policy that all future stock option grants to senior executives be performance-based

Votes For	Votes Against	Votes Abstained	Broker Non-Votes
229,280,400	1,128,247,978	19,628,083	235,815,604

8.

Stockholder proposal requesting that we adopt a policy that some portion of future stock option grants to senior executives be performance-based

Votes For	Votes Against	Votes Abstained	Broker Non-Votes
621,183,300	733,194,917	22,778,244	235,815,604

9.

Stockholder proposal requesting that we establish a policy of expensing in our financial statements the costs of all future stock options issued by us

Votes For	Votes Against	Votes Abstained	Broker Non-Votes
556,841,903	780,274,356	40,040,202	235,815,604

27

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market for Qwest Common Stock

        The United States market for trading in our common stock is the New York Stock Exchange. As of January 31, 2004, our common stock was held by approximately 408,000 stockholders of record. The following table sets forth the high and low sales prices per share of our common stock for the periods indicated.

	Market Price
	High		Low
2003
First quarter	$	6.02	$	3.10
Second quarter		5.23		3.48
Third quarter		5.09		3.40
Fourth quarter		4.32		3.32
2002
First quarter	$	14.93	$	7.27
Second quarter		8.00		1.79
Third quarter		3.60		1.11
Fourth quarter		5.69		1.95

        We did not pay any cash dividends on our common stock in 2003 or 2002 nor do we intend to pay any dividends for the foreseeable future.

        For a discussion of restrictions on our subsidiaries' ability to pay dividends to us contained in certain of our debt instruments, see Note 8—Borrowings to our consolidated financial statements in Item 8 of this report.

Sales of Unregistered Securities

        During the three months ended December 31, 2003, we issued approximately 2.4 million shares of our common stock that were not registered under the Securities Act in reliance on an exemption pursuant to Section 3(a)(9) of that Act. These shares of common stock were issued in a number of separately and privately negotiated direct exchange transactions occurring on various dates throughout the quarter for $9.8 million in face amount of debt issued by Qwest Capital Funding, Inc., or QCF, a wholly owned subsidiary and guaranteed by Qwest. The trading prices for our shares at the time the exchange transactions were consummated ranged from $3.42 per share to $3.58 per share. No underwriters or underwriting discounts or commissions were involved.

28

ITEM 6. SELECTED FINANCIAL DATA

        On June 30, 2000, we completed the Merger. We accounted for the Merger as a reverse acquisition under the purchase method of accounting, with U S WEST being deemed the accounting acquirer and pre-Merger Qwest the acquired entity. As a result, our consolidated financial statements do not include financial results of pre-Merger Qwest for any period prior to June 30, 2000. The following selected consolidated financial data should be read in conjunction with, and are qualified by reference to, the consolidated financial statements and notes thereto in Item 8 of this report and "Management's Discussion and Analysis of Financial Condition and Results of Operation" in Item 7 of this report. The selected consolidated financial data for the years ended December 31, 2003, 2002 and 2001 are derived from, and are qualified by reference to, our audited consolidated financial statements included in Item 8 of this report.

			Years Ended December 31,
			2003			2002			2001			2000			1999 (Unaudited)
			(Dollars in million, shares in thousands except per share amounts)
Operating revenue			$	14,288		$	15,371		$	16,530		$	14,148		$	11,746
Operating expenses				14,542			34,288			18,882			14,422			9,101
Operating (loss) income				(254	)		(18,917	)		(2,352	)		(274	)		2,645
(Loss) income from continuing operations				(1,313	)		(17,618	)		(6,117	)		(1,442	)		884
Net income (loss)(1)			$	1,512		$	(38,468	)	$	(5,603	)	$	(1,037	)	$	1,084
(Loss) earnings per share(2)
	Continuing operations:
		Basic	$	(0.76	)	$	(10.48	)	$	(3.68	)	$	(1.13	)	$	1.01
		Diluted	$	(0.76	)	$	(10.48	)	$	(3.68	)	$	(1.13	)	$	1.00
	Net income (loss):
		Basic	$	0.87		$	(22.87	)	$	(3.37	)	$	(0.82	)	$	1.24
		Diluted	$	0.87		$	(22.87	)	$	(3.37	)	$	(0.82	)	$	1.23
Weighted-average common shares outstanding (in thousands):(2)
		Basic		1,738,766			1,682,056			1,661,133			1,272,088			872,309
		Diluted		1,738,766			1,682,056			1,661,133			1,272,088			880,753
Dividends per common share			$	0.00		$	0.00		$	0.05		$	0.31		$	1.36
Balance sheet data:
	Total assets		$	26,216		$	29,345		$	72,166		$	72,816		$	22,914
	Total debt(3)			17,508			22,540			25,037			19,157			13,071
	Debt to total capital ratio(4)			106.16	%		114.36	%		41.42	%		31.55	%		94.04	%
Other data:
	Cash provided by operating activities		$	2,175		$	2,388		$	3,001		$	3,762		$	4,546
	Cash used for investing activities			(2,340	)		(2,738	)		(8,152	)		(5,256	)		(6,462	)
	Cash (used for) provided by financing activities			(4,856	)		(789	)		4,660			1,268			1,945
	Capital expenditures			2,088			2,764			8,042			7,135			3,944

(1)

Amounts that follow in this footnote are on an after-tax basis. Also, as described in footnote (2), all share and per share amounts for the periods 1999 through 2000 assume the conversion of U S WEST common stock into Qwest common stock.

2003.    The 2003 net income includes a charge of $140 million ($0.08 per basic and diluted share) for an impairment of assets (primarily cell sites, switches, related tools and equipment inventory and certain information technology systems supporting the wireless network), a net gain of $206 million ($0.12 per basic and diluted share) resulting from the adoption of SFAS No. 143, "Accounting for Asset Retirement Obligations", or SFAS No. 143, relating to the reversal of net

29

removal costs where there was not a legal removal obligation, a net charge of $241 million ($0.14 per basic and diluted share) resulting from the termination of services arrangements with Calpoint and another service provider, a net charge of $69 million ($0.04 per basic and diluted share) for restructuring charges, a net charge of $61 million ($0.04 per basic and diluted share) for litigation related losses, a net gain of $23 million ($0.01 per basic and diluted share) relating to the early retirement of debt and a net gain on sale of discontinued operations of $2.619 billion ($1.51 per basic and diluted share).

2002.    2002 net loss includes a charge of $22.800 billion ($13.55 per basic and diluted share) for a transitional impairment from the adoption of a change in accounting for goodwill and other intangible assets, charges aggregating $14.927 billion ($8.87 per basic and diluted share) for additional goodwill and asset impairments, a net charge of $112 million ($0.07 per basic and diluted share) for Merger-related, restructuring and other charges, a charge of $1.190 billion ($0.71 per basic and diluted share) for the losses and impairment of investment in KPNQwest, a gain of $1.122 billion ($0.67 per basic and diluted share) relating to the gain on the early retirement of debt and income from and gain on sale of discontinued operations of $1.950 billion ($1.16 per basic and diluted share).

2001.    2001 net loss includes charges aggregating $697 million ($0.42 per diluted share) for Merger-related, restructuring and other charges, a charge of $3.300 billion ($1.99 per basic and diluted share) for the losses and impairment of investment in KPNQwest, a charge of $136 million ($0.08 per basic and diluted share) for a depreciation adjustment on access lines returned to service, a charge of $163 million ($0.10 per basic and diluted share) for investment write-downs, a charge of $154 million ($0.09 per basic and diluted share) for asset impairments, a charge of $65 million ($0.04 per basic and diluted share) for the early retirement of debt and a gain of $31 million ($0.02 per basic and diluted share) for the sale of rural exchanges.

2000.    2000 net loss includes a charge of $907 million ($0.71 per basic and diluted share) for Merger-related costs, a charge of $531 million ($0.42 per basic and diluted share) for the loss on sale of Global Crossing investments and related derivatives, a charge of $208 million ($0.16 per basic and diluted share) for asset impairments and a net gain of $126 million ($0.10 per basic and diluted share) on the sale of investments.

1999.    1999 net income includes expenses of $282 million ($0.32 per basic and diluted share) related to a terminated merger, a loss of $225 million ($0.26 per basic and diluted share) on the sale of marketable securities and a charge of $34 million ($0.04 per basic and diluted share) on the decline in the market value of derivative financial instruments.

(2)

In connection with the Merger, each outstanding share of U S WEST common stock was converted into the right to receive 1.72932 shares of Qwest common stock (and cash in lieu of fractional shares). The weighted-average common shares outstanding assume the 1-for-1.72932 conversion of U S WEST shares for Qwest shares for all periods presented. In addition, weighted-average common shares outstanding also assume a one-for-one conversion of U S WEST Communications Group common shares outstanding into shares of U S WEST as of the date of the separation of U S WEST's former parent company.

(3)

Amounts include outstanding commercial paper borrowings of $3.165 billion, $2.035 billion and $1.265 billion for 2001, 2000 and 1999, respectively, and exclude future purchase commitments, operating leases, letters of credit and guarantees. There were no commercial paper borrowings outstanding as of December 31, 2003 and 2002. At December 31, 2003, the amount of those future purchase commitments, operating leases, letters of credit and guarantees was approximately $7.359 billion.

(4)

The debt to total capital ratio is a measure of the amount of debt in our capitalization. The ratio is calculated by dividing debt by total capital. Debt includes current borrowings and long-term borrowings as reflected on our consolidated balance sheets in Item 8 of this report. Total capital is the sum of debt and total stockholders' (deficit) equity.

30

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        Certain statements set forth below under this caption constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. See "Special Note Regarding Forward-Looking Statements" at the end of this Item 7 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 (services provided within the same LATA) and InterLATA (services provided across more than one LATA) long-distance services and wireless, data and video services within our local service area, which consists of the 14-state region of Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming. We also provide InterLATA long-distance services and reliable, scalable and secure broadband data, voice and video communications outside our local service area as well as globally.

        We previously provided directory publishing services in our local service area. In 2002, we entered into contracts for the sale of our directory publishing business. In November 2002, we closed the sale of our directory publishing business in 7 of the 14 states in which we offered these services (referred to as Dex East). In September 2003, we completed the sale of the directory publishing business in the remaining states (referred to as Dex West). As a consequence, the results of operations of our directory publishing business are included in income from discontinued operations in our consolidated statements of operations.

        Our analysis presented below is organized in a way that provides the information required, while highlighting the information that we believe will be instructive for understanding the relevant trends going forward. Our operating revenues are generated from our wireline, wireless and other services segments. The presentation of "Operating Revenue" includes revenue results for each of our customer channels: business, consumer and wholesale for the wireline segment. An overview of the segment results is provided in "Segment Results" below. The segment discussion below reflects the way we reported our segment results to our Chief Executive Officer in 2003.

Restatement of Prior Years' Consolidated Financial Statements

        Our 2002 Form 10-K was filed in October 2003 and contains, among other things, our restated consolidated financial statements for the years ended December 31, 2001 and 2000. In our 2002 Form 10-K, we also attempted to address comments received from the SEC on our previous filings. To date, we have not received comments from the SEC regarding our restatement, the 2002 Form 10-K or the adequacy of our responses to its previous comments.

Business Trends

        Our results continue to be impacted by a number of factors influencing the telecommunications industry and our local service area. First, technology substitution and competition are expected to continue to cause additional access line losses. We expect industry-wide competitive factors to continue to impact our results and we have developed new strategies for offering complementary services such as satellite television and wireless. Second, our results continue to be impacted by regulatory responses to the competitive landscape for both our local and long-distance services. Third, the weak economy in our local service area has impacted demand from both our consumer and business customers. We believe demand for our products and services will continue to be affected because of a slow recovery in our local service area.

31

Revenue Trends

        Historically, at least 95% of our revenue comes from our wireline segment, which provides voice services and data and Internet services. In general, we have experienced a decline in local voice-related revenue as a result of a decrease in access lines and our competitors' accelerated use of UNE-P to deliver voice services. Access lines are expected to continue decreasing primarily because of technology substitution, including wireless and cable substitution for wireline telephony, and cable modem substitution for dial-up Internet access lines. UNE-P rules, which require us to sell access to our wireline network to our competitors at wholesale rates, will continue to impact our results. The use of UNE-P is expected to precipitate incremental losses of retail access lines and apply downward pressure on our revenue. We recently re-entered the long-distance market within our local service area; and we expect the anticipated increase in InterLATA long-distance revenue and increases in wireless revenue to offset some of the above mentioned revenue declines. Broadband services have been expanded to allow more of our customers to convert from dial-up Internet connections to our DSL services. In addition, Internet related revenues continue to expand, while offsetting declines in data services have stabilized and, late in 2003, certain data services revenue has shown signs of growth.

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

        Our wireless revenue has declined as a result of reduced marketing efforts, intense industry competition and the impact of the economic slowdown. Starting in late 2003, we expanded our consumer and small business product offerings to bundle wireless services with our local voice services, broadband services, video services and long-distance services. By offering our customers a complete telecommunications solution, we may experience a decrease in the rate of our wireline access line losses. We have redesigned our local services package to provide customers with choice and simplification. Wireless offerings are being expanded through a new arrangement with Sprint. This arrangement will enable utilization of Sprint's nationwide digital wireless network to offer our customers new voice and data capabilities.

Expense Trends

        Our expenses continue to be impacted by shifting demand due to increased competition and the expansion of our product offerings. Expenses associated with our new product offerings tend to be more variable in nature. While existing products tend to rely upon our embedded cost structure, the mix of products we expect to sell, combined with regulatory and market pricing stresses, may pressure operating margins. Facility costs are third-party telecommunications expenses we incur to connect customers to networks or to end-user product platforms not owned by us. As revenue decreases, associated facilities costs are not always reduced at the same rate as those revenue declines.

        In order to improve operational efficiencies, and in response to continued declines in revenue, we have implemented restructuring plans in which we reduced the number of our employees and consolidated and subleased idle real estate properties. We have also reduced capital expenditures and expect to continue at this reduced level for the foreseeable future. We will continue to evaluate our staffing levels and cost structure and adjust these areas as deemed necessary.

32

Results of Operations

Overview

        Our operating revenues are generated within our segments: wireline, wireless and other services. Our wireline segment includes revenue from the provision of voice services and data and Internet services. Within each of the revenue categories described below, we present the customer channel from which the revenue was earned (consumer, business or wholesale). Certain prior year revenue amounts have been reclassified to conform to the current year presentations. 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:

•

Voice services. Voice services revenue includes local voice services, 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, public telephone services, collocation services and CPE. Long-distance voice services revenue includes revenue from InterLATA and IntraLATA long-distance services. Access services revenue includes fees charged to other long-distance providers to connect to our network.



•

Data and Internet services. Data and Internet services revenue includes data services (such as traditional private lines, wholesale private lines, frame relay, ISDN, ATM and related CPE) and Internet services (such as DSL, DIA, VPN, Internet dial access, web hosting, professional services and related CPE).



•

Wireless services. Our wireless services are provided primarily through our wholly owned subsidiary, Qwest Wireless. We offer wireless services to residential and business customers, providing them the ability to use the same telephone number for their wireless phone as for their home or business phone. In August 2003, Qwest Wireless entered into a services agreement with a subsidiary of Sprint that allows us to resell Sprint wireless services, including access to Sprint's nationwide PCS wireless network, to consumer and business customers, primarily within our local service area. We began offering these Sprint services under our brand name in March 2004.



•

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

33

        The following table summarizes our results of operations:

	Years Ended December 31,									Increase/(Decrease)						Percentage Change
	2003			2002			2001			2003 v 2002			2002 v 2001			2003 v 2002		2002 v 2001
	(Dollars in millions, except per share amounts)
Operating revenue	$	14,288		$	15,371		$	16,530		$	(1,083	)	$	(1,159	)	(7	)%	(7	)%
Operating expenses, excluding goodwill and asset impairment charges		14,312			15,280			18,631			(968	)		(3,351	)	(6	)%	(18	)%
Goodwill impairment charge		—			8,483			—			(8,483	)		8,483		nm		nm
Asset impairment charges		230			10,525			251			(10,295	)		10,274		(98	)%	nm
Operating loss		(254	)		(18,917	)		(2,352	)		18,663			(16,565	)	99	%	nm
Other expense—net		1,578			1,198			5,010			380			(3,812	)	32	%	(76	)%
Loss before income taxes, discontinued operations, and cumulative effect of changes in accounting principles		(1,832	)		(20,115	)		(7,362	)		18,283			(12,753	)	91	%	(173	)%
Income tax benefit		519			2,497			1,245			(1,978	)		1,252		(79	)%	101	%
Loss from continuing operations		(1,313	)		(17,618	)		(6,117	)		16,305			(11,501	)	93	%	(188	)%
Income from and gain on sale of discontinued operations—net of tax		2,619			1,950			490			669			1,460		34	%	nm
Income (loss) before cumulative effect of changes in accounting principles		1,306			(15,668	)		(5,627	)		16,974			(10,041	)	nm		(178	)%
Cumulative effect of changes in accounting principles—net of tax		206			(22,800	)		24			23,006			(22,824	)	nm		nm
Net income (loss)	$	1,512		$	(38,468	)	$	(5,603	)	$	39,980		$	(32,865	)	nm		nm
Basic and diluted income (loss) per share	$	0.87		$	(22.87	)	$	(3.37	)	$	23.74		$	(19.50	)	nm		nm

nm—not meaningful

34

Operating Revenue

        The following table compares operating revenue for 2003, 2002 and 2001:

		Years Ended December 31,						Increase/(Decrease)						Percentage Change
		2003		2002		2001		2003 v 2002			2002 v 2001			2003 v 2002		2002 v 2001
		(Dollars in millions)
Operating revenue
Wireline revenue
Business local voice		$	2,277	$	2,534	$	2,687	$	(257	)	$	(153	)	(10	)%	(6	)%
Consumer local voice			3,933		4,298		4,419		(365	)		(121	)	(8	)%	(3	)%
Wholesale local voice			806		888		1,046		(82	)		(158	)	(9	)%	(15	)%
	Total local voice		7,016		7,720		8,152		(704	)		(432	)	(9	)%	(5	)%
Business long-distance			775		809		875		(34	)		(66	)	(4	)%	(8	)%
Consumer long-distance			297		335		554		(38	)		(219	)	(11	)%	(40	)%
Wholesale long-distance			826		952		1,087		(126	)		(135	)	(13	)%	(12	)%
	Total long-distance		1,898		2,096		2,516		(198	)		(420	)	(9	)%	(17	)%
Business access			87		76		77		11			(1	)	14	%	(1	)%
Consumer access			102		97		100		5			(3	)	5	%	(3	)%
Wholesale access			756		849		1,052		(93	)		(203	)	(11	)%	(19	)%
	Total access		945		1,022		1,229		(77	)		(207	)	(8	)%	(17	)%
	Total voice services		9,859		10,838		11,897		(979	)		(1,059	)	(9	)%	(9	)%
Business data and Internet			2,291		2,230		1,990		61			240		3	%	12	%
Consumer data and Internet			216		194		212		22			(18	)	11	%	(8	)%
Wholesale data and Internet			1,284		1,373		1,704		(89	)		(331	)	(6	)%	(19	)%
	Total data and Internet		3,791		3,797		3,906		(6	)		(109	)	—		(3	)%
	Total wireline revenue		13,650		14,635		15,803		(985	)		(1,168	)	(7	)%	(7	)%
Wireless revenue			594		694		688		(100	)		6		(14	)%	1	%
Other services revenue			44		42		39		2			3		5	%	8	%
	Total operating revenue	$	14,288	$	15,371	$	16,530	$	(1,083	)	$	(1,159	)	(7	)%	(7	)%

Wireline Revenue

        Wireline revenue declined by $985 million, or 7%, in 2003 and by $1.168 billion, or 7%, in 2002. Data and Internet revenue, as a percentage of total wireline revenue, increased to 28% in 2003, from 26% in 2002 and 25% in 2001. Voice services revenue, as a percentage of total wireline revenue, declined to 72% in 2003, from 74% in 2002 and 75% in 2001. Changes in the components of wireline revenue are described in more detail below.

Voice Services

        Voice services revenue decreased $979 million, or 9%, in 2003 and decreased $1.059 billion, or 9%, in 2002. The voice services decreases were the result of declines in local voice, long-distance, and access service revenue, as described in more detail below.

35

Local voice

        Local voice revenue decreased $704 million, or 9%, in 2003 and decreased $432 million, or 5%, in 2002. Local voice revenue declines were driven by losses of access lines as we have experienced competition from both technology substitution and other telecommunications providers reselling our services by using UNE-Ps. Access lines declined by 797,000, or 5%, in 2003, and by 781,000, or 4%, in 2002. In 2003, we experienced consumer access line declines of 897,000, or 8%, while business retail access lines decreased by 443,000 (which included 145,000 lines lost due to the impact of the MCI bankruptcy), or 9%. UNE-Ps, which are reflected in our wholesale channel, increased by 543,000, or 52%. The increase in UNE-Ps partially offset the loss of retail access lines, but because of the regulated pricing structure of UNE-Ps this applied downward pressure on our revenue. In 2002, we experienced consumer access line declines of 667,000, or 6%, and business retail access line declines of 234,000, or 4%, while UNE-Ps increased by 120,000, or 13%. We also experienced declines in sales of enhanced features and installation and repair services in the consumer channel in both 2003 and 2002, and in the business channel in 2002. Wholesale local voice revenue declined in 2003 and 2002 primarily due to reductions in demand for services such as operator assistance, pay phones, and collocation.

Long-distance

        Long-distance revenue decreased $198 million, or 9%, in 2003 and decreased $420 million, or 17%, in 2002. In 2002, we evaluated specific long-distance services sold primarily outside of our local service area. Based upon that evaluation, we de-emphasized and stopped promoting certain products, including IntraLATA long-distance in the consumer and business markets and wholesale long-distance, which resulted in a decline in both our 2003 and 2002 revenue. However, in 2003, we re-entered the long-distance market within our local service area and expanded our offerings to provide complementary local and long-distance services. As a result, InterLATA long-distance revenue within our service area increased due to the addition of 2.3 million new customers, partially offsetting other 2003 long-distance revenue declines. The 2002 decline was also due to downward pressure on our prices by our competitors.

Access services

        Access services revenue decreased $77 million, or 8%, in 2003 and decreased $207 million, or 17%, in 2002, primarily due to the access line losses described above as well as the increase in the number of customers using our local service area long-distance services. In 2003, we recorded a reserve, through reduction of revenue, of $34 million for anticipated customer credits resulting from regulatory rulings that redefined tariffs on local calls. The 2002 decline was also due to reduced demand caused by the bankruptcy of several large customers.

Data and Internet Services

        Data and Internet services revenue was relatively flat in 2003 and decreased $109 million, or 3%, in 2002.

        In 2003, revenue increases in our Internet products were largely offset by declines in data services. Business channel revenue increased primarily due to increases in Internet dial access and VPN. Pursuant to the amendment of our agreement with Microsoft in July 2003, we became responsible for providing broadband services to end-user customers, while we previously provided related services to Microsoft on a wholesale basis. As a result, we are recognizing revenue at higher retail rates rather than the lower wholesale rates we charged Microsoft. We have also increased our DSL subscriber base by 25%. We have also expanded our DSL service area to 45% of our local service area. In addition, wholesale channel revenue declined primarily due to decreases in private data lines resulting from the bankruptcies of large customers such as Touch America and MCI.

36

        In 2002, we experienced revenue increases of $91 million from Internet products. Internet dial access revenue increased primarily from sales to large ISPs and businesses for use in their internal telecommunication networks, while DSL and DIA grew in response to increased demand for access to the Internet. These increases were more than offset by declines of $200 million in data services such as wholesale private line, precipitated in part by the weakened economy.

Wireless Revenue

        Revenue from wireless services decreased by $100 million, or 14%, in 2003 and increased by $6 million, or 1%, in 2002. The decrease in wireless revenue in 2003 was due to our strategic decision to de-emphasize marketing of wireless services on a stand-alone basis coupled with tightened credit policies and intense industry competition. Although the wireless industry revenue grew in total in 2002, our wireless revenue was relatively flat in 2002, due in part to our limited ability to offer a competitive wireless product. Our wireless offerings, which were expanded to allow the bundling of wireless and local voice services, will be further enhanced in 2004 through our aforementioned arrangement with Sprint.

Other Services Revenue

        Other services revenue consists primarily of sublease income from our owned and leased real estate. Other services revenue increased $2 million, or 5%, in 2003 and increased $3 million, or 8%, in 2002. Through our restructuring and other efforts, we have decreased the amount of real estate we manage by 3.4 million square feet, or 8%, in 2003 and by 4.9 million square feet, or 10%, in 2002.

Operating Expenses

        The following table provides further detail regarding our operating expenses:

		Years Ended December 31,						Increase/(Decrease)						Percentage Change
		2003		2002		2001		2003 v 2002			2002 v 2001			2003 v 2002		2002 v 2001
		(Dollars in millions)
Operating expenses:
	Cost of sales	$	6,386	$	6,032	$	6,634	$	354		$	(602	)	6	%	(9	)%
	Selling, general and administrative		4,646		5,219		5,496		(573	)		(277	)	(11	)%	(5	)%
	Depreciation		2,739		3,268		3,704		(529	)		(436	)	(16	)%	(12	)%
	Goodwill and other intangible amortization		428		579		1,660		(151	)		(1,081	)	(26	)%	(65	)%
	Goodwill impairment charge		—		8,483		—		(8,483	)		8,483		nm		nm
	Asset impairment charges		230		10,525		251		(10,295	)		10,274		(98	)%	nm
	Restructuring, Merger-related and other charges		113		182		1,137		(69	)		(955	)	(38	)%	(84	)%
	Total operating expenses	$	14,542	$	34,288	$	18,882	$	(19,746	)	$	15,406		(58	)%	82	%

nm—not meaningful

37

Cost of Sales

        The following table shows a breakdown of cost of sales by major component:

		Years Ended December 31,						Increase/(Decrease)						Percentage Change
		2003		2002		2001		2003 v 2002			2002 v 2001			2003 v 2002		2002 v 2001
		(Dollars in millions)
Facility costs		$	3,294	$	2,962	$	3,042	$	332		$	(80	)	11	%	(3	)%
Network costs			391		384		538		7			(154	)	2	%	(29	)%
Employee and service-related costs			1,988		1,888		1,868		100			20		5	%	1	%
Non-employee related costs			713		798		1,186		(85	)		(388	)	(11	)%	(33	)%
	Total cost of sales	$	6,386	$	6,032	$	6,634	$	354		$	(602	)	6	%	(9	)%

        Cost of sales includes: facility costs, network costs, salaries and wages directly attributable to products or services, benefits, materials and supplies, contracted engineering services, computer systems support and the cost of CPE sold.

        Cost of sales, as a percentage of revenue, was 45% for 2003, 39% for 2002 and 40% for 2001. Total cost of sales increased $354 million, or 6%, in 2003 and decreased $602 million, or 9%, in 2002. The increase in 2003 was caused in part by the deterioration in product margins as retail access line losses were partially offset by lower margin UNE-Ps sold to our competitors at regulated rates. Margins were also adversely impacted by the settlement of certain purchase obligations. More discussion of these changes is provided below.

        Facility costs increased $332 million, or 11%, in 2003 and decreased $80 million, or 3%, in 2002. The increase in 2003 was primarily due to a $393 million charge resulting from the termination of our services arrangements with Calpoint and another service provider. Exclusive of this one time charge, facility costs decreased $61 million, or 2%, as the result of reduced third-party network services and declines in our out-of-region long-distance volumes. The decrease in 2002 was due to network optimization savings whereby we eliminated excess capacity from the network and migrated from lower-speed services to more cost efficient higher-speed services where applicable. Beginning in the fourth quarter of 2003, we satisfied certain FCC requirements that allowed us to begin providing in-region InterLATA long-distance using our proprietary network assets, thereby reducing our reliance on third-party facility providers.

        Network costs include third-party expenses to repair and maintain our network and supplies to provide services to customers. Our network costs were relatively flat in 2003 and decreased $154 million, or 29%, in 2002. In 2003 we focused on maintenance activities and experienced a slight increase in expense associated with our recent re-entry in to the InterLATA long-distance market. Additionally, the July 2003 amendment of our agreement with Microsoft required that we become responsible for all costs associated with providing broadband services to end-user customers. As a result, the revenue and costs associated with this expanded service offering increased. During 2002, we reduced our reliance on third-party contractors to provide network maintenance services by shifting this work to our employees. We also experienced lower costs associated with wireless handset sales as a result of lower unit prices and decreases in the number of new wireless subscribers.

        Employee and service-related costs, such as salaries and wages, benefits, commissions, overtime and third-party customer service increased $100 million, or 5%, in 2003 and were essentially unchanged in 2002. While we have realized savings due to reductions in salaries and wages and professional fees resulting from our restructuring efforts, we continue to experience offsetting increases in costs related to our pension and post-retirement benefit plans due to the change to a net expense of $125 million in 2003 from a net credit of $40 million in 2002, as described more fully below. Additionally, in 2003 we

38

experienced increased information technology costs as resources were partially shifted to system maintenance activities from development activities, which are generally capitalized. In 2002, we significantly reduced our employee incentive compensation. We did not experience a similar reduction of employee incentive compensation in 2003.

        Non-employee related costs, such as real estate, cost of sales for CPE and reciprocal compensation payments decreased $85 million, or 11%, in 2003 and decreased $388 million, or 33%, in 2002. The decrease in 2003 is attributable to lower sales of CPE equipment to customers, corresponding with lower CPE revenue, a decrease in external commissions and a decrease in reciprocal compensation. Reciprocal compensation costs, which are charges we must pay other carriers to terminate IntraLATA local calls, declined in 2003 and 2002 due to the decline in local voice services revenue, and also as a result of regulatory action which limited the amount of charges. The decrease in 2002 is also attributable to lower postage and shipping costs associated with improved management expense controls and lower cost of sales for data and Internet CPE, associated with lower CPE revenue.

Selling, General and Administrative Expenses

        The following table shows a breakdown of selling, general and administrative, or SG&A, expenses by major component:

		Years Ended December 31,						Increase/(Decrease)						Percentage Change
		2003		2002		2001		2003 v 2002			2002 v 2001			2003 v 2002		2002 v 2001
		(Dollars in millions)
Property and other taxes		$	451	$	540	$	437	$	(89	)	$	103		(16	)%	24	%
Bad debt			304		511		615		(207	)		(104	)	(41	)%	(17	)%
Employee and service-related costs			2,464		2,743		3,276		(279	)		(533	)	(10	)%	(16	)%
Non-employee related costs			1,427		1,425		1,168		2			257		—		22	%
	Total SG&A	$	4,646	$	5,219	$	5,496	$	(573	)	$	(277	)	(11	)%	(5	)%

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

        Total SG&A decreased $573 million, or 11%, in 2003 and decreased $277 million, or 5%, in 2002. SG&A, as a percent of revenue, was 33% for 2003, 34% for 2002 and 33% for 2001. The 2003 decreases primarily result from decreases in professional fees, bad debt expense, and other factors discussed in more detail below.

        Property and other taxes, such as taxes on owned or leased assets and real estate, and transactional items such as certain sales, use and excise taxes, decreased $89 million, or 16%, in 2003 and increased $103 million, or 24%, in 2002. The decrease in 2003 is primarily a result of reduced property taxes, which resulted from lower asset valuations related to our impairments. The increase in our 2002 expense is attributable to higher levels of capital expansion for both the traditional telephone network and global fiber optic broadband network that took place during the years ended December 31, 2001 and 2000.

        Bad debt expense decreased $207 million, or 41%, in 2003 and decreased $104 million, or 17%, in 2002. Bad debt decreased as a percentage of revenue to 2.1% for 2003 from 3.3% for 2002 and 3.7% for 2001. The decrease in our 2003 expense as compared to 2002 was primarily caused by large provisions associated with uncollectible receivables from MCI, Touch America and others which we recorded in 2002, improved collection practices and tighter credit policies in 2003. The 2002 decrease

39

as a percentage of revenue was due primarily to improved collections practices and tighter credit policies offset by bankruptcies of certain wholesale customers.

        Employee and service-related costs, such as salaries and wages, benefits, sales commissions and professional fees (such as telemarketing and customer service costs) decreased $279 million, or 10%, in 2003 and decreased $533 million, or 16%, in 2002. The decrease in 2003 was due to reduced salaries and wages resulting from staffing reductions implemented in 2003 and 2002, reduced professional fees to third-party vendors as we re-incorporated certain previously outsourced customer service functions into our operations, and reduced sales commissions due to lower revenues and a revision to our sales compensation plan. These cost reductions were partially offset by increases in incentive compensation and increases in our pension and post-retirement benefit plan expenses due to the change to a net benefit expense of $84 million in 2003 from a net credit of $57 million in 2002, as described more fully below. The decrease in 2002 was due to reduced salaries and wages resulting from staffing reductions implemented in 2002 and 2001, reduced professional fees, reduced incentive compensation and reduced sales commissions. Partially offsetting these decreases were expenses associated with the settlement of outstanding litigation and increases in our pension and post-retirement benefit plan expenses.

        Non-employee related costs, such as marketing and advertising, rent for administrative space and software expenses, were flat in 2003 and increased $257 million, or 22%, in 2002. Our 2003 expenses declined due to lower real estate expenses and lower maintenance costs, reflecting the reduction in Qwest managed real estate holdings which was partially a result of our restructuring activities. These declines were offset by a net charge of $100 million related to pending litigation. The 2002 increase primarily resulted from software costs related to our re-entry into the InterLATA long-distance market, and a shift of information technology resources to maintenance activities from development activities that were eligible for capitalization. The increase was partially offset by lower postage and shipping costs, reduced customer care costs and lower marketing and advertising expenses.

Pension and Post-Retirement Benefits

        Our results include pension credits and post-retirement benefit expenses, which we refer to on a combined basis as a net pension expense or credit. We recorded a net pension expense of $209 million in 2003, a net pension credit of $97 million in 2002 and a net pension credit of $337 million in 2001. The net pension expense or credit is a function of the amount of pension and post-retirement benefits earned, interest on projected benefit obligations, amortization of costs and credits from prior benefit changes and the expected return on the assets held in the various plans. The net pension expense or credit is allocated primarily to cost of sales and the remaining balance to SG&A.

        The change to a net pension expense for 2003 from a net pension credit in 2002 was due primarily to a $123 million reduction in the expected return on plan assets, a $122 million reduction in recognized actuarial gains resulting in a change to losses and a $59 million increase in interest costs. These changes are due to lower expected and actual rates of return on plan assets, lower discount rates, and increased medical costs for plan participants. A reduction of $209 million in the expected return on plan assets as well as a reduction of $122 million in recognized actuarial gains, offset by lower service and interest costs of $98 million, accounted for the decrease in the net pension credit in 2002.

        We expect that our 2004 net pension expense will be higher than 2003 due to a reduction in the expected rate of return on plan assets, the effect of amortizing losses incurred in the volatile equity market of 2000 through 2002, a lower discount rate and rising healthcare rates.

        In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003, or the Act, became law in the United States. The Act introduces a prescription drug benefit under Medicare as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to the Medicare benefit. In accordance with Financial

40

Accounting Standards Board, or FASB, Staff Position FAS No. 106-1, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003", we elected to defer recognition of the effects of the Act in any measures of the benefit obligation or cost. Specific authoritative guidance on the accounting for the federal subsidy is pending and that guidance, when issued, could require us to change previously reported information. Currently, we do not believe we will need to amend our plan to benefit from the Act.

        For additional information on our pension and post-retirement plans see Note 11—Employee Benefits to our consolidated financial statements in Item 8 of this report. Also, for a discussion of the accounting treatment and assumptions regarding pension and post-retirement benefits, see the discussion of "Critical Accounting Policies and Estimates" below.

Depreciation

        Depreciation expense decreased $529 million, or 16%, in 2003 and decreased $436 million, or 12%, in 2002. The decrease in 2003 was primarily the result of the asset impairment charges we recorded as of June 30, 2002 and September 30, 2003 and the resulting decreases in the depreciable basis of our fixed assets as discussed below. The decrease in 2002 was primarily the result of the June 30, 2002 impairment charge. The impact of the June 30, 2002 impairment reduced our annual depreciation expense by approximately $900 million, beginning July 1, 2002. The impact of the September 30, 2003 impairment further reduced our annual depreciation expense by approximately $30 million, beginning October 1, 2003. These savings were partially offset by depreciation on assets acquired during 2003 and 2002.

Goodwill and Other Intangibles Amortization

        Amortization expense decreased $151 million, or 26%, in 2003 and decreased $1.081 billion, or 65%, in 2002. The decrease in 2003 was primarily the result of the asset impairment charge we recorded as of June 30, 2002, which included an impairment charge of approximately $1.2 billion to other intangible assets with finite lives, reducing the amortizable basis by that amount. The decrease in 2002 was the result of the adoption of SFAS No. 142 "Goodwill and Other Intangible Assets", or SFAS No. 142, which required us to cease amortization of indefinite-lived intangible assets effective January 1, 2002, and the June 30, 2002 impairment charge. The impact of the impairment reduced our annual amortization expense by approximately $400 million, beginning July 1, 2002. The impact of the discontinuance of amortization on indefinite-lived intangibles reduced our annual amortization expense by approximately $1.0 billion, beginning January 1, 2002.

Goodwill Impairment Charges

        As discussed in greater detail under "Critical Accounting Policies and Estimates" below, on January 1, 2002 we adopted the provisions of SFAS No. 142. Prior to the adoption of SFAS No. 142, we reviewed our goodwill and other intangibles with indefinite lives for potential impairment based on the fair value of our entire enterprise using undiscounted cash flows. SFAS No. 142 requires that goodwill impairments be assessed based on allocating our goodwill to reporting units and comparing the net book value of the reporting unit to its estimated fair value. A reporting unit is an operating segment or one level below.

        We performed a transitional impairment test of goodwill and intangible assets with indefinite lives on January 1, 2002. Based on this analysis, we recorded a charge for the cumulative effect of adopting SFAS No. 142 of $22.800 billion on January 1, 2002. Changes in market conditions, downward revisions to our projections of future operating results and other factors indicated that the carrying value of the remaining goodwill should be evaluated for impairment as of June 30, 2002. Based on the results of that impairment analysis, we determined that the remaining goodwill balance of $8.483 billion was

41

completely impaired and we recorded an impairment charge on June 30, 2002 to write-off the remaining balance.

Asset Impairment Charges

        During 2003, 2002 and 2001, we recorded asset impairment charges of $230 million, $10.525 billion and $251 million, respectively, detailed as follows:

		Years Ended December 31,
		2003		2002		2001
		(Dollars in millions)
Property, plant and equipment and internal use software		$	230	$	10,493	$	134
Real estate assets held for sale			—		28		—
Capitalized software due to restructuring and Merger activities			—		4		101
Other Merger-related			—		—		16
	Total asset impairments	$	230	$	10,525	$	251

        Pursuant to the agreement with Sprint that allows us to resell Sprint wireless services, our wireless customers who are currently being serviced through our proprietary wireless network will be transitioned onto Sprint's network. Due to the anticipated decrease in usage of our own wireless network following the transition of our customers onto Sprint's network, in the third quarter of 2003 we performed an evaluation of the recoverability of the carrying value of our long-lived wireless network assets.

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

        The fair value of the impaired assets becomes the new basis for accounting purposes. Approximately $25 million in accumulated depreciation was eliminated in connection with the accounting for the impairments. The impact of the impairments is expected to reduce our annual depreciation and amortization expense by approximately $40 million, beginning October 1, 2003.

        Effective June 30, 2002, a general deterioration of the telecommunications market, downward revisions to our expected future results and other factors indicated that our investments in our long-lived assets may have been impaired at that date. We performed an evaluation of the recoverability of the carrying value of our long-lived assets using gross undiscounted cash flow projections. For impairment analysis purposes, we grouped our property, plant and equipment and projected cash flows as follows: traditional telephone network, national fiber optic broadband network, international fiber optic broadband network, wireless network, web hosting and application service provider, or ASP, assets held for sale and out-of-region DSL. Based on the gross undiscounted cash flow projections, we determined that all of our asset groups, except our traditional telephone network, were impaired at June 30, 2002. For those asset groups that were impaired, we then estimated the fair value using a variety of techniques. For the year ended December 31, 2002, we determined that the fair values were less than our carrying amounts by $10.493 billion in the aggregate.

        Approximately $1.9 billion in accumulated depreciation was eliminated in connection with the accounting for the impairments. The impact of the impairments reduced our annual depreciation and amortization expense by approximately $1.3 billion, beginning July 1, 2002.

42

        As part of our restructuring activities in 2001, we reviewed all of our existing construction projects. Following this review, we recorded asset impairment charges of $134 million related to the abandonment of certain of the web hosting centers and other internal use construction projects.

        We also recorded asset impairment charges of $101 million in 2001 related to internal software projects that we terminated.

Restructuring and Merger-related Charges

        During the year ended December 31, 2003, as part of an ongoing effort of evaluating costs of operations, we reviewed employee levels in certain areas of our business. As a result, we established a reserve and recorded a charge to our 2003 consolidated statement of operations for $131 million to cover the related costs of this plan. The 2003 activities include charges of $107 million for severance benefits and other charges pursuant to established severance policies. As part of this plan we identified approximately 2,300 employees from various functional areas to be terminated. Through December 31, 2003, approximately 1,600 of the planned reductions had been completed. The remaining 700 reductions will occur over the next year. Severance payments generally extend for two to 12 months. In addition, we established a reserve of $24 million for real estate obligations, which primarily include estimated future net payments on abandoned operating leases. As a result of these restructuring activities, we expect to realize annual cost savings of approximately $170 million. Also during 2003, we reversed $18 million of the 2001 and 2002 restructuring plan reserves as those plans were complete and the actual cumulative costs associated with those plans were less than had been anticipated.

        In response to shortfalls in employee reductions as part of the 2001 restructuring plan (as discussed below), during 2002 we identified employee reductions in several functional areas. As a result, we established a reserve and recorded a charge to our 2002 consolidated statement of operations of $299 million for these restructuring activities. This reserve was comprised of $179 million for severance costs and $120 million for real estate exit costs. The 2002 restructuring plan included the termination of 4,500 employees. During 2002 we recorded an additional charge of $71 million relative to the 2001 restructuring plan, which was associated with higher than originally anticipated real estate exit costs. In addition, during 2002 we reversed $135 million of severance and real estate exit related accruals relative to the 2001 restructuring plan, as actual terminations and real estate exit costs were lower than had been planned. The 2001 plan reversal was comprised of $113 million of severance and $22 million of real estate exit costs. Also during the year ended December 31, 2002, in relation to the Merger, we reversed $53 million of reserves that were originally recorded in 2000. The reversals resulted from favorable developments relative to matters underlying the related contractual settlements.

        During the fourth quarter of 2001, a plan was approved to reduce employee levels and consolidate or abandon certain real estate locations and projects. As a result, we established a reserve and recorded a charge to our 2001 consolidated statement of operations of $825 million for these restructuring activities. This reserve was comprised of $332 million for severance costs and $493 million for real estate exit costs. This reserve was partially offset by a reversal of $9 million of leased real estate-related reserves. The 2001 restructuring plan included the anticipated termination of 10,000 employees. In relation to the Merger as earlier described, during 2001, we charged to our consolidated statement of operations $189 million for additional contractual settlements, legal contingencies and other related costs, and $132 million for additional severance charges, net of Merger reversals. The additional provisions and reversals of Merger-related costs were due to additional Merger-related activities and modification to the previously accrued Merger-related activities.

Total Other Expense—Net

        Other expense—net.    Other expense—net includes interest expense, net of capitalized interest; investment write-downs; gains and losses on the sales of investments and fixed assets; gains and losses

43

on early retirement of debt; declines in derivative instrument market values; and our share of the investees income or losses for investments accounted for under the equity method of accounting.

		Years Ended December 31,									Increase/(Decrease)						Percentage Change
		2003			2002			2001			2003 v 2002			2002 v 2001			2003 v 2002		2002 v 2001
		(Dollars in millions)
Interest expense		$	1,757		$	1,789		$	1,437		$	(32	)	$	352		(2	)%	24	%
Losses and impairment of investment in KPNQwest			—			1,190			3,300			(1,190	)		(2,110	)	(100	)%	(64	)%
Loss on sale of investments and other investment write-downs			13			88			267			(75	)		(179	)	(85	)%	(67	)%
(Gain) loss on early retirement of debt			(38	)		(1,836	)		106			1,798			(1,942	)	98	%	nm
Gain on sales of fixed assets			—			—			(51	)		—			51		nm		nm
Other income—net			(154	)		(33	)		(49	)		(121	)		16		nm		33	%
	Total other expense—net	$	1,578		$	1,198		$	5,010		$	380		$	(3,812	)	32	%	(76	)%

nm—not meaningful

        Interest expense.    Interest expense was $1.757 billion for 2003, compared to $1.789 billion for 2002 and $1.437 billion for 2001. This decrease was primarily due to a reduction of our total outstanding debt by $5.0 billion during 2003 and more specifically due to the reduction of the credit facility held by Qwest Services Corporation, or the QSC Credit Facility, by $750 million in September 2003. As a result of the timing of these repayments, there was only a minimal impact on interest expense for 2003.

        Interest expense was $1.789 billion for 2002, compared to $1.437 billion for 2001. The increase in interest expense was attributable to the issuance of new indebtedness during 2002. In March 2002 we issued $1.5 billion of ten-year bonds at an 8.875% interest rate. These bonds ultimately replaced short-term debt, which consisted primarily of commercial paper that had a weighted-average interest rate of 2.59% at December 31, 2001. In the first quarter of 2002, we borrowed $4.0 billion from our syndicated credit facility to fund the repayment of approximately $3.2 billion of outstanding commercial paper, which had a lower interest rate than the new credit facility. Our directory publishing business borrowed $750 million in August 2002. Finally, interest expense in 2002 was higher due to $146 million decrease in capitalized interest as a result of lower capital expenditures.

        Losses and impairment of investment in KPNQwest.    As more fully discussed in Note 7—Investments to our consolidated financial statements in Item 8 of this report, we reviewed the carrying value of our investment in KPNQwest as of June 30, 2001 and as of December 31, 2001, to evaluate whether the carrying amount of our investment in KPNQwest was impaired. In both instances we determined that there was an other-than-temporary decline in the value of our investment. As a result, we recorded an asset impairment loss of $3.3 billion in our 2001 consolidated statement of operations. In 2002, after KPNQwest filed for bankruptcy and ceased operations, we wrote-off the remaining $1.2 billion of our investment.

        Loss (gain) on sale of investments and other investment write-downs.    We review our portfolio of equity securities on a quarterly basis to determine whether declines in value on individual securities are other-than-temporary. If we determine that a decline in value of an equity security is other-than-temporary, we record a charge in the statement of operations to reduce the carrying value of the security to its estimated fair value. We recorded write-downs of our investments for other-than-temporary declines of $19 million, $7 million and $115 million for the years ended December 31, 2003, 2002 and 2001, respectively.

44

        Our portfolio of equity securities includes a number of warrants to purchase securities in other entities. We carry these securities at fair market value and include any gains or losses recognized in our consolidated statement of operations. We recorded losses of $1 million, $20 million and $6 million for the years ended December 31, 2003, 2002 and 2001, respectively.

        We also have owned a number of other public and private investments. During 2002 and 2001 we recorded charges totaling $8 million and $63 million, respectively, related to other-than-temporary declines in value relating to our investments in publicly traded marketable securities. There were no charges recorded during 2003. During 2002 and 2001 we sold various equity investments. As a result of these sales we received approximately $12 million and $2 million in cash and recognized a loss of $37 million and a loss of $22 million for the years ended December 31, 2002 and 2001, respectively. We had no significant sales of investments in 2003.

        Qwest owned an interest in Qwest Digital Media, LLC as discussed in Note 7—Investments to our consolidated financial statements in Item 8 of this report. We accounted for this investment under the equity method of accounting. We recorded charges of $14 million and $20 million in the years ended December 31, 2002 and 2001, respectively, representing primarily our equity share of losses in this investment.

        (Gain) loss on early retirement of debt.    On December 22, 2003, we completed a cash tender offer for the purchase of $3 billion aggregate face amount of outstanding debt of Qwest, Qwest Services Corporation, or QSC, and QCF for approximately $3 billion in cash. As a result, we recorded a loss of $15 million on the early retirement of this debt. In addition, during 2003, we exchanged $454 million of face amount of existing QCF and Qwest Communications Corporation, or QCC, notes for $198 million of cash and 52.5 million shares of our common stock with an aggregate value of $202 million. As a result, a gain of $53 million was recorded on the early retirement of this debt.

        On December 26, 2002, we completed an offer to exchange up to $12.9 billion in aggregate principal face amount of outstanding unsecured debt securities of QCF for new unsecured debt securities of QSC. We received valid tenders of approximately $5.2 billion in total principal amount of the QCF notes and issued in exchange approximately $3.3 billion in face value of new debt securities of QSC. The majority of these debt exchanges were accounted for as debt retirements resulting in the recognition of a $1.8 billion gain. The cash flows for two of the new debt securities were not considered "substantially" different than the exchanged debt and therefore no gain was realized upon exchange. For these two debt instruments, the difference between the fair value of the new debt and the carrying amount of the exchanged debt of approximately $70 million was recorded as a premium and is being amortized as a credit to interest expense using the effective interest method over the life of the new debt.

        In March 2001, we completed a tender offer to buy back certain outstanding debt. In the tender offer, we repurchased approximately $995 million in principal of the outstanding debt for $1.1 billion in cash. As a result, a loss of $106 million was recorded on the early retirement of this debt.

        Other (income) expense—net.    Other (income) expense—net, which primarily includes interest income and early contract termination income, decreased $121 million in 2003 and increased $16 million in 2002. Interest income increased $19 million to $47 million in 2003 as compared to $28 million in 2002 due to increases in our cash balances resulting from the Dex proceeds. Interest income was essentially flat in 2002 as compared to 2001.

        Included in other (income) expense—net for 2003 were gains totaling $82 million related to the early termination of services contracts and IRU arrangements with certain customers. Under these arrangements, we received cash up-front and we were recognizing revenue over the multi-year terms of the related agreements. In these cases where the customers elected to terminate the agreements prior

45

to their contractual end and we had no continuing obligations, we recognized the remaining portion of the deferred revenue as other income as of the termination date.

Income Tax Benefit

        Our continuing operations effective tax benefit rate was 28.3% in 2003, 12.4% in 2002 and 16.9% in 2001. Our 2003 effective tax benefit rate was less than the expected rate of 38.9% because of an increase in beginning of year valuation allowance of $195 million. Our 2003 effective tax benefit increased primarily because 2002 included significant non-deductible impairments that were not included in our 2003 income tax benefit. Our 2002 effective tax benefit rate also decreased compared to 2001, due to the non-deductible charges we recorded related to the impairment of our goodwill, and the deferred tax asset valuation allowance we recorded in the second quarter of 2002. We recorded a non-cash charge of $1.677 billion to establish a valuation allowance against the 2002 net federal and state deferred tax assets. The valuation allowance is determined in accordance with the provisions of SFAS No. 109, "Accounting for Income Taxes", or SFAS No. 109, which requires an assessment of both negative and positive evidence when measuring the need for a valuation allowance. Our losses in recent years represented sufficient negative evidence to require a valuation allowance beginning in 2002 under SFAS No. 109. We intend to maintain the valuation allowance until sufficient positive evidence exists to support realization of the federal and state deferred tax assets in excess of deferred tax liabilities. In the future, until we generate taxable income, we do not expect to record any significant net tax benefit in our consolidated statement of operations.

Income from and gain on sale of Discontinued Operations—net of tax

        Income from discontinued operations increased $669 million, or 34%, in 2003 and increased $1.460 billion, or 298%, in 2002. Income from discontinued operations in all years predominately relates to our directory publishing business, Dex, and has been adjusted to reflect a change in the composition of our other discontinued operations. The increase in income from discontinued operations in 2003 is primarily the result of the completion of the sale of the Dex West business resulting in a gain on sale of $4.3 billion ($2.5 billion after tax). The increase in income from discontinued operations in 2002 is primarily the result of the completion of the sale of the Dex East business resulting in a gain on sale of $2.6 billion ($1.6 billion after tax).

Segment Results

        We report select information about operating segments, that offer similar products and services. Our three segments are (1) wireline, (2) wireless and (3) other services. Until September 2003, we operated a fourth segment, our directory publishing business which, as described in Note 6—Assets Held for Sale including Discontinued Operations to our consolidated financial statements in Item 8 of this report, has been classified as discontinued operations and accordingly is not presented in our segment results below. Our chief operating decision maker, or CODM, regularly reviews the results of operations at a segment level to evaluate the performance of each segment and allocate capital resources based on segment income as defined below.

        The wireline segment utilizes our traditional telephone and our fiber optic broadband networks to provide voice services and data and Internet services to consumer and business customers. The wireless segment, which operates a PCS wireless network, serves consumer and business customers in a select area within our local service area. The August, 2003 services agreement with Sprint will allow us to expand our wireless service by reselling access to Sprint's nationwide PCS wireless network, primarily within our local service area. The other services segment primarily contains results of sublease activities of unused real estate assets.

46

        Segment income consists of each segment's revenue and direct expenses. Segment revenue is based on the types of products and services offered as described in "Results of Operations" above. Segment expenses include employee and service-related costs, facility costs, network expenses and non-employee related costs such as customer support, collections and marketing. We manage indirect administrative services costs such as finance, information technology, real estate and legal centrally; consequently, these costs are allocated to the other services segment. Our network infrastructure is designed to be scalable and flexible to handle multiple products and services. As a result, we do not allocate network infrastructure costs, which include all engineering expense, design, repair and maintenance costs and all third-party facilities costs, to individual products. We evaluate depreciation, amortization, interest expense, interest income, and other income (expense) on a total company basis. As a result, these charges are not allocated to any segment.

        SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities", or SFAS No. 146, establishes standards for reporting information about restructuring activities. Effective for exit or disposal activities initiated after December 31, 2002, SFAS No. 146 requires disclosure of the total amount of costs expected to be incurred in connection with these activities for each reportable segment. The 2003 restructuring provisions for our wireline, wireless and other services segments were $87 million, $0 million and $44 million, respectively. We do not include restructuring costs in the segment results which are reviewed by our CODM. As a result, we have excluded restructuring costs from our presentation below. For additional information on restructuring costs by segment please see Note 9—Restructuring and Merger-related Charges to our consolidated financial statements in Item 8 of this report.

        Set forth below is revenue and operating expense information for the years ended December 31, 2003, 2002 and 2001. Since all expenses have not been allocated to the segments, we have disclosed segment expenses without distinguishing between cost of sales and SG&A.

			Years Ended December 31,
			2003			2002			2001
			(Dollars in millions)
Operating revenue:
	Wireline		$	13,650		$	14,635		$	15,803
	Wireless			594			694			688
	Other services			44			42			39
		Total operating revenue	$	14,288		$	15,371		$	16,530
Operating expenses:
	Wireline		$	7,840		$	8,130		$	8,996
	Wireless			349			507			751
	Other services			2,843			2,614			2,383
		Total segment expenses	$	11,032		$	11,251		$	12,130
Segment income (loss):
	Wireline		$	5,810		$	6,505		$	6,807
	Wireless			245			187			(63	)
	Other services			(2,799	)		(2,572	)		(2,344	)
		Total segment income	$	3,256		$	4,120		$	4,400

47

Wireline

Wireline Revenue

        For a discussion of wireline revenue please see "Results of Operations—Operating Revenue—Wireline Revenue" above. Since it is expected to continue to be by far the largest component of our business, this segment will continue to be our primary focus going forward.

Wireline Expenses

        The following table sets forth additional expense information to provide greater detail as to the composition of wireline expenses for the years of 2003, 2002 and 2001.

		Years Ended December 31,						Increase/(Decrease)						Percentage Change
		2003		2002		2001		2003 v 2002			2002 v 2001			2003 v 2002		2002 v 2001
		(Dollars in millions)
Facility costs		$	3,289	$	2,955	$	2,999	$	334		$	(44	)	11	%	(1	)%
Network expenses			268		252		312		16			(60	)	6	%	(19	)%
Bad debt			252		440		531		(188	)		(91	)	(43	)%	(17	)%
Employee and service-related costs			2,999		3,205		3,696		(206	)		(491	)	(6	)%	(13	)%
Non-employee related costs			1,032		1,278		1,458		(246	)		(180	)	(19	)%	(12	)%
	Total wireline operating expenses	$	7,840	$	8,130	$	8,996	$	(290	)	$	(866	)	(4	)%	(10	)%

        Wireline operating expenses decreased $290 million, or 4%, in 2003 and decreased $866 million, or 10%, in 2002. The decreases were due primarily to reduced outlays in employee and service-related costs and non-employee related costs. These factors and other items are discussed in more detail below.

        Facility costs increased $334 million, or 11%, in 2003 and decreased $44 million, or 1%, in 2002. The 2003 increase was primarily due to the termination of services contracts with Calpoint and another service provider. Exclusive of this one-time charge, facilities costs decreased in both 2003 and 2002 as we eliminated excess capacity that had been provided by third-party vendors.

        Network expenses increased $16 million, or 6%, in 2003 and decreased $60 million, or 19%, in 2002. In 2003 we focused on maintenance activities and experienced a slight increase in activity associated with our recent re-entry in to the InterLATA long-distance market. In 2002 we reduced our reliance on third-party vendors to provide network maintenance services, by shifting this work to our employees.

        Bad debt expense decreased $188 million, or 43%, in 2003 and decreased $91 million, or 17%, in 2002. Wireline bad debt expense declined to 1.8% of revenue in 2003 from 3.0% of revenue in 2002 and 3.4% of revenue in 2001. The 2003 decrease in bad debt expense was primarily due to improved collection practices and the 2002 provisions for bankrupt customers.

        Employee and service-related costs, such as salaries and wages, benefits, commissions and overtime, decreased $206 million, or 6%, in 2003 and decreased $491 million, or 13%, in 2002. Reduced headcount levels resulting from our recent restructuring activities have reduced salaries and wages in both 2003 and 2002. The reduced staffing requirements resulted from efficiently managing resources to repair and maintain our network and reduced demand for our services. Additionally, we re-incorporated certain previously outsourced functions into our operations, resulting in a reduction of professional fees. Commission expense has declined due to lower revenue and the implementation of a new commission plan in 2003. The 2003 reductions were partially offset by increases in the combined benefits and post-retirement plan expenses, discussed previously.

48

        Non-employee related costs, such as network real estate, cost of sales for CPE and reciprocal compensation payments, decreased $246 million, or 19%, in 2003 and decreased $180 million, or 12%, in 2002. Reciprocal compensation costs, which are charges we must pay other carriers to terminate local calls, declined in 2003 and 2002 due to the decrease in local voice services revenue. In 2003 we experienced a decline in CPE revenue, thus precipitating reductions in our CPE costs. In addition, we experienced reductions in our per unit cost of CPE. In 2002 we reduced marketing and advertising efforts due to cost cutting measures, which partially offset settlement charges we recorded which related to outstanding litigation.

Wireless

Wireless Revenue

        For a discussion of wireless revenue please see "Results of Operations—Operating Revenue—Wireless Revenue" above.

Wireless Expenses

        The following table sets forth additional expense information to provide greater detail as to the composition of wireless expenses for the years of 2003, 2002 and 2001.

		Years Ended December 31,						Increase/(Decrease)						Percentage Change
		2003		2002		2001		2003 v 2002			2002 v 2001			2003 v 2002		2002 v 2001
		(Dollars in millions)
Network expenses		$	118	$	126	$	230	$	(8	)	$	(104	)	(6	)%	(45	)%
Bad debt			52		71		84		(19	)		(13	)	(27	)%	(15	)%
Employee and service-related costs			100		206		310		(106	)		(104	)	(51	)%	(34	)%
Non-employee related costs			79		104		127		(25	)		(23	)	(24	)%	(18	)%
	Total wireless operating expenses	$	349	$	507	$	751	$	(158	)	$	(244	)	(31	)%	(32	)%

        Wireless operating expenses decreased $158 million, or 31%, in 2003 and decreased $244 million, or 32%, in 2002.

        Network expenses, such as handset costs, roaming fees, and third-party expenses to repair and maintain the network, decreased $8 million, or 6%, in 2003 and decreased $104 million, or 45%, in 2002. The 2003 decline was associated with lower purchases of handsets due to fewer new customers. The 2002 decline was associated with purchasing handsets at more competitive prices and lower costs associated with fewer new subscribers. Additionally, in 2002 we reduced our reliance on third-party contractors to provide network maintenance services. Pursuant to the agreement with Sprint, our wireless customers who are currently being serviced through our proprietary wireless network will be transitioned onto Sprint's network over time. The cost to complete the transition of our customers to Sprint's network is estimated to be $55 million, of which $10 million had been incurred as of December 31, 2003. Some of these costs may be capitalized.

        Bad debt expense decreased $19 million, or 27%, in 2003 and decreased $13 million, or 15%, in 2002. Wireless bad debt as a percentage of revenue declined to 8.8% in 2003 from 10.2% in 2002 and 12.2% in 2001. The decreases in bad debt expense can be attributed to lower customer acquisitions and tighter credit policies.

        Employee and service-related costs, such as salaries and wages, benefits, commissions, overtime, telemarketing and customer service costs, decreased $106 million, or 51%, in 2003 and decreased $104 million, or 34%, in 2002. The 2003 reduction was primarily a result of reduced sales activity and

49

reduced reliance on third-party vendors for customer care services. The 2002 reduction was due to reduced salaries and wages and reduced professional fees for customer care services.

        Non-employee related costs, such as real estate and marketing and advertising expense, decreased $25 million, or 24%, in 2003 and decreased $23 million, or 18%, in 2002. The 2003 decrease was primarily a result of lower postage and shipping costs and a decrease in the costs associated with providing wireless accessories to our customers. The 2002 decrease resulted from lower marketing and advertising costs associated with our strategic decision to de-emphasize the sale of wireless services on a stand-alone basis.

Other Services

Other Services Revenue

        For a discussion of other services revenue please see "Results of Operations—Operating Revenue—Other Services Revenue" above.

Other Services Expense

        As previously noted, other services includes unallocated corporate expenses for functions such as finance, information technology, real estate, legal, marketing services and human resources, which we centrally manage. The following table sets forth additional expense information to provide greater detail as to the composition of other services expenses for the years of 2003, 2002 and 2001.

	Years Ended December 31,						Increase/(Decrease)						Percentage Change
	2003		2002		2001		2003 v 2002			2002 v 2001			2003 v 2002		2002 v 2001
	(Dollars in millions)
Property and other taxes	$	451	$	540	$	437	$	(89	)	$	103		(16	)%	24	%
Real estate costs		409		422		436		(13	)		(14	)	(3	)%	(3	)%
Employee and service-related costs		1,354		1,220		1,137		134			83		11	%	7	%
Non-employee related costs		629		432		373		197			59		46	%	16	%
Total other services expenses	$	2,843	$	2,614	$	2,383	$	229		$	231		9	%	10	%

        Other services operating expenses increased $229 million, or 9%, in 2003 and increased $231 million, or 10%, in 2002.

        Property and other taxes decreased $89 million, or 16%, in 2003 and increased $103 million, or 24%, in 2002. The decrease in 2003 was primarily a result of reduced property taxes, which resulted from lower asset valuations. The increase in 2002 was attributable to valuations for capital expansion to local telephone and global fiber optic broadband networks that occurred during the years ended December 31, 2001 and 2000.

        Real estate costs decreased $13 million, or 3%, in 2003 and decreased $14 million, or 3%, in 2002 due to reduced administrative space needs attributable to lower staffing requirements and our decision to abandon certain properties which no longer supported our business plan.

        Employee and service-related costs, such as salaries and wages, benefits and overtime, increased $134 million, or 11%, in 2003 and increased $83 million, or 7%, in 2002. The increase was primarily due to the increase in the combined benefits and post-retirement plan expenses as discussed above and increased employee incentive compensation costs. Additionally, in 2002 we incurred professional fees as part of our re-entry into the InterLATA long-distance market.

        Non-employee related costs increased $197 million, or 46%, in 2003 and increased $59 million, or 16%, in 2002. The 2003 increase was driven by losses related to litigation, increases in marketing and

50

advertising costs and a shift of information technology resources to maintenance activities from development activities that were eligible for capitalization. The 2002 increase primarily resulted from software costs related to our re-entry into the InterLATA long-distance market and a shift of information technology resources to maintenance activities from development activities that were eligible for capitalization.

Liquidity and Capital Resources

Near-Term View

        Our working capital deficit, or the amount by which our current liabilities exceed our current assets, was $1.132 billion, $510 million and $5.522 billion as of December 31, 2003, 2002 and 2001, respectively. Our working capital deficit increased $622 million in 2003 compared to 2002 and decreased by $5.012 billion in 2002 compared to 2001. Our working capital deficit increased during 2003 primarily due to payments on long-term borrowings, which were partially funded by proceeds from sale of the Dex West business. Our working capital position improved during 2002, primarily due to refinancing of current borrowings to long-term and receipt of proceeds from sale of the Dex East business. As described below, in early 2004 we refinanced a portion of our borrowings that were due in 2004. Consequently, even if we are unable to access capital markets to refinance our current portion of debt, we believe that our cash on hand together with our cash flows from operations would be sufficient to meet our cash needs for the remainder of 2004. However, if we become subject to significant judgments and/or settlements as further discussed in "Legal Proceedings" in Item 3 of this report, we may need to obtain additional financing or explore other methods to generate cash. Therefore, in the event of an adverse outcome in one or more of these matters, our ability to meet our debt service obligations and our financial condition could be materially and adversely affected. 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 investigations and securities actions discussed in "Legal Proceedings" in Item 3 of this report.

        The wireline segment provides over 95% of our total operating revenue with the balance attributed to wireless and other services segments. Accordingly, the wireline segment provides all of the consolidated cash flows from operations. Cash flows used in operations of our wireless segment are not expected to be significant in the near term. Cash flows used in operations of our other services segment are significant, however, we expect that the cash flows provided by the wireline segment will be sufficient to fund these operations in the near term.

        We expect that our 2004 capital expenditures will approximate 2003 levels, with the majority being used in our wireline segment.

        We continue to pursue our strategy to improve our near-term liquidity and our capital structure in order to reduce financial risk. Since December 31, 2003, we have taken the following measures to improve our near term financial position:

•

On February 5, 2004, Qwest issued a total of $1.775 billion of notes which consisted of $750 million in floating rate notes due in 2009 with interest at London Interbank Offered Rates, or LIBOR, plus 3.50%, $525 million in fixed rate notes due in 2011 with an interest rate of 7.25%, and $500 million in fixed rate notes due in 2014 with an interest rate of 7.50%;



•

Also in February 2004, QSC paid off in full the outstanding balance of $750 million and terminated the QSC Credit Facility. QSC established a new three-year revolving credit facility, or the 2004 QSC Credit Facility, providing for $750 million of availability. If drawn, the 2004 QSC Credit Facility bears interest, at our election, at adjusted LIBOR or a base rate, in each case plus an applicable margin. The margin varies based on the credit ratings of the debt issued under the facility, and is currently 3.0% for LIBOR based borrowings and 2.0% for base rate

51

borrowings. The QSC Credit Facility has a variable interest rate based on the credit ratings of the facility; and

•

On February 26, 2004, we completed a cash tender offer for the purchase of $921 million aggregate principal face amount of QCF's 5.875% notes due in August 2004 with $939 million in cash. A loss of $21 million was recorded for the early retirement of debt which will be included in 2004 results.

Long-Term View

        We have historically operated with a working capital deficit as a result of our highly leveraged position. We expect this trend to continue. Given the long-term payment obligations reflected below, we believe that without significant improvement, our cash provided by operations alone will not be sufficient to meet both our anticipated capital expenditures and debt obligations. However, 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 cash (such as further cost reductions or the sale of non-strategic assets) if cash provided by operations does not improve, if revenue and cash provided by operations continue to decline, if economic conditions do not improve or if we become subject to significant judgments and/or settlements as further discussed in "Legal Proceedings" in Item 3 of this report. Therefore, in the event of an adverse outcome in one or more of these matters, our ability to meet our debt service obligations and our financial condition could be materially and adversely affected. 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 investigations and securities actions discussed in "Legal Proceedings" in Item 3 of this report.

Payment Obligations and Contingencies

Payment obligations

        The following table summarizes our future contractual cash obligations as of December 31, 2003:

			Payments Due by Period
			2004		2005		2006		2007		2008		Thereafter		Total
			(Dollars in millions)
Future Contractual Obligations:(1)(2)
Long-term debt			$	1,834	$	1,391	$	491	$	2,246	$	592	$	10,859	$	17,413
Interest on debt (3)				1,421		1,301		1,247		1,160		1,032		8,215		14,376
Capital lease and other obligations				47		28		5		5		5		34		124
Operating leases				325		313		268		247		219		1,534		2,906
Purchase commitment obligations:
	Telecommunications commitments			706		517		158		65		60		10		1,516
	IRU operating and maintenance obligations			54		52		52		52		52		776		1,038
	Advertising and promotion			53		50		32		26		26		219		406
	Services			282		259		234		199		196		254		1,424
		Total future contractual cash obligations	$	4,722	$	3,911	$	2,487	$	4,000	$	2,182	$	21,901	$	39,203

(1)

This table does not include our pension and other post-employment benefit obligations, as we cannot presently determine when such payments will be made.

52

(2)

This table does not include accounts payable of $759 million, accrued expenses and other current liabilities of $2.3 billion, deferred income taxes of $121 million and other long-term liabilities of $1.8 billion all of which are recorded on our December 31, 2003 consolidated balance sheet. This table does not include our open purchase orders as of December 31, 2003 as they are primarily cancelable without penalty and, therefore, do not represent a contractual obligation.

(3)

Interest expense in all years will differ due to refinancing of debt. In February 2004, we have refinanced long-term debt. See Note 18—Subsequent Events to our consolidated financial statements in Item 8 of this report for additional information. Interest on our floating rate debt was calculated for all years using the rates effective as of December 31, 2003.

        Purchase Commitment Obligations.    We have telecommunications commitments with CLECs, IXCs and third-party vendors that require us to make payments to purchase network services, capacity and telecommunications equipment. These commitments generally require us to maintain minimum monthly and/or annual billings, based on usage.

        Included in the telecommunications commitments are purchase commitments that we entered into with KMC in connection with sales of equipment to KMC. At that time we also entered into facilities management services agreements with them. In connection with the KMC arrangements, we also agreed to pay the monthly service fees directly to trustees that serve as paying agents on debt instruments issued by special purpose entities sponsored by KMC. These unconditional purchase obligations require us to pay at least 75% of the monthly service fees for the entire term of the agreements, regardless of whether KMC provides us services. Our remaining unconditional purchase obligations under this agreement were $418 million as of December 31, 2003.

        A portion of our fiber optic broadband network includes facilities that were purchased or are leased from third parties in the form of IRUs. These agreements are generally 20 to 25 years in length and generally include the requirement for us to pay operating and maintenance fees to a third party for the term of the agreement.

        We also have various long-term, non-cancelable purchase commitments for advertising and promotion services, including advertising and marketing at sports arenas and other venues and events. We also have service related commitments with various vendors for data processing, technical and software support. Future payments under certain services contracts will vary depending on our actual usage. In the table above we estimated payments for these service contracts based on the level of services we expect to use.

Letters of Credit and Guarantees

        At December 31, 2003, we had letters of credit of approximately $67 million and guarantees of approximately $2 million.

Contingencies

        We are a defendant in a number of legal actions and the subject of a number of investigations by federal and state agencies. While we intend to defend against these matters vigorously, the ultimate outcomes of these cases are very uncertain, and we can give no assurance as to the impacts on our financial results or financial condition as a result of these matters. For a description of these legal actions and the potential impact on our liquidity, please see "Legal Proceedings" in Item 3 of this report and the "Near-Term View" and the "Long-Term View" above.

Historical View

        Operating activities.    We generated cash from continuing operating activities of $2.175 billion, $2.388 billion and $3.001 billion in 2003, 2002 and 2001, respectively. The $213 million decrease in cash

53

provided by continuing operating activities in 2003 compared to 2002 resulted primarily from a decrease in income from continuing operations of $1.098 billion after adjusting for non-cash items including depreciation, amortization, cumulative effect of changes in accounting principles and asset impairments. The decrease in income from continuing operations was primarily due to the continued trend of decreasing revenues. The 7% annualized decrease in revenue over the last two years is attributed to increasing competition and general downturn in the economy and telecommunications industry evidenced by access line losses, pricing declines and reduction in access services revenue. During 2003 the reduction in cash from declines in revenue was partially offset by reductions in cash outlays for operating expenditures.

        The $613 million decrease in cash provided by continuing operating activities in 2002 compared to 2001 was the result of lower income from continuing operations of $194 million after adjusting for non-cash items such as depreciation, amortization, cumulative effect of changes in accounting principles and asset impairments. The decrease in income from continuing operations was primarily due to the continued trend of decreasing revenues. Also contributing to the decrease in cash provided by continuing operating activities in 2002 was the higher level of cash outlays attributed to non-recurring merger and restructuring expenditures.

        Cash provided by continuing operating activities in 2001 was negatively impacted by the payment of $492 million in accounts payable and accrued expenses and the build-up in accounts receivable of $439 million due to higher sales resulting from the Merger, and an overall slowdown in receipts from customers as a result of the weak economic environment.

        Investing activities.    Cash used in continuing investing activities was $2.340 billion, $2.738 billion and $8.152 billion in 2003, 2002 and 2001, respectively. Cash used in continuing investing activities in 2003 decreased $398 million compared to 2002 primarily as a result of a $676 million reduction in capital expenditures in 2003 partially offset by the purchase of marketable securities investments of $198 million during 2003.

        Cash used in continuing investing activities in 2002 decreased $5.414 billion compared to 2001 primarily as a result of a $5.278 billion reduction in capital expenditures in 2002. The decrease in capital expenditures was the result of our decision to reduce our expansion efforts as a result of the general economic downturn and the completion of many of our major capital projects in 2001.

        Financing activities.    Cash (used) provided by financing activities was ($4.856) billion in 2003, ($789) million in 2002 and $4.660 billion in 2001. During 2003, we were able to obtain new debt, refinance current debt with long-term debt and retire some long-term debt with cash, new long-term debt or stock. At December 31, 2003 we were in compliance with all provisions or covenants of our borrowings. For additional information regarding the covenants of our existing debt instruments, see Note 8—Borrowings to our consolidated financial statements in Item 8 of this report.

2003 Financing activities

        On June 9, 2003, Qwest Corporation, or QC, entered into a senior term loan with two tranches for a total of $1.75 billion principal amount of indebtedness. The term loan consists of a $1.25 billion floating rate tranche, due in 2007, and a $500 million fixed rate tranche, due in 2010. The term loan is unsecured and ranks equally with all of QC's current indebtedness. The floating rate tranche is non-prepayable for two years and thereafter is subject to prepayment premiums through 2006. There are no mandatory prepayment requirements. The covenant and default terms are substantially the same as other senior QC indebtedness. The net proceeds were used to refinance QC's debt that was due in 2003 and to fund or refinance QC's investment in telecommunications assets. Concurrently with this issuance, our obligation under the QSC Credit Facility was paid down by $429 million to a balance of $1.57 billion.

54

        The floating rate tranche bears interest at LIBOR plus 4.75% (with a minimum interest rate of 6.50%) and the fixed rate tranche bears interest at 6.95% per annum. The interest rate on the floating rate tranche was 6.5% at December 31, 2003. The lenders funded the entire principal amount of the loan subject to the original issue discount for the floating rate tranche of 1.00% and for the fixed rate tranche of 1.652%.

        On August 12, 2003 we used cash to pay the outstanding balance of $750 million of the Dex Term loan in full.

        On September 9, 2003, we completed the sale of the Dex West business. The gross proceeds from the sale of the Dex West business were $4.3 billion and were received in cash. We used $321 million of the cash proceeds to reduce our QSC Credit Facility obligation to $1.25 billion. We have used some of the proceeds from the Dex West sale to redeem indebtedness in December 2003. We expect to use the remainder of the proceeds from the Dex West sale to invest in telecommunications assets and/or to redeem other indebtedness.

        On December 22, 2003, we completed a cash tender offer for the purchase of $3 billion aggregate principal face amount of outstanding debt of Qwest, QSC and QCF for approximately $3 billion in cash.

        In December of 2003, the QSC Credit Facility was reduced by an additional $500 million. At December 31, 2003 the outstanding balance of the QSC Credit Facility was $750 million. The QSC Credit Facility was paid in full and terminated in February 2004 as discussed above.

        During 2003, we exchanged $454 million of existing QCF and QCC notes for $198 million of cash and 52.5 million shares of our common stock with an aggregate value of $202 million. The trading prices of our shares at the time the exchange transactions were consummated ranged from $3.22 to $5.11 per share. During 2003, we also exchanged $406 million of new QSC notes for $560 million face amount of QCF notes. The new QSC notes have interest rates ranging from 13.0% to 13.5% with maturities of 2007 and 2010 while the QCF notes had interest rates ranging from 6.875% to 7.90%.

        We paid no dividends in 2003.

2002 Financing activities

        Until February 2002, we maintained commercial paper programs to finance our short-term operating cash needs. We had a $4.0 billion syndicated credit facility, or the Credit Facility, available to support our commercial paper program. As a result of reduced demand for our commercial paper, in February 2002 we borrowed the full amount under the Credit Facility and used the proceeds to repay the $3.2 billion of commercial paper outstanding and terminated our commercial paper program. The remainder of the proceeds was used to pay maturities and capital lease obligations and to fund operations.

        In March 2002, we amended the Credit Facility and converted the $4.0 billion balance into a one-year term loan due May 2003, with $3.0 billion designated to QCF and $1.0 billion designated to QC. QC used approximately $608 million of the proceeds from its March 2002 bond offering discussed below to reduce the total amount outstanding under the Credit Facility. Following this repayment, the Credit Facility had $3.39 billion outstanding as of March 31, 2002, all of which was allocated to QCF.

        Also in March 2002, QC issued $1.5 billion in bonds with a ten-year maturity and an 8.875% interest rate. At December 31, 2003, the interest rate was 9.125%. Once we have registered the notes with the SEC, the interest rate will return to 8.875%, the original stated rate. The proceeds from the sale of the bonds were used to repay $608 million on the Credit Facility, short-term obligations and currently maturing long-term borrowings.

55

        During the first quarter of 2002, we exchanged, through private transactions, $97 million in face amount of debt issued by QCF. In exchange for the debt, we issued approximately 9.88 million shares of our common stock with a fair value of $87 million. The trading prices for our shares at the time the exchange transactions were consummated ranged from $8.29 per share to $9.18 per share.

        In August 2002, we amended the Credit Facility a second time. In connection with the second amendment, we reconstituted the Credit Facility as a revolving credit facility with QSC as the primary borrower. The term of this reconstituted facility, or the QSC Credit Facility, was extended to May 2005. The QSC Credit Facility contains financial reporting covenants that require delivery of annual and quarterly periodic reports. We obtained extensions under the QSC Credit Facility for the delivery of certain annual and quarterly financial information. The waivers extended the compliance date to provide certain annual and quarterly financial information to March 31, 2004. On February 5, 2004, the QSC Credit Facility was paid off and terminated (See Note 18—Subsequent Events, Debt-related matters in Item 8 of this report).

        In August 2002, Dex borrowed $750 million under a term loan agreement, or the Dex Term Loan, due September 2004 to fund costs in connection with the construction, installation, acquisition and improvement of telecommunications assets. We classified this term loan as a current liability based upon the requirement to pay this debt in full upon the sale of the Dex West business. On August 12, 2003, this loan was paid in full. See Note 6—Assets Held for Sale including Discontinued Operations to our consolidated financial statements in Item 8 of this report, for further discussion of the terms of the Dex sale.

        On November 8, 2002, we completed the sale of the Dex East business. The gross proceeds from the sale of the Dex East business were approximately $2.75 billion and were received in cash. We used approximately $1.4 billion of the cash proceeds we received from the sale of the Dex East business to reduce our obligations under the QSC Credit Facility to $2.0 billion.

        On December 26, 2002, we completed an exchange of approximately $5.2 billion in total face amount of QCF notes for approximately $3.3 billion of new debt securities of QSC. The new QSC notes consist of 13.0% notes due 2007, 13.5% notes due 2010 and 14.0% notes due 2014 that were issued on December 26, 2002.

        We paid no dividends in 2002.

2001 Financing activities

        In January 2001, we repurchased 22.22 million shares of our common stock from BellSouth for $1.0 billion in cash. As part of this transaction, we entered into an agreement with BellSouth under which BellSouth agreed to purchase services valued at $250 million from us over a five-year period, or the 2001 Agreement. The 2001 Agreement provided that BellSouth could pay for the services with our common stock based upon share values specified in the 2001 Agreement.

        During the first quarter of 2002, we received approximately 278,000 shares of our common stock valued at $13 million from BellSouth in partial satisfaction of the $16 million accounts receivable outstanding at December 31, 2001. In addition, in accordance with the 2001 Agreement, we used $12 million of the $18 million in cash received from certain BellSouth affiliates to purchase approximately 253,000 shares of our common stock. The fair value of the stock tendered in the first quarter of 2002 of $5 million was recorded in treasury stock. The $20 million difference between (i) the fair value of the shares and (ii) the value assigned to the shares in the 2001 Agreement of $25 million was recorded as a reduction to additional paid-in capital. For additional information concerning transactions with BellSouth, see Note 15—Stockholders' Equity to the consolidated financial statements in Item 8 of this report.

56

        In February 2001, QCF issued a total of $3.25 billion in notes which consisted of $2.25 billion in notes due 2011 with an interest rate of 7.25% and $1.0 billion in notes due 2031 with an interest rate of 7.75%. The net proceeds from the notes were used to repay outstanding commercial paper and for general corporate purposes.

        In March 2001, we completed a cash tender to buy back certain outstanding debt. In the tender offer, we repurchased approximately $995 million in principal of outstanding debt using $1.1 billion of cash. In connection with this tender offer, the indentures were amended to eliminate restrictive covenants and certain default provisions.

        In July 2001, QCF issued a total of $3.75 billion in notes which consisted of $1.25 billion in notes due 2004 with an interest rate of 5.875%, $2.0 billion in notes due 2009 with an interest rate of 7.0%, and $500 million in notes due 2021 with an interest rate of 7.625%. The net proceeds from the notes were used to repay outstanding commercial paper and maturing debt.

        On May 2, 2001, our Board approved a dividend of $0.05 per share on our common stock which was paid to stockholders of record as of the close of business on June 1, 2001 in satisfaction of any prior statement by us in connection with or following the Merger regarding the payment or declaration of dividends. As a result, dividends of $83 million were paid on common stock in 2001.

Credit ratings

        Our credit ratings were lowered by Moody's Investor Services, Standard and Poor's and Fitch Ratings on multiple occasions during 2002. The table below summarizes our ratings for the years ended December 31, 2003 and 2002.

	December 31, 2003			December 31, 2002
	Moody's	S&P	Fitch	Moody's	S&P	Fitch
Corporate rating	NA	B-	NA	NA	B-	NA
Qwest Corporation	Ba3	B-	B	Ba3	B-	B
Qwest Services Corporation	NR	CCC+	NR	NR	CCC+	NR
Qwest Communications Corporation	Caa1	CCC+	CCC+	Caa1	CCC+	CCC+
Qwest Capital Funding, Inc.	Caa2	CCC+	CCC+	Caa2	CCC+	CCC+
Qwest Communications International Inc.	Caa1	CCC+	CCC+	Caa1	CCC+	CCC+

NA = Not applicable

NR = Not rated

        On January 30, 2004, Moody's assigned a senior implied rating of B2 to Qwest and a B3 rating to the new Qwest senior notes guaranteed by QSC issued in February 2004. They also assigned a B2 rating to the 2004 QSC Credit Facility and a Caa1 rating to the senior subordinate notes of QSC. At the same time, Moody's confirmed ratings of other entities and lowered the rating on Qwest's outstanding unguaranteed senior secured notes to Caa2. In addition, on March 3, 2004, S&P assigned a B- to the 2004 QSC Credit Facility. All other ratings are still in effect and represent ratings of long-term debt and loans of each entity.

        With respect to Moody's, a Ba rating is judged to have speculative elements, meaning that the future of the issuer cannot be considered to be well-assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times. Issuers with Caa ratings are in poor standing with Moody's. These issuers may be in default, according to Moody's, or there may be present elements of danger with respect to principal and interest. The "1,2,3" modifiers show relative standing within the major categories, 1 being the highest, or best, modifier in terms of credit quality.

57

        With respect to S&P, any rating below BBB indicates that the security is speculative in nature. A B- rating indicates that the issuer currently has the capacity to meet its financial commitment on the obligation, but adverse business, financial or economic conditions will likely impair the issuers' capacity or willingness to meet its financial commitment on the obligation. A CCC+ indicates that the obligation is currently vulnerable to nonpayment and the issuer is dependent on favorable business, financial and economic conditions in order to meet its financial commitment on the obligation. The plus and minus symbols show relative standing within the major categories.

        With respect to Fitch, any rating below BBB is considered speculative in nature. A B rating is considered highly speculative, meaning that significant credit risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is contingent upon a sustained, favorable business and economic environment. A CCC+ rating indicates default is a real possibility. Capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic developments. The plus and minus symbols show relative standing within major categories.

        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.

Critical Accounting Policies and Estimates

        We have identified the policies and estimates below as critical to our business operations and the understanding of our results of operations. For a detailed discussion on the application of these and other significant accounting policies, see Note 2—Summary of Significant Accounting Policies to the consolidated financial statements in Item 8 of this report. These policies and estimates are considered "critical" because they have the potential to have a material impact on our financial statements, and because they require significant judgments and estimates. Note that our preparation of this annual report on Form 10-K requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.

Estimates and Other Reserves

        Our consolidated financial statements are prepared in accordance with GAAP. These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions made when accounting for items and matters such as long-term contracts, customer retention patterns, allowance for bad debts, depreciation, amortization, asset valuations, internal labor capitalization rates, recoverability of assets, impairment assessments, employee benefits, taxes, reserves and other provisions and contingencies are reasonable, based on information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the periods presented. We also assess potential losses in relation to pending litigation. If a loss is considered probable and the amount can be reasonably estimated, we recognize an expense for the estimated loss. See Item 3—Legal Proceedings in this report. To the extent there are material differences between these estimates and actual results, our consolidated financial statements are affected.

58

Restructuring

        Periodically, we commit to exit certain business activities, eliminate office or facility locations and/or reduce our number of employees. The charge to record such a decision depends upon various assumptions, including future severance costs, sublease income or disposal costs, length of time on market for abandoned rented facilities, contractual termination costs and so forth. Such estimates are inherently judgmental and may change materially based upon actual experience. The number of employees and the related estimate of severance costs for employees combined with the estimate of future losses on sublease income and disposal activity generally has the most significant impact. Due to the estimates and judgments involved in the application of each of these accounting policies, changes in our plans and these estimates and market conditions could materially impact our financial condition or results of operations.

Revenue Recognition and Related Reserves

        Revenue from services is recognized when the services are provided. Up-front fees received, primarily activation fees and installation charges, as well as the associated customer acquisition costs, are deferred and recognized over the expected customer relationship period, generally one to ten years. Payments received in advance are deferred until the service is provided. Customer arrangements that include both equipment and services are evaluated to determine whether the elements are separable based on objective evidence. If the elements are separable and separate earnings processes exist, total consideration is allocated to each element based on the relative fair values of the separate elements and the revenue associated with each element is recognized as earned. If separate earnings processes do not exist, total consideration is deferred and recognized ratably over the longer of the contractual period or the expected customer relationship period. We believe that the accounting estimates related to customer relationship periods and to the assessment of whether a separate earnings process are "critical accounting estimates" because: (1) it requires management to make assumptions about how long we will retain customers; (2) the assessment of whether a separate earnings process exists can be subjective; (3) the impact of changes in actual retention periods versus these estimates on the revenue amounts reported in our consolidated statements of operations could be material; and (4) the assessment of whether a separate earnings process exists may result in revenues being reported in different periods than significant portions of the related costs. As the telecommunications market experiences greater competition and customers shift from traditional land based telephony services to mobile services, our estimated customer relationship periods will likely decrease and when customers terminate their relationship with us, we may recognize revenue that had previously been deferred under the expectation that services would be provided to that customer over a longer period.

        GAAP requires us to record reserves against our receivable balances based on estimates of future collections and to not record revenue for services provided or equipment sold if collectibility of the revenue is not reasonably assured. We believe that the accounting estimates related to the establishment of reserves for uncollectible amounts in the results of operations is a "critical accounting estimate" because: (1) it requires management to make assumptions about future collections, billing adjustments and unauthorized usage; and (2) the impact of changes in actual performance versus these estimates on the accounts receivable balance reported on our consolidated balance sheets and the results reported in our consolidated statements of operations could be material. In selecting these assumptions, we use historical trending of write-offs, industry norms, regulatory decisions and recognition of current market indicators about general economic conditions that might impact the collectibility of accounts.

Software Capitalization

        Internally used software, whether purchased or developed, is capitalized and amortized using the straight-line method over an estimated useful life of 18 months to five years. In accordance with

59

American Institute of Certified Public Accountants Statement of Position No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use", we capitalize certain costs associated with internally developed software such as payroll costs of employees devoting time to the projects and external direct costs for materials and services. Costs associated with internally developed software to be used internally are expensed until the point at which the project has reached the development stage. Subsequent additions, modifications or upgrades to internal-use software are capitalized only to the extent that they allow the software to perform a task it previously did not perform. Software maintenance and training costs are expensed in the period in which they are incurred. The capitalization of software requires judgement in determining when a project has reached the development stage and the period over which we expect to benefit from the use of that software. Further, the recovery of software projects is periodically reviewed and may result in significant write-offs.

Pension and Post-Retirement Benefits

        Pension and post-retirement health care and life insurance benefits earned by employees during the year, as well as interest on projected benefit obligations, are accrued currently. Prior service costs and credits resulting from changes in plan benefits are amortized over the average remaining service period of the employees expected to receive benefits. Pension and post-retirement costs are recognized over the period in which the employee renders service and becomes eligible to receive benefits as determined using the projected unit credit method.

        In computing the pension and post-retirement benefit costs, we must make numerous assumptions about such things as employee mortality and turnover, expected salary and wage increases, discount rates, expected rate of return on plan assets and expected future cost increases. Two of these items generally have the most significant impact on the level of cost: the discount rate and the expected rate of return on plan assets.

        Annually, we set our discount rate primarily based upon the yields on high-quality fixed-income investments available at the measurement date and expected to be available during the period to maturity of the pension benefits. In making this determination we consider, among other things, the yields on Moody's AA corporate bonds as of year-end.

        The expected rate of return on plan assets is the long-term rate of return we expect to earn on the trust assets. The rate of return is determined by the investment composition of the plan assets and the long-term risk and return forecast for each asset category. The forecasts for each asset class are generated using historical information as well as an analysis of current and expected market conditions. The expected risk and return characteristics for each asset class are reviewed annually and revised, as necessary, to reflect changes in the financial markets.

        We have a noncontributory defined benefit pension plan, or the Pension Plan, for substantially all management and occupational (union) employees. To compute the expected return on Pension Plan assets, we apply our expected rate of return to the market-related value of the Pension Plan assets. The market-related asset value is a computed value that recognizes changes in fair value of Pension Plan assets over a period of time, not to exceed five years. In accordance with SFAS No. 87, "Employers' Accounting for Pensions", we elected to recognize actual returns on our Pension Plan assets ratably over a five year period when computing our market-related value of Pension Plan assets. This method has the effect of reducing the annual market volatility that may be experienced from year to year. As a result, our expected return is not significantly impacted by the actual return on Pension Plan assets experienced in the current year.

        Changes in any of the assumptions we made in computing the pension and post-retirement benefit costs could have a material impact on various components that comprise these expenses. Factors to be considered include the strength or weakness of the investment markets, changes in the composition of

60

the employee base, fluctuations in interest rates, significant employee hirings or downsizings and medical cost trends. Changes in any of these factors could impact cost of sales and SG&A in the consolidated statement of operations as well as the value of the asset or liability on our consolidated balance sheet. If our assumed expected rate of return of 9.0% for 2003 was 100 basis points lower, the impact would have been to increase the net pension expense by $110 million. In response to current and expected market conditions, effective January 1, 2004, we lowered our assumed expected long-term rate on plan assets to 8.5%. If our assumed discount rate of 6.75% for 2003 was 100 basis points lower, the impact would have been to increase the net expense by $56 million.

Goodwill and Other Intangible Assets

        We adopted SFAS No. 142 in January 2002, which requires companies to cease amortizing goodwill and certain intangible assets with indefinite useful lives. Instead, SFAS No. 142 requires that goodwill and indefinite-lived intangible assets be reviewed for impairment upon adoption on January 1, 2002 and at least annually thereafter. Goodwill impairment is deemed to exist if the carrying value of the reporting unit exceeds its estimated fair value.

        We performed our initial impairment analysis of goodwill and indefinite-lived intangible assets as of January 1, 2002. The implementation involved the determination of the fair value of each reporting unit, where a reporting unit is defined as an operating segment or one level below.

        We estimated the fair value of each significant reporting unit based on discounted forecasts of future cash flows. Significant judgments and assumptions were required in the preparation of the estimated future cash flows, including long-term forecasts of revenue growth, gross margins and capital expenditures.

        Two of the most significant assumptions underlying the determination of the fair value of goodwill and other intangible assets upon our initial implementation were the cash flow forecasts and discount rates used. In connection with the measurement we performed at the date we adopted SFAS No. 142 (January 1, 2002), we determined that a 10% increase in the cash flow forecasts would have decreased the transitional impairment charge by approximately $1.5 billion, resulting in a transitional impairment charge of approximately $21.3 billion instead of $22.8 billion. In contrast, a 10% decrease in the cash flow forecasts would have increased the transitional impairment charge by approximately $1.2 billion, resulting in an impairment charge of approximately $24.0 billion. A 100 basis point increase in the discount rate we used would have resulted in a transitional impairment charge of approximately $25.2 billion instead of $22.8 billion, while a 100 basis point decrease in the discount rate would have resulted in a transitional impairment charge of approximately $17.1 billion.

        Subsequent to adoption on January 1, 2002 of SFAS No. 142, we determined that circumstances indicated that it was more likely than not that an impairment loss was incurred, and as a result, we tested the remaining goodwill for possible impairment. Our impairment analysis as of June 30, 2002, resulted in an impairment of the remaining goodwill of approximately $8.483 billion. As a result of recording the cumulative effect of the change in accounting for the transitional impairment of $22.8 billion and the additional impairment of $8.483 billion, there is no goodwill remaining on our balance sheet as of and subsequent to June 30, 2002. A hypothetical 10% increase or decrease in the fair value estimates used in our June 30, 2002 measurement would have had no impact on the impairment recorded.

61

Impairments of Long-lived Assets

        Pursuant to the 2003 services agreement with Sprint that allows us to resell Sprint wireless services, our wireless customers who are currently being serviced through our proprietary wireless network will be transitioned onto Sprint's network. Due to the anticipated decrease in usage of our own wireless network following the transition of our customers onto Sprint's network, in the third quarter of 2003 we performed an evaluation of the recoverability of the carrying value of our long-lived wireless network assets.

        We compared gross undiscounted cash flow projections to the carrying value of the long-lived wireless network assets and determined that certain asset groups were not expected to be recovered through future projected cash flows. For those asset groups that were not recoverable, we then estimated the fair value using estimates of market prices for similar assets. Cell sites, switches, related tools and equipment inventory and certain information technology systems that support the wireless network were determined to be impaired by $230 million.

        Estimating the fair value of the asset groups involved significant judgment and a variety of assumptions. Comparable market data was obtained by reviewing recent sales of similar asset types. However, the market for cell sites and switches is not highly developed or liquid. As such, our estimates of the fair value of such assets are highly subjective and the amounts we might receive from an orderly liquidation of such assets could differ by $25 million or more from our estimates of the fair value of these assets used to record the impairment.

        Effective June 30, 2002, the general deterioration of the telecommunications market, the downward revisions to our expected future results of operations and other factors indicated that our investments in long-lived assets may have been impaired at that date. We performed an evaluation of the recoverability of the carrying value of our long-lived assets using gross undiscounted cash flow projections. For impairment analysis purposes, we grouped our property, plant and equipment and projected cash flows as follows: traditional telephone network, national fiber optic broadband network, international fiber optic broadband network, wireless network, web hosting and ASP, assets held for sale, and out-of-region DSL. Based on this assessment of recoverability, we concluded that our traditional telephone network was not impaired. However, this analysis revealed that the remaining asset groups were impaired. We then estimated the fair value of these asset groups and, as a result, we recorded a total of $10.493 billion in asset impairment charges during the year ended December 31, 2002 as more fully described below.

        Following is a summary of impairment charges recognized by asset group for the year ended December 31, 2002 net of $120 million for certain web hosting centers that have been reclassified to income from and gain on sale of discontinued operations to our consolidated statements of operations in Item 8 of this report.

Asset Group	Impairment Charge		Fair Value Methodology
	(Dollars in millions)
National fiber optic broadband network	$	8,505	Discounted cash flows
International fiber optic broadband network		685	Comparable market data
Wireless network		825	Comparable market data and discounted cash flows
Web hosting and ASP assets		88	Comparable market data
Assets held for sale		348	Comparable market data
Out-of-region DSL		42	Discounted cash flows
Total impairment charges	$	10,493

62

        The national fiber optic broadband network provides long-distance voice services, data and Internet services, and wholesale services to business, consumer and wholesale customers outside of our local service area. The international fiber optic broadband network provides the same services to the same types of customers only outside of the United States. The wireless network provides PCS in select markets in our local service area. Our web hosting and ASP asset group provides business customers both shared and dedicated hosting on our servers as well as application hosting services to help design and manage the customer's website and their hosting applications. Assets held for sale primarily consist of excess network supplies. Our out-of-region DSL assets provide DSL service to customers outside our local service area.

        Calculating the estimated fair value of the asset groups as listed above involves significant judgments and a variety of assumptions. For calculating fair value based on discounted cash flows, we forecasted future operating results and future cash flows, which included long-term forecasts of revenue growth, gross margins and capital expenditures. We also used a discount rate based on an estimate of the weighted-average cost of capital for the specific asset groups as of June 30, 2002. Comparable market data was obtained by reviewing recent sales of similar asset types in third-party market transactions. Relative to the above excluding the wireless network, a hypothetical increase or decrease in the estimated future cash flows of 10% would have changed the impairment charge by approximately $105 million. Also excluding wireless, a hypothetical increase or decrease in the discount rate used of 100 basis points would have changed the impairment charge by approximately $40 million. In respect to the wireless assets, a hypothetical 10% increase or decrease in the current cost factors would have changed the impairment charge by $17.1 million. Also relative to the wireless assets, a hypothetical 100 basis point change in the discount factors related to physical deterioration, functional obsolescence and economic obsolescence would have changed the impairment charge by $10.4 million.

Recently Adopted Accounting Pronouncements and Cumulative Effect of Adoption

        FASB Interpretation, or FIN, No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others", was issued in November 2002. The interpretation provides guidance on the guarantor's accounting and disclosure of guarantees, including indirect guarantees of indebtedness of others. We have adopted the disclosure requirements of the interpretation as of December 31, 2002. The accounting guidelines are applicable to certain guarantees, excluding affiliate guarantees, issued or modified after December 31, 2002, and require that we record a liability for the fair value of such guarantees on our consolidated balance sheet. The adoption of this interpretation did not have a material effect on our consolidated financial statements.

        On January 1, 2003, we adopted SFAS No. 143 which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs, generally referred to as asset retirement obligations. SFAS No. 143 requires entities to record the fair value of a legal liability for an asset retirement. If a reasonable estimate of fair value can be made, the fair value of the liability shall be recognized in the period it is incurred, or if not, in the period a reasonable estimate of fair value can be made. This cost is initially capitalized and then amortized over the estimated remaining useful life of the asset. We have determined that we have legal asset retirement obligations associated with the removal of a limited group of long-lived assets and recorded a cumulative effect of a change in accounting principle charge upon adoption of SFAS No. 143 of $28 million (an asset retirement obligation of $43 million net of an incremental adjustment to the historical cost of the underlying assets of $15 million) in 2003.

        Prior to the adoption of SFAS No. 143, we included in our group depreciation rates estimated net removal costs (removal costs less salvage). These costs have historically been reflected in the calculation of depreciation expense and therefore recognized in accumulated depreciation. When the assets were actually retired and removal costs were expended, the net removal costs were recorded as a reduction to accumulated depreciation. While SFAS No. 143 requires the recognition of a liability for asset

63

retirement obligations that are legally binding, it precludes the recognition of a liability for asset retirement obligations that are not legally binding. Therefore, upon adoption of SFAS No. 143, we reversed the net removal costs within accumulated depreciation for those fixed assets where the removal costs exceeded the estimated salvage value and we did not have a legal removal obligation. This resulted in income from the cumulative effect of a change in accounting principle of $365 million before taxes upon adoption of SFAS No. 143. The net income impact of the adoption is $206 million ($365 million less the $28 million charge disclosed above, net of income taxes of $131 million) in 2003. Beginning January 1, 2003, the net costs of removal related to these assets are charged to our consolidated statement of operations in the period in which the costs are incurred.

        In January 2003 and December 2003, the FASB issued and then revised FIN No. 46, "Consolidation of Variable Interest Entities", or FIN No. 46, which is effective immediately for all variable interest entities created after January 31, 2003. FIN No. 46 must be applied for the first fiscal year or interim period ending after March 15, 2004 for variable interest entities, or the first quarter 2004 for us. FIN No. 46 requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among the parties involved. A primary beneficiary absorbs the majority of the entity's expected losses, if they occur, receives a majority of the entity's expected residual returns, if they occur, or both. Where it is reasonably possible that the information about our variable interest entity relationships must be disclosed or consolidated, we must disclose the nature, purpose, size and activity of the variable interest entity and the maximum exposure to loss as a result of our involvement with the variable interest entity in all financial statements issued after January 31, 2003. We believe that it is unlikely that the adoption of FIN No. 46 will require consolidation of any significant unconsolidated entities.

Risk Management

        We are exposed to market risks arising from changes in interest rates. The objective of our interest rate risk management program is to manage the level and volatility of our interest expense. We may employ derivative financial instruments to manage our interest rate risk exposure. We may also employ financial derivatives to hedge foreign currency exposures associated with particular debt.

        As of December 31, 2003 and 2002, approximately $2.0 billion and $2.2 billion, respectively, of floating-rate debt was exposed to changes in interest rates. This exposure is linked to LIBOR. A hypothetical increase of 100 basis points in LIBOR and commercial paper rates would increase annual pre-tax interest expense by $20 million. As of December 31, 2003 and 2002, we also had approximately $1.8 billion and $1.2 billion of long-term fixed rate debt obligations maturing in the following 12 months. Any new debt obtained to refinance this debt would be exposed to changes in interest rates. A hypothetical 10% change in the interest rates on this debt would not have had a material effect on our earnings. We had $13.5 billion and $19.0 billion of long-term fixed rate debt at December 31, 2003 and 2002, respectively. A 100 basis point increase in interest rates would result in a decrease in the fair value of these instruments of $900 million and $700 million at December 31, 2003 and 2002, respectively. A 100 basis point decrease in interest rates would result in an increase in the fair value of these instruments of $1.0 billion and $800 million at December 31, 2003 and 2002, respectively.

        As of December 31, 2003, we had $1.756 billion of cash invested in money market and other short-term investments. Most cash investments are invested at floating rates. As interest rates change so will the interest income derived from these accounts.

64

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This Form 10-K contains or incorporates by reference "forward-looking statements," as that term is used in federal securities laws, about our financial condition, results of operations and business. These statements include, among others:

•

statements concerning the benefits that we expect will result from our business activities and certain transactions we have completed, such as increased revenue, decreased expenses and avoided expenses and expenditures; and



•

statements of our expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts.

        These statements may be made expressly in this document or may be incorporated by reference to other documents we will file with the 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.

65

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 ourselves), facilities-based providers using their own networks as well as those leasing parts of our network (unbundled network elements), and resellers. Regulatory developments have generally increased competitive pressures on our business, such as the recent decision allowing for number portability from wireline to wireless phones.

        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 untested. 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, such as Sprint's wireless services and the video services of our satellite provider partners. Even if we are successful, these initiatives may not be sufficient to offset our continuing loss of access lines.

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

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

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

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

        The telecommunications industry is experiencing significant technological changes, and our ability to execute on our business plans and compete depends upon our ability to develop new products and accelerate the deployment of advanced new services, such as broadband data, wireless services, video services and VoIP 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

66

develop new products to keep pace with technological advances, or if such products are not widely accepted by customers, our ability to compete could be adversely affected and our market share could decline. Any inability to keep up with changes in technology and markets could also adversely affect the trading price of our securities and our ability to service our debt.

Risks Relating to Our Legal and Regulatory Matters

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

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

        On July 9, 2002, we were informed by the U.S. Attorney's Office for the District of Colorado of a criminal investigation of Qwest. We believe the U.S. Attorney's Office is investigating various matters that include the subjects of the investigation by the SEC.

        While we are continuing in our efforts to cooperate fully with the SEC and the U.S. Attorney's Office in each of their respective investigations, we cannot predict the outcome of those investigations. We have engaged in discussions with the SEC staff in an effort to resolve the issues raised in the SEC's investigation of us. While our most recent discussions and further analysis have led us to conclude that a reserve should be provided for this matter and our securities actions (see Item 3—Legal Proceedings in this report), such discussions are preliminary and we cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. However, settlements typically involve, among other things, the SEC making claims under the federal securities laws in a complaint filed in United States District Court that, for purposes of the settlement, the defendant neither admits nor denies. Were such a settlement to occur, we would expect such claims to address many of the accounting practices and transactions and related disclosures that are the subject of the various restatements we have made as well as additional transactions. In addition, any settlement with the SEC may also involve, among other things, the imposition of disgorgement and a civil penalty, the amounts of which could be materially in excess of our recorded reserve, and the entry of a court order that would require, among other things, that we and our officers and directors comply with provisions of the federal securities laws as to which there have been allegations of prior violations.

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

        Also, the GSA is conducting a review of all contracts with us for purposes of determining present responsibility. On September 12, 2003, we were informed that the Inspector General of the GSA had referred to the GSA Suspension/Debarment Official the question of whether we should be considered

67

for debarment. We are cooperating fully with the GSA and believe that we will remain a supplier of the government, although we cannot predict the outcome of this referral.

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

Further review by the SEC could result in additional adjustments to our annual and quarterly reports.

        We have engaged in discussions with the staff of the SEC's Division of Corporation Finance regarding our periodic filings. They have reviewed and commented upon our 2001 Form 10-K and March 2002 Form 10-Q. As appropriate, we have attempted to address the Staff's comments in our current filings and have provided responses to those other comments that we could address. It is also possible that these comments may lead to further investigations from the SEC's Division of Enforcement. We may receive additional comments from the staff of the Division of Corporation Finance and may be required to make further adjustments or additional disclosures.

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

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

        Several lawsuits have been filed against us, as well as certain of our past and present officers and directors. These lawsuits include putative class action lawsuits in which the plaintiffs allege numerous violations of securities laws. In one of these actions, lead counsel for the plaintiffs has indicated that plaintiffs will seek damages in the tens of billions of dollars. For a description of these legal actions, please see "Legal Proceedings" in Item 3 of this report.

        The consolidated securities action, the consolidated ERISA action, the CalSTRS, New Jersey, SURSI and SPA actions described in "Legal Proceedings" in Item 3 of this report present material and significant risk to us. Some of the allegations in these lawsuits include many of the same subjects that the SEC and U.S. Attorney's Office are investigating. The size, scope and nature of the recent restatements of our consolidated financial statements for fiscal 2001 and 2000 affect the risks presented by these matters, and we can give no assurance as to the impacts on our financial results or financial condition that may ultimately result from these matters. As we have previously disclosed, we have engaged in preliminary discussions for purposes of resolving certain of these matters. Our most recent preliminary discussions and further analysis have led us to conclude that a reserve should be provided. Accordingly, we have recorded a reserve in our consolidated financial statements for the estimated minimum liability associated with these matters. However, the ultimate outcomes of these matters are still uncertain and there is a significant possibility that the amount of loss we ultimately incur could be substantially more than the reserve we have provided.

        The securities actions are in a preliminary phase and we continue to defend against these matters vigorously. None of the plaintiffs or the defendants in the securities actions has advanced evidence concerning possible recoverable damages and we have not yet conducted discovery on these and other relevant issues. We are currently unable to provide any estimate as to the timing of the resolution of any of these matters. Any settlement of or judgment in one or more of these matters in excess of our recorded reserves could be significant, and we can give no assurance that we will have the resources available to pay any such judgment. In the event of an adverse outcome in one or more of these

68

matters, our ability to meet our debt service obligations and our financial condition could be materially and adversely affected.

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

Increased scrutiny of financial disclosure, particularly in the telecommunications industry in which we operate, could reduce investor confidence and affect our business opportunities.

        As a result of our accounting issues and the increased scrutiny of financial disclosure, investor confidence in us has suffered and could suffer further. Congress, the SEC, other government authorities and the media are intensely scrutinizing a number of financial reporting issues and practices. In addition, as discussed earlier, the SEC and the U.S. Attorney's Office are currently conducting investigations including, without limitation, inquiries into several specifically identified accounting practices and transactions and related disclosures and our earnings release for the fourth quarter and full year 2000.

        A criminal trial of former Qwest executives is taking place in the first quarter of 2004. Additional civil and criminal trials 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 and these pending investigations could adversely affect investor confidence and cause the trading price for our securities to decline.

        Our 2002 Form 10-K was filed in October of 2003 and contains our restated consolidated financial statements for the years ended December 31, 2001 and 2000. These restatements involved, among other matters, revenue recognition issues related to optical capacity asset transactions, equipment sales, directory publishing and purchase accounting and resulted in, among other things, an aggregate reduction in revenue of approximately $2.5 billion. We cannot assure you that the information in our 2002 Form 10-K or in this annual report will not be subject to change upon receipt of any such comments from the SEC, and any such changes could be material. In addition, we cannot assure you that we will not have to further restate earnings for prior periods as a result of any formal actions or the SEC's review of our filings. Any such restatement could further impact our ability to access the capital markets and the trading price of our securities.

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

        Our operations are subject to extensive federal regulation, including the Communications Act of 1934, as amended, and 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 interstate telecommunications (including international telecommunications that originate or terminate in the United States), while state regulatory authorities generally have jurisdiction over telecommunications that originate and terminate within the same state. Generally, we must obtain and maintain certificates of authority from regulatory bodies in most states where we offer intrastate services and must obtain prior regulatory approval of rates, terms and conditions for our intrastate services in most of these jurisdictions. 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.

69

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

        We monitor our compliance with federal, state and local regulations governing the discharge and disposal of hazardous and environmentally sensitive materials, including the emission of electromagnetic radiation. Although we believe that we are in compliance with such regulations, any such discharge, disposal or emission might expose us to claims or actions that could have a material adverse effect on our business, financial condition and operating results.

Risks Affecting Our Liquidity

Our high debt levels, the restrictive terms of our debt instruments and the substantial litigation pending against us pose risks to our viability and may make us more vulnerable to adverse economic and competitive conditions, as well as other adverse developments.

        We are highly leveraged. As of December 31, 2003, our consolidated debt was approximately $17.5 billion. As shown above in "Liquidity and Capital Resources—Payment Obligations and Contingencies" in Item 7 of this report, a considerable amount of our debt obligations come 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 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 non-strategic assets) if cash provided by operations does not improve, if revenue and cash provided by operations continue to decline, if economic conditions do not improve or if we become subject to significant judgments and/or settlements as further discussed in "Legal Proceedings" in Item 3 of this report and in "Liquidity and Capital Resources" above. 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 investigations and securities actions discussed in "Legal Proceedings" in Item 3 of this report.

        If we fail to repay indebtedness in respect to any our indebtedness when due, or fail to comply with the financial maintenance covenants contained in the 2004 QSC Credit Facility, if and when drawn, the applicable creditors or their representatives could declare the entire amount owed under such indebtedness immediately due and payable. Any such event could adversely affect our ability to conduct business or access the capital markets and could adversely impact our credit ratings.

        Additionally, the degree to which we are leveraged may have important limiting consequences, including the following:

•

Our ability to obtain additional financing in the future for working capital, capital expenditures or general corporate purposes may be impaired;



•

Our leverage may place us at a competitive disadvantage as compared with our less leveraged competitors, including some who have significantly reduced their debt through a bankruptcy proceeding;



•

Our leverage may make us more vulnerable to the current or future downturns in general economic conditions or in any of our businesses;

70

•

Our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate may be limited; and



•

Our high debt levels could adversely impact our credit ratings.

We may be unable to significantly reduce the substantial capital requirements or operating expenses necessary to continue to operate our business, which may in turn affect our operating results.

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

If we are unable to renegotiate a significant portion of our future purchase commitments, we may suffer related losses.

        As of December 31, 2003, our aggregate future purchase commitments totaled approximately $4.4 billion. We entered into these commitments, which obligate us to purchase network services and capacity, hardware or advertising from other vendors, with the expectation that we would use these commitments in association with projected revenues. We currently do not expect to generate revenues in the near-term that are sufficient to offset the costs associated with some of these commitments. Although we are attempting to renegotiate and restructure certain of these contracts, there can be no assurance that we will be successful to any material degree. If we cannot renegotiate or restructure a significant portion of these contracts on terms that are favorable to us, we will continue to have substantial ongoing expenses without sufficient revenues to offset the expenses related to these arrangements. In addition, we may incur substantial losses in connection with these restructurings and renegotiations.

Declines in the value of pension plan assets could require us to provide significant amounts of funding for our pension plan.

        While we do not expect to be required to make material cash contributions to our defined benefit pension plan in the near-term based upon current actuarial analyses and forecasts, a significant decline in the value of pension plan assets in the future or unfavorable changes in laws or regulations that govern pension plan funding could materially change the timing and amount of required pension funding. As a result, we may be required to fund our benefit plans with cash from operations, perhaps by a material amount.

If we pursue and are involved in any business combinations, our financial condition could be affected.

        On a regular and ongoing basis, we review and evaluate other businesses and opportunities for business combinations that would be strategically beneficial. As a result, we may be involved in negotiations or discussions that, if they were to result in a transaction, could have a material effect on our financial condition (including short-term or long-term liquidity) or short-term or long-term results of operations.

        Should we make an error in judgment when identifying an acquisition candidate, or should we fail to successfully integrate acquired operations, we will likely fail to realize the benefits we intended to

71

derive from the acquisition and may suffer other adverse consequences. Acquisitions involve a number of other risks, including:

•

incurrence of substantial transaction costs;



•

diversion of management's attention from operating our existing business;



•

charges to earnings in the event of any write-down or write-off of goodwill recorded in connection with acquisitions;



•

depletion of our cash resources or incurrence of additional indebtedness to fund acquisitions; and



•

assumption of liabilities of an acquired business (including unforeseen liabilities).

        We can give no assurance that we will be able to successfully complete and integrate strategic acquisitions.

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 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 this Form 10-K, describe the significant accounting policies and methods used in the preparation of our condensed consolidated financial statements. These accounting policies are considered "critical" because they require judgments, assumptions and estimates that materially impact our consolidated financial statements and related disclosures. As a result, if future events differ significantly from the judgments, assumptions and estimates in our critical accounting policies or different assumptions are used in the future, such events or assumptions could have a material impact on our consolidated financial statements and related disclosures.

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

        As a significant taxpayer, we are subject to frequent and regular audits from the IRS, as well as from state and local tax authorities. These audits could subject us to risk due to adverse positions that may be taken by these tax authorities.

        For example, the IRS has proposed a tax adjustment for tax years 1994 through 1996. The principal issue involves our 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 us. The IRS disputes our allocation of the costs between us and third parties for whom we were building similar network assets during the same time period. Similar claims have been asserted against us with respect to 1997 and 1998, and it is possible that claims could be made against us for other periods. We are contesting these claims and do not believe the IRS will be successful. Even if they are, we believe that any significant tax obligations will be substantially offset as a result of available net operating losses and tax sharing agreements. However, the ultimate effect of these claims is uncertain.

        Because prior to 1999 Qwest was a member of an affiliated group filing a consolidated U.S. federal income tax return, we 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 us and previous affiliates, and we believe the liabilities, if any, arising from adjustments to tax liability would be borne by the affiliated group member determined to have a

72

deficiency under the terms and conditions of such agreements and applicable tax law. We have not provided for the liability of former affiliated members in our financial statements.

        As a result of the restatement of our financial results, previously filed returns and reports may be required by legal, regulatory, or administrative provisions to be amended to reflect the tax related impacts, if any, of such restatements. Where legal, regulatory or administrative rules would require or allow us to amend our previous tax filings, we intend to comply with our obligations under applicable law. To the extent that tax authorities do not accept the tax consequences of restatement entries, liabilities for taxes could differ materially from what has been recorded in our consolidated financial statements.

        While we believe we have adequately provided for taxes associated with these restatements, risks and contingencies, tax audits and examinations may result in liabilities that differ materially from those we have recorded in our consolidated financial statements.

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 CWA and the IBEW on new two-year labor contracts. Each of these agreements was ratified by union members and expires on August 13, 2005.

The trading price of our securities could be volatile.

        In recent years, the capital markets have experienced extreme price and volume fluctuations. The overall market and the trading price of our securities may fluctuate greatly. The trading price of our securities may be significantly affected by various factors, including:

•

quarterly fluctuations in our operating results;



•

changes in investors' and analysts' perception of the business risks and conditions of our business;



•

broader market fluctuations; and



•

general economic or political conditions.

ITEM 7A. 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" is incorporated herein by reference.

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

73

Independent Auditors' Report

The Board of Directors and Stockholders
Qwest Communications International Inc.:

        We have audited the accompanying consolidated balance sheets of Qwest Communications International Inc. and subsidiaries as of December 31, 2003, and 2002, and the related consolidated statements of operations, stockholders' (deficit) equity and cash flows for each of the years in the three-year period ended December 31, 2003. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Qwest Communications International Inc. and subsidiaries as of December 31, 2003, and 2002, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.

        As discussed in note 2 to the accompanying consolidated financial statements, effective January 1, 2003, the Company adopted Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations. Also, as discussed in note 2, effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, and Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, and effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities.

/s/ KPMG LLP

Denver, Colorado
March 2, 2004

74

QWEST COMMUNICATIONS INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

			Years Ended December 31,
			2003			2002			2001
			(Dollars in millions except per share amounts, shares in thousands)
Operating revenue			$	14,288		$	15,371		$	16,530
Operating expenses:
	Cost of sales (exclusive of depreciation and amortization)			6,386			6,032			6,634
	Selling, general and administrative			4,646			5,219			5,496
	Depreciation			2,739			3,268			3,704
	Goodwill and other intangible assets amortization			428			579			1,660
	Goodwill impairment charge			—			8,483			—
	Asset impairment charges			230			10,525			251
	Restructuring and other charges			113			235			816
	Merger-related (credits) charges			—			(53	)		321
		Total operating expenses		14,542			34,288			18,882
Operating loss				(254	)		(18,917	)		(2,352	)
Other expense (income):
	Interest expense—net			1,757			1,789			1,437
	Losses and impairment of investment in KPNQwest			—			1,190			3,300
	Loss on sale of investments and other investment write-downs—net			13			88			267
	(Gain) loss on early retirement of debt			(38	)		(1,836	)		106
	Gain on sales of fixed assets			—			—			(51	)
	Other income—net			(154	)		(33	)		(49	)
		Total other expense		1,578			1,198			5,010
Loss before income taxes, discontinued operations and cumulative effect of changes in accounting principles				(1,832	)		(20,115	)		(7,362	)
Income tax benefit				519			2,497			1,245
Loss from continuing operations				(1,313	)		(17,618	)		(6,117	)
Income from and gain on sale of discontinued operations, net of taxes of $1,658, $1,235 and $311, respectively				2,619			1,950			490
Income (loss) before cumulative effect of changes in accounting principles				1,306			(15,668	)		(5,627	)
Cumulative effect of changes in accounting principles, net of taxes of $131, $0 and $15, respectively				206			(22,800	)		24
Net income (loss)			$	1,512		$	(38,468	)	$	(5,603	)
Basic and diluted income (loss) per share:
	Loss from continuing operations		$	(0.76	)	$	(10.48	)	$	(3.68	)
	Discontinued operations, net of taxes			1.51			1.16			0.30
	Income (loss) before cumulative effect of changes in accounting principles			0.75			(9.32	)		(3.38	)
	Cumulative effect of changes in accounting principles, net of taxes			0.12			(13.55	)		0.01
Basic and diluted income (loss) per share			$	0.87		$	(22.87	)	$	(3.37	)
Basic and diluted weighted-average shares outstanding				1,738,766			1,682,056			1,661,133

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

75

QWEST COMMUNICATIONS INTERNATIONAL INC.

CONSOLIDATED BALANCE SHEETS

			December 31,
			2003			2002
			(Dollars in millions, shares in thousands)
ASSETS
Current assets:
	Cash and cash equivalents		$	1,756		$	2,253
	Accounts receivable—net			1,835			2,344
	Inventories			82			68
	Deferred income taxes			159			898
	Prepaid and other assets			584			494
	Assets held for sale			—			315
Total current assets				4,416			6,372
Property, plant and equipment—net				18,149			19,012
Intangible assets—net				1,549			1,612
Deferred income taxes				—			398
Other assets				2,102			1,951
		Total assets	$	26,216		$	29,345
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
	Current borrowings		$	1,869		$	2,772
	Accounts payable			759			921
	Accrued expenses and other current liabilities			2,266			2,191
	Deferred revenue and advance billings			654			773
	Liabilities associated with discontinued operations			—			225
Total current liabilities				5,548			6,882
Long-term borrowings (net of unamortized debt discount of $3 and $129, respectively—See Note 8)				15,639			19,768
Post-retirement and other post-employment benefit obligations				3,325			3,075
Deferred income taxes				121			—
Deferred revenue				762			957
Other long-term liabilities				1,837			1,493
		Total liabilities		27,232			32,175
Commitments and contingencies (Note 17)
Stockholders' deficit:
	Preferred stock-$1.00 par value, 200 million shares authorized, none issued or outstanding			—			—
	Common stock-$0.01 par value, 5 billion shares authorized; 1,770,223 and 1,713,592 issued, respectively			18			17
	Additional paid-in capital			42,925			43,225
	Treasury stock-327 and 14,477 shares, respectively (including 327 and 387 shares, respectively, held in Rabbi trust—Note 13)			(15	)		(618	)
	Accumulated deficit			(43,927	)		(45,439	)
	Accumulated other comprehensive loss			(17	)		(15	)
		Total stockholders' deficit		(1,016	)		(2,830	)
		Total liabilities and stockholders' deficit	$	26,216		$	29,345

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

76

QWEST COMMUNICATIONS INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

				Years Ended December 31,
				2003			2002			2001
				(Dollars in millions)
OPERATING ACTIVITIES
	Net income (loss)			$	1,512		$	(38,468	)	$	(5,603	)
	Adjustments to net income (loss):
		Income from and gain on sale of discontinued operations—net of tax			(2,619	)		(1,950	)		(490	)
		Depreciation and amortization			3,167			3,847			5,364
		Loss on sale of investments and other investment write- downs—net			13			1,278			3,567
		Provision for bad debts			304			511			615
		Cumulative effect of changes in accounting principles—net of taxes			(206	)		22,800			(24	)
		Goodwill impairment charge			—			8,483			—
		Asset impairment charges			230			10,525			251
		Tax benefit from stock options			—			—			165
		Deferred income taxes			(532	)		(2,252	)		(733	)
		Gain on sales of fixed assets			—			—			(51	)
		(Gain) loss on early retirement of debt—net			(38	)		(1,836	)		106
		Other non-cash charges—net			199			290			255
	Changes in operating assets and liabilities:
		Accounts receivable			205			57			(439	)
		Inventories			(13	)		117			(62	)
		Prepaid and other current assets			78			81			(111	)
		Accounts payable and accrued expenses			(186	)		(1,189	)		(492	)
		Current deferred revenue and advanced billings			(314	)		14			72
		Other non-current assets and liabilities			375			80			611
			Cash provided by operating activities		2,175			2,388			3,001
INVESTING ACTIVITIES
	Expenditures for property, plant and equipment				(2,088	)		(2,764	)		(8,042	)
	Proceeds from sale of property and equipment				7			115			117
	Proceeds from sale of rural exchanges				—			—			94
	Purchase of investment securities				(198	)		(5	)		(82	)
	Payments on derivative contracts				—			—			(97	)
	Other				(61	)		(84	)		(142	)
			Cash used for investing activities		(2,340	)		(2,738	)		(8,152	)
FINANCING ACTIVITIES
	Proceeds from long-term borrowings				1,729			1,476			6,911
	Repayments of long-term borrowings, including current maturities				(5,792	)		(2,890	)		(2,659	)
	Net (payments of) proceeds from short-term debt				(750	)		809			1,247
	Proceeds from issuance of common stock				—			14			286
	Repurchase of common stock				—			(12	)		(1,000	)
	Dividends paid on common stock				—			—			(83	)
	Debt issuance costs				(43	)		(186	)		(42	)
			Cash (used for) provided by financing activities		(4,856	)		(789	)		4,660
CASH AND CASH EQUIVALENTS
	Decrease in cash				(5,021	)		(1,139	)		(491	)
	Net cash generated by discontinued operations				234			452			470
	Proceeds from sale of directory publishing business				4,290			2,754			—
	Beginning balance				2,253			186			207
	Ending balance			$	1,756		$	2,253		$	186

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

77

QWEST COMMUNICATIONS INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY

			Shares of Common Stock		Common Stock and Additional Paid-in Capital			Treasury Stock, at cost			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total			Comprehensive Loss
			(Shares in thousands)		(Dollars in millions)
Balance, December 31, 2000			1,671,279		$	42,951		$	(38	)	$	(1,285	)	$	(61	)	$	41,567
	Net loss		—			—			—			(5,603	)		—			(5,603	)	$	(5,603	)
	Other comprehensive loss—net of taxes		—			—			—			—			—			—			—
	Total comprehensive loss		—			—			—			—			—			—		$	(5,603	)
	Dividends declared on common stock		—			—			—			(83	)		—			(83	)
	Common stock issuances:
		Stock options exercised	12,280			250			—			—			—			250
		Employee stock purchase plan	1,761			36			—			—			—			36
		Other	1,898			77			—			—			—			77
	Tax benefit from stock options		—			165			—			—			—			165
	Stock-based compensation expense		—			34			—			—			—			34
	Repurchase of stock—BellSouth		(23,439	)		(5	)		(1,015	)		—			—			(1,020	)
	Rabbi Trust treasury share issuance		187			(6	)		12			—			—			6
	Share repurchase commitment		—			(16	)		—			—			—			(16	)
Balance, December 31, 2001			1,663,966			43,486			(1,041	)		(6,971	)		(61	)		35,413
	Net loss		—			—			—			(38,468	)		—			(38,468	)	$	(38,468	)
	Other comprehensive income—net of taxes		—			—			—			—			46			46			46
	Total comprehensive loss		—			—			—			—			—			—		$	(38,422	)
	Common stock issuances:
		Stock options exercised	34			1			—			—			—			1
		Employee stock purchase plan	3,680			13			—			—			—			13
		401(k) plan match	21,682			77			—			—			—			77
		Other	239			6			—			—			—			6
	Stock-based compensation expense		—			18			—			—			—			18
	Repurchase of stock—BellSouth		(531	)		(20	)		(5	)		—			—			(25	)
	Extinguishment of debt		9,880			(333	)		420			—			—			87
	Rabbi Trust treasury share issuance		165			(6	)		8			—			—			2
	Cancellation of share repurchase commitment		—			16			—			—			—			16
	Other		—			(16	)		—			—			—			(16	)
Balance, December 31, 2002			1,699,115			43,242			(618	)		(45,439	)		(15	)		(2,830	)
Net income			—			—			—			1,512			—			1,512		$	1,512
	Other comprehensive loss—net of taxes		—			—			—			—			(2	)		(2	)		(2	)
	Total comprehensive income		—			—			—			—			—			—		$	1,510
	Common stock issuances:
		401(k) plan match	18,260			76			—			—			—			76
		Other	(21	)		—			—			—			—			—
	Stock-based compensation expense		—			6			—			—			—			6
	Extinguishment of debt		52,482			(396	)		598			—			—			202
	Rabbi Trust treasury share issuance		60			(5	)		5			—			—			—
	Other		—			20			—			—			—			20
Balance, December 31, 2003			1,769,896		$	42,943		$	(15	)	$	(43,927	)	$	(17	)	$	(1,016	)

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

78

QWEST COMMUNICATIONS INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2003, 2002 and 2001

Unless the context requires otherwise, references in this report to "Qwest," "we," "us," the "Company" and "our" refer to Qwest Communications International Inc. and its consolidated subsidiaries.

Note 1: Business and Background

Description of business

        We provide local telecommunications and related services, IntraLATA and InterLATA long-distance services and wireless, data and video services within our local service area, which consists of the 14-state region of Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming. We also provide InterLATA long-distance services and reliable, scalable and secure broadband data, voice and video communications services outside our local service area as well as globally. We also provided, until September 2003, directory publishing services in our local service area. In November 2002, we completed the first half of the sale of our directory publishing business; and in September 2003, we completed the sale of the remaining portion. As a consequence, the results of operations of our directory publishing business are included in income from discontinued operations in our consolidated statements of operations.

        On June 30, 2000, we completed the acquisition of U S WEST, Inc. ("U S WEST") (the "Merger"). U S WEST (our pre-Merger parent) was deemed the accounting acquirer and its historical financial statements, including those of its wholly owned subsidiaries, have been carried forward as the predecessor of the combined company. The Merger has been accounted for as a reverse acquisition under the purchase method of accounting with U S WEST being deemed the accounting acquirer and Qwest (prior to the Merger, "pre-Merger Qwest") the acquired entity.

Note 2: Summary of Significant Accounting Policies

        Basis of presentation.    The accompanying consolidated financial statements include the accounts of Qwest Communications International Inc. and its subsidiaries over which we exercise control. All intercompany amounts and transactions have been eliminated. Investments where we exercise significant influence, but do not control the investee, are accounted for under the equity method of accounting.

        Use of estimates.    Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions made when accounting for items and matters such as long-term contracts, customer retention patterns, allowance for bad debts, depreciation, amortization, asset valuations, internal labor capitalization rates, recoverability of assets, impairment assessments, employee benefits, taxes, reserves and other provisions and contingencies are reasonable, based on information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the periods presented. We also assess potential losses in relation to pending litigation and if a loss is considered probable and the amount can be reasonably estimated, we recognize an expense for the estimated loss. Actual results could differ from these estimates. See Note 17—Commitments and Contingencies.

79

        Reclassifications.    Certain prior year balances have been reclassified to conform to the current year presentation.

        Revenue recognition.    Revenue for services is recognized when the related services are provided. Payments received in advance are deferred until the service is provided. Up-front fees received, primarily activation fees and installation charges, as well as the associated customer acquisition costs, are deferred and recognized over the expected customer relationship period, which ranges from one to ten years. Expected customer relationship periods are estimated using historical data of actual customer retention patterns. Termination fees or other fees on existing contracts that are negotiated in conjunction with new contracts are deferred and recognized over the new contract term.

        We have periodically transferred optical capacity assets on our network to other telecommunications service carriers. These transactions are structured as indefeasible rights of use, commonly referred to as IRUs, which are the exclusive right to use a specified amount of capacity or fiber for a specified term, typically 20 years. We account for the consideration received on transfers of optical capacity assets for cash and on all of the other elements deliverable under an IRU as revenue ratably over the term of the agreement. We do not recognize revenue on contemporaneous exchanges of our optical capacity assets for other optical capacity assets. See our accounting policy for contemporaneous transactions in our property, plant and equipment policy below.

        Revenue related to equipment sales is recognized upon acceptance by the customer and when all the conditions for revenue recognition have been satisfied. Customer arrangements that include both equipment and services are evaluated to determine whether the elements are separable based on objective evidence. If the elements are separable and separate earnings processes exist, total consideration is allocated to each element based on the relative fair values of the separate elements and the revenue associated with each element is recognized as earned. If separate earnings processes do not exist, total consideration is deferred and recognized ratably over the longer of the contractual period or the expected customer relationship period.

        Directory publishing accounting.    Directory publishing revenue and costs are recognized ratably over the life of each directory, which is generally one year, commencing in the month of delivery. Such revenue and costs are included in our accompanying consolidated statements of operations as income from discontinued operations.

        Advertising costs.    Costs related to advertising are expensed as incurred. Advertising expense was $335 million, $344 million and $378 million for the years ended December 31, 2003, 2002 and 2001, respectively, and is included in selling, general and administrative on our consolidated statements of operations.

        Legal costs.    In our normal course of business, we incur costs to hire and retain external legal counsel to advise us on regulatory and litigation matters. We expense these costs as such services are received.

        Income taxes.    The provision for income taxes consists of an amount for taxes currently payable and an amount for tax consequences deferred to future periods. Investment tax credits are accounted for under the deferral method and are amortized as reductions in income tax expense over the lives of the assets which gave rise to the credits and are included in other long-term liabilities in our consolidated balance sheets. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement and tax basis of assets and

80

liabilities as well as for operating loss and tax credit carryforwards using enacted tax rates expected to apply in the year in which the differences are expected to affect taxable income. The effect on deferred income tax assets and liabilities of a change in tax rate is recognized in operations in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred income tax assets to the amounts expected to be recovered.

        We use the deferral method of accounting for investment tax credits earned prior to the repeal of such credits in 1986. We also defer certain transitional investment tax credits earned after the repeal, as well as investment tax credits earned in certain states. We amortize these credits over the estimated service lives of the related assets as an increase to our income tax benefit in our consolidated statement of operations.

        Cash and cash equivalents.    Cash and cash equivalents include highly liquid investments with original maturities of three months or less that are readily convertible into cash and are not subject to significant risk from fluctuations in interest rates. As a result, the carrying amount of cash and cash equivalents approximates fair value. To preserve capital and maintain liquidity, we invest with financial institutions we deem to be of sound financial condition and in high quality and relatively risk-free investment products. Our cash investment policy limits the concentration of investments with specific financial institutions or among certain products and includes criteria related to credit worthiness of any particular financial institution.

        Allowance for doubtful accounts.    The allowance for doubtful accounts receivable reflects our best estimate of probable losses inherent in our receivable portfolio determined on the basis of historical experience, specific allowances for known troubled accounts and other currently available evidence.

        Inventories.    Inventories, primarily wireless handsets and customer premises equipment ("CPE"), are carried at the lower of cost or market on a first-in, first-out basis. Market is determined based upon estimated replacement cost.

        Assets held for sale and discontinued operations.    Assets to be disposed of that meet all of the criteria to be classified as held for sale are reported at the lower of their carrying amounts or fair values less cost to sell. Assets are not depreciated while they are classified as held for sale. Assets held for sale that have operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of our assets are reported in discontinued operations when (a) it is determined that the operations and cash flows of the assets will be eliminated from our ongoing operations and (b) we will not have any significant continuing involvement in the operations of the assets after the disposal transaction.

        Property, plant and equipment.    Property, plant and equipment is carried at cost and, effective January 1, 2003, with our adoption of Statement of Financial Accounting Standards ("SFAS") No. 143, "Accounting for Asset Retirement Obligations", ("SFAS No. 143"), is adjusted for legal retirement obligations. Property, plant and equipment is depreciated using the straight-line group method. Under the straight-line group method, assets dedicated to providing regulated telecommunications services (which comprise the majority of our property, plant and equipment) that have similar physical characteristics, use and expected useful lives are categorized in the year acquired on the basis of equal life groups of similar assets for purposes of depreciation and tracking. Generally, under the straight-line group method, when an asset is sold or retired, the cost is deducted from property, plant and equipment and charged to accumulated depreciation without recognition of a gain or loss. A gain or

81

loss is recognized in our consolidated statements of operations only if a disposal is abnormal; unusual; when a sale involves land; assets associated with the sale of customer contracts; or assets constructed or acquired for sale. Leasehold improvements are amortized over the shorter of the useful lives of the assets or the lease term. Expenditures for maintenance and repairs are expensed as incurred. Interest is capitalized during the construction phase of network and other internal-use capital projects. Employee-related costs directly related to construction of internal use assets are also capitalized during the construction phase. Property, plant and equipment supplies used internally are carried at average cost, except for significant individual items for which cost is based on specific identification.

        We have periodically entered into agreements to acquire optical capacity assets from other telecommunications service carriers. These acquisitions of optical capacity assets expanded our fiber optic broadband network both domestically and internationally and enables us to provide broadband communications services to our customers. Several of these other carriers have also acquired optical capacity from us, principally in the United States of America. Optical capacity transactions in which we transfer capacity to and acquire capacity from the same third party at or about the same time are referred to as "contemporaneous transactions." We record the contemporaneous transactions as non-monetary exchanges of similar assets at book value, as these transactions do not represent the culmination of an earnings process. Contemporaneous transactions do not result in the recognition of revenue. Net cash or other monetary assets paid or received in contemporaneous transactions are recorded as an adjustment to the book value of the transferred property. The adjusted book value becomes the carrying value of the transferred property, plant and equipment.

        Impairment of long-lived assets.    We review long-lived assets, other than goodwill and other intangible assets with indefinite lives, for impairment whenever facts and circumstances indicate that the carrying amounts of the assets may not be recoverable. An impairment loss is recognized only if the carrying amount of the asset is not recoverable and exceeds its fair value. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future net cash flows expected to be generated by the asset. If the asset's carrying value is not recoverable, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds its fair value. We determine fair values by using a combination of comparable market values and discounted cash flows, as appropriate.

        Prior to the adoption of SFAS No. 142, "Goodwill and Other Intangible Assets", ("SFAS No. 142") and SFAS No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets", ("SFAS No. 144"), on January 1, 2002, we reviewed our long-lived assets, such as goodwill, intangibles and property, plant and equipment for impairment in accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of", ("SFAS No. 121"). Under SFAS No. 121, we reviewed our long-lived assets for impairment whenever events or changes in circumstances indicated that the carrying amount of an asset might not be recoverable. We evaluated the recoverability of our long-lived assets based on estimated undiscounted future cash flows and provided for impairment when such undiscounted cash flows were insufficient to recover the carrying amount of the long-lived asset.

        Software capitalization.    Internally used software, whether purchased or developed, is capitalized and amortized using the straight-line method over an estimated useful life of 18 months to five years. In accordance with American Institute of Certified Public Accountants Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use", we capitalize certain costs associated with internally developed software such as costs of employees

82

devoting time to the projects and external direct costs for materials and services. Costs associated with internally developed software to be used internally are expensed until the point at which the project has reached the development stage. Subsequent additions, modifications or upgrades to internal-use software are capitalized only to the extent that they allow the software to perform a task it previously did not perform. Software maintenance and training costs are expensed in the period in which they are incurred. The capitalization of software requires judgment in determining when a project has reached the development stage and the period over which we expect to benefit from the use of that software. Capitalized software development costs are included in intangible assets in our consolidated balance sheets.

        Goodwill and other intangible assets.    Intangible assets arising from business combinations, such as goodwill, customer lists, trademarks and trade names, are initially recorded at fair value. Other intangible assets not arising from business combinations, such as wireless spectrum licenses and capitalized software, are recorded at cost.

        Intangible assets with finite lives are amortized on a straight-line basis over that life. Where there are no legal, regulatory, contractual or other factors that would reasonably limit the useful life of an intangible asset, we classify the intangible asset as indefinite lived and such intangible assets are not amortized. Prior to the adoption of SFAS No. 142, intangible assets were amortized on a straight-line basis over their estimated useful lives.

        Impairment of goodwill and other indefinite-lived intangible assets.    Goodwill and other long-lived intangible assets with indefinite lives, such as trademarks, trade names and wireless spectrum licenses are reviewed for impairment annually or whenever an event occurs or circumstances change that would more likely than not reduce fair value below carrying value. These assets are carried at historical cost if their estimated fair value is greater than their carrying amounts. However, if their estimated fair value is less than the carrying amount, goodwill and other indefinite lived intangible assets are reduced to their estimated fair value through an impairment charge to our consolidated statements of operations.

        Investments.    Investments where we exercise significant influence, but do not control the investee are accounted for under the equity method of accounting. Under the equity method, investments are recorded at initial cost and are adjusted for contributions, distributions and our share of the investee's income or losses as well as impairment write-downs for other-than-temporary declines in value.

        Equity investments where we cannot exercise significant influence over the investee are carried at cost or, if the security is publicly traded, at fair-market value. For publicly traded securities, unrealized gains or losses, net of taxes, are included in other comprehensive income (loss) until realized upon sale or other disposition of the securities. Realized gains and losses on securities and other-than-temporary declines in value are determined on the specific identification method and are reclassified from other comprehensive income (loss) and included in the determination of net income (loss).

        We review our equity investments on a quarterly basis to determine whether a decline in value on individual securities is other-than-temporary. Many factors are considered in assessing whether a decline in value is other-than-temporary, including, as may be appropriate: earnings trends and asset quality; near-term prospects and financial condition of the issuer; financial condition and prospects of the issuer's region and industry; the cause and severity of the decline in market price; analysts' recommendations and stock price projections; the length of time (generally six to nine months) that fair value has been less than the carrying value; stock-price volatility and near-term potential for recovery; and our intent and ability to retain the investment. If we conclude that a decline in value of an equity

83

investment is other-than-temporary, we record a charge to our consolidated statement of operations to reduce the carrying value of the security to its estimated fair value.

        Marketable debt securities are classified as held-to-maturity as we have intent and ability to hold the securities to maturity. Held-to-maturity securities are carried at amortized cost, adjusted for amortization of premiums and accretion of discounts to maturity.

        Derivative instruments.    Effective January 1, 2001, we adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", ("SFAS No. 133"). SFAS No. 133 requires that all derivatives be measured at fair value and recognized as either assets or liabilities on our consolidated balance sheets. Changes in the fair values of derivative instruments that do not qualify as hedges and/or any ineffective portion of hedges are recognized as a gain or loss in our consolidated statement of operations in the current period. Changes in the fair values of derivative instruments used effectively as fair value hedges are recognized in earnings (losses), along with the change in the value of the hedged item. Changes in the fair value of the effective portions of cash flow hedges are reported in other comprehensive income (loss) and recognized in earnings (losses) when the hedged item is recognized in earnings (losses).

        Restructuring and Merger-related charges.    Periodically, we commit to exit certain business activities, eliminate administrative and network locations and/or reduce our number of employees. At the time a restructuring plan is approved, we record a charge to our consolidated statement of operations for our estimated costs associated with the plan. Charges associated with these exit or restructuring plans incorporate various estimates, including severance costs, sublease income and costs, disposal costs, length of time on market for abandoned rented facilities and contractual termination costs. We also record a charge when we permanently cease use of a leased location. Estimates of charges associated with abandoned operating leases, some of which entail long-term lease obligations, are based on existing market conditions and net amounts that we estimate we will pay in the future. In accordance with SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities", ("SFAS No. 146") charges associated with abandoned operating leases recorded in 2003 were measured using the present value of the estimated net amounts we will pay and charges recorded in 2002 and 2001 were measured on an undiscounted basis. We utilize real estate brokers to assist in assessing market conditions and net amounts that we expect to pay.

        Fair value of financial instruments.    Our financial instruments consist of cash and cash equivalents, accounts receivable, investments, accounts payable and borrowings. The carrying values of cash and cash equivalents, accounts receivable, marketable debt securities, accounts payable and short-term borrowings approximate their fair values because of their short-term nature. Our equity investments are also recorded at their estimated fair market value. Our borrowings had a fair value of approximately $18.8 billion and $18.5 billion at December 31, 2003 and 2002, respectively. The fair values of our borrowings are based on quoted market prices where available or, if not available, based on discounted future cash flows using current market interest rates.

        Stock-based compensation.    Our stock option plans are accounted for using the intrinsic-value method allowed under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", ("APB No. 25") under which no compensation expense is recognized for our options granted to employees when the exercise 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

84

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", ("FIN No. 28").

        Had compensation cost for our stock-based compensation plans been determined under the fair-value method in accordance with the provisions of SFAS No. 123, "Accounting for Stock-Based Compensation", ("SFAS No. 123"), our net loss and basic and diluted loss per share would have been changed to the pro forma amounts indicated below:

		Years Ended December 31,
		2003			2002			2001
		(Dollars in millions, except per share amounts)
Net income (loss):
	As reported	$	1,512		$	(38,468	)	$	(5,603	)
	Add: Stock-based employee compensation expense included in net income (loss), net of related tax effects		6			71			21
	Deduct: Total stock-based employee compensation expense determined under the fair-value-based method for all awards, net of related tax effects		(104	)		(201	)		(203	)
	Pro forma	$	1,414		$	(38,598	)	$	(5,785	)
Earnings (loss) per share:
	As reported—basic and diluted	$	0.87		$	(22.87	)	$	(3.37	)
	Pro forma—basic and diluted	$	0.81		$	(22.95	)	$	(3.48	)

        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 Note 12—Stock Incentive Plans for further information.

Recently Adopted Accounting Pronouncements and Cumulative Effects of Adoption

        FIN No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others", was issued in November 2002. The interpretation provides guidance on the guarantor's accounting and disclosure of guarantees, including indirect guarantees of indebtedness of others. We adopted the disclosure requirements of FIN No. 45 as of December 31, 2002. The accounting guidelines are applicable to certain guarantees, excluding affiliate guarantees, issued or modified after December 31, 2002, and required that we record a liability for the fair value of such guarantees on our consolidated balance sheet. The adoption of this interpretation had no material effect on our consolidated financial statements.

        On January 1, 2003, we adopted SFAS No. 143. This statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs, generally referred to as asset retirement obligations. SFAS No. 143 requires entities to record the fair value of a legal liability for an asset retirement obligation. If a reasonable estimate of fair value can be made, the fair value of the liability will be recognized in the period it is incurred, or if not, in the period a reasonable estimate of fair value can be made. This cost is initially

85

capitalized and then amortized over the estimated remaining useful life of the asset. We have determined that we have legal asset retirement obligations associated with the removal of a limited group of long-lived assets and recorded a cumulative effect of a change in accounting principle charge upon adoption of SFAS No. 143 of $28 million (an asset retirement obligation of $43 million, net of an incremental adjustment to the historical cost of the underlying assets of $15 million) in 2003.

        Prior to the adoption of SFAS No. 143, we included in our group depreciation rates estimated net removal costs (removal costs less salvage). These costs have historically been reflected in the calculation of depreciation expense and therefore recognized in accumulated depreciation. When the assets were actually retired and removal costs were expended, the net removal costs were recorded as a reduction to accumulated depreciation. While SFAS No. 143 requires the recognition of a liability for asset retirement obligations that are legally binding, it precludes the recognition of a liability for asset retirement obligations that are not legally binding. Therefore, upon adoption of SFAS No. 143, we reversed the net removal costs within accumulated depreciation for those fixed assets where the removal costs exceeded the estimated salvage value and we did not have a legal removal obligation. This resulted in income from the cumulative effect of a change in accounting principle of $365 million before taxes upon adoption of SFAS No.143. The net income impact of the adoption is $206 million ($365 million less the $28 million charge disclosed above, net of income taxes of $131 million) in 2003. Beginning January 1, 2003, the net costs of removal related to these assets are charged to our consolidated statement of operations in the period in which the costs are incurred.

        In January and December 2003, the FASB issued and then revised FIN No. 46, "Consolidation of Variable Interest Entities" ("FIN No. 46"), which is effective immediately for all variable interest entities created after January 31, 2003. FIN No. 46 must be applied for the first fiscal year or interim period ending after March 15, 2004 for variable interest entities or the first quarter of 2004 for us. FIN No. 46 requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among the parties involved. A primary beneficiary absorbs the majority of the entity's losses or receives a majority of the entity's residual returns, if they occur, or both. Where it is reasonably possible that the information about our variable interest entity relationships must be disclosed or consolidated, we must disclose the nature, purpose, size and activity of the variable interest entity and the maximum exposure to loss as a result of our involvement with the variable interest entity in all financial statements issued after January 31, 2003. We believe that it is unlikely that the adoption of FIN No. 46 will require consolidation of any significant unconsolidated entities.

86

Note 3: Accounts Receivable

        The following table presents details of our accounts receivable balances:

		December 31,
		2003			2002
		(Dollars in millions)
Trade receivables		$	1,485		$	1,991
Earned and unbilled receivables			337			353
Purchased receivables			88			104
Other receivables			205			256
	Total accounts receivables		2,115			2,704
Less: Allowance for bad debts			(280	)		(360	)
	Accounts receivable, net	$	1,835		$	2,344

        We are exposed to concentrations of credit risk from customers within our local service area and from other telecommunications service providers. We generally do not require collateral to secure our receivable balances. We have agreements with other telecommunications service providers whereby we agree to bill and collect on their behalf for services rendered by those providers to our customers within our local service area. We purchase accounts receivable from other telecommunications service providers on a non-recourse basis and include these amounts in our accounts receivable balance. We have not experienced any significant losses related to these purchased receivables.

Note 4: Property, Plant and Equipment

        The components of property, plant and equipment are as follows:

			December 31,
		Depreciable Lives
			2003			2002
			(Dollars in millions)
Land		N/A	$	113		$	116
Buildings		30-38 years		3,559			3,532
Communications equipment		2-25 years		18,913			18,947
Other network equipment		8-57 years		19,324			18,642
General purpose computers and other		3-11 years		2,942			3,008
Construction in progress		N/A		243			352
	Total property, plant and equipment			45,094			44,597
Less: accumulated depreciation				(26,945	)		(25,585	)
	Property, plant and equipment—net		$	18,149		$	19,012

87

        A summary of asset impairments recognized is as follows:

		Years Ended December 31,
		2003		2002		2001
		(Dollars in millions)
Property, plant and equipment and internal use software projects		$	230	$	10,493	$	134
Real estate assets held for sale			—		28		—
Capitalized software due to restructuring and Merger activities (Note 5—Goodwill and Intangible Assets)			—		4		101
Other Merger-related			—		—		16
	Total asset impairments	$	230	$	10,525	$	251

2003 Activities

        In August 2003, Qwest Wireless LLC ("Qwest Wireless") entered into a services agreement with a subsidiary of Sprint Corporation ("Sprint") that allows us to resell Sprint wireless services, including access to Sprint's nationwide personal communications service ("PCS") wireless network, to consumer and business customers, primarily within our local service area. We began offering these Sprint services under our brand name in March 2004. Under the services agreement, we retain control of all sales and marketing, customer service, billing and collection, pricing, promotion and product offerings relating to the Sprint services that we resell. The services agreement provides that Sprint will be our exclusive wireless provider and has an initial term of five years (with automatic renewal for successive one-year terms until either party provides notice of non-renewal). Through Qwest Wireless, we continue to operate a PCS wireless network that serves select markets within our local service area, including Denver, Seattle, Phoenix, Minneapolis, Portland, Salt Lake City and other smaller markets. Our wireless customers who are currently being serviced through our proprietary wireless network will be transitioned onto Sprint's network over time. Due to the anticipated decrease in usage of our own wireless network following the transition of our customers onto Sprint's network, in the third quarter of 2003 we performed an evaluation of the recoverability of the carrying value of our long-lived wireless network assets.

        In accordance with SFAS No. 144, we compared gross undiscounted cash flow projections to the carrying value of the wireless network assets and determined that the carrying value of those assets were not expected to be recovered through future projected cash flows. We then estimated the fair value using recent selling prices for comparable assets and determined that our cell sites, switches, related tools and equipment inventory and certain capitalized software that support the wireless network were impaired by an aggregate amount of $230 million.

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

2002 Activities

        Effective June 30, 2002, a general deterioration of the telecommunications market, downward revisions to our expected future results of operations and other factors indicated that our investments

88

in long-lived assets may have been impaired at that date. We performed an evaluation of the recoverability of the carrying value of our long-lived assets using gross undiscounted cash flow projections. For impairment analysis purposes, we grouped our property, plant and equipment, capitalized software and customer lists and then projected cash flows as follows: traditional telephone network, national fiber optic broadband network, international fiber optic broadband network, wireless network, web hosting and application service provider ("ASP"), assets held for sale and out-of-region digital subscriber line ("DSL"). Based on the gross undiscounted cash flow projections, we determined that all of our asset groups, except our traditional telephone network, were impaired at June 30, 2002. For those asset groups that were impaired, we then estimated the fair value using a variety of techniques, which are presented in the table below. For those asset groups that were impaired, we determined that the fair values were less than our carrying amount by $10.613 billion in the aggregate of which $120 million has been reclassified to income from and gain on sale of discontinued operations for certain web hosting centers in our consolidated statements of operations for the year ending December 31, 2002.

Asset Group		Impairment Charge		Fair Value Methodology
		(Dollars in millions)
National fiber optic broadband network		$	8,505	Discounted cash flows
International fiber optic broadband network			685	Comparable market data
Wireless network			825	Comparable market data and discounted cash flows
Web hosting and ASP assets			88	Comparable market data
Assets held for sale			348	Comparable market data
Out-of-region DSL			42	Discounted cash flows
	Total impairment charges	$	10,493

        Calculating the estimated fair value of the asset groups as listed above involved significant judgment and a variety of assumptions. For calculating fair value based on discounted cash flows, we forecasted future operating results and future cash flows, which included long-term forecasts of revenue growth, gross margins and capital expenditures. We also used a discount rate based on an estimate of the weighted-average cost of capital for the specific asset groups. Comparable market data was obtained by reviewing recent sales of similar asset types in third-party market transactions.

        A brief description of the underlying business purpose of each of the asset groups that were impaired as a result of our analysis as of June 30, 2002 is as follows:

•

Our national fiber optic broadband network provides long-distance voice services, data and Internet services and wholesale services to business, residential and wholesale customers outside of our local service area;



•

Our international fiber optic broadband network ("International Network") provides the same services to the same types of customers, only outside of the United States;



•

Our wireless network provides PCS in select markets in our local service area;

89

•

Our web hosting and ASP assets provide business customers shared and dedicated hosting on our servers as well as application hosting services to help design and manage customers' websites and hosting applications;



•

Assets held for sale primarily consist of excess network supplies; and



•

Our out-of-region DSL assets provide DSL service to customers outside our local service area.

        In accordance with SFAS No. 144, the fair value of the impaired assets becomes the new basis for accounting purposes. As such, approximately $1.9 billion in accumulated depreciation was eliminated in connection with the accounting for the impairments. The impact of the impairments reduced our annual depreciation and amortization expense by approximately $1.3 billion, beginning July 1, 2002.

        In 2002, we recorded other asset impairment charges of $28 million associated with the write-down of other real estate assets that were held for sale.

2001 Activities

        As part of our restructuring activities in 2001, we analyzed the feasibility of our web hosting centers and other internal use construction projects. As a result of this analysis, we decided to abandon certain web hosting centers and terminate certain projects that were no longer feasible. We recorded an asset impairment charge of $134 million related to the abandonment of web hosting centers and termination of certain internal use construction projects.

        Subsequent to the Merger, we re-evaluated all of our assets for potential impairment and, in certain instances, we concluded that the fair value of some of our assets were below their carrying value. As a result, we recorded impairment charges in 2001 of $16 million, writing off the full carrying value of certain internal use construction projects and equipment.

Asset Retirement Obligations

        As discussed in Note 2—Summary of Significant Accounting Policies, we adopted SFAS No. 143 on January 1, 2003.

        Our asset retirement obligations primarily relate to the costs of removing circuit equipment and wireless towers from leased properties when the leases expire. The following table reconciles the change in asset retirement obligations during the year:

		Change in Asset Retirement Obligations
		(Dollars in millions)
Liability recognized upon adoption on January 1, 2003		$	43
	Liability incurred		—
	Liability settled		—
	Accretion expense		6
Balance as of December 31, 2003		$	49

        If the provisions of SFAS No. 143 had been adopted for the prior years presented, net loss would have increased by approximately $50 million and $45 million for the years ended December 31, 2002 and 2001, respectively, and loss per share would have increased by $0.03 and $0.03, respectively. The asset retirement obligation would have been approximately $37 million and $31 million at December 31, 2001 and December 31, 2000, respectively.

90

Note 5: Goodwill and Intangible Assets

        The components of intangible assets are as follows:

			December 31,
			2003					2002
		Amortizable Lives	Carrying Cost		Accumulated Amortization			Carrying Cost		Accumulated Amortization
			(Dollars in millions)
Intangibles with indefinite lives:
	Wireless spectrum licenses and other		$	152	$	—		$	146	$	—
Intangibles with finite lives:
	Capitalized software	1.5-5 years		2,351		(961	)		2,032		(577	)
	Customer lists and other	5 years		35		(28	)		33		(22	)
Total intangibles with finite lives				2,386		(989	)		2,065		(599	)
Total intangible assets			$	2,538	$	(989	)	$	2,211	$	(599	)

        We recorded amortization expense of $428 million in 2003 for intangibles assets with finite lives. Based on the current amount of intangible assets subject to amortization, the estimated amortization for each of the succeeding 5 years is as follows:

		Estimated Amortization Expense
		(Dollars in millions)
2004		$	489
2005			394
2006			296
2007			162
2008			56
	Total	$	1,397

Adoption of SFAS No. 142

        Effective January 1, 2002, we adopted SFAS No. 142, which requires companies to cease amortizing goodwill and intangible assets which have indefinite useful lives. SFAS No. 142 also requires that goodwill and indefinite-lived intangible assets be reviewed for impairment upon adoption and annually thereafter, or more often if events or circumstances warrant. Under SFAS No. 142, goodwill impairment may exist if the carrying value of the reporting unit to which it is allocated exceeds its estimated fair value.

        We ceased amortizing our intangible assets with indefinite lives, including trademarks, trade names and wireless spectrum licenses on January 1, 2002. Upon adoption of SFAS No. 142, we reviewed the useful lives of our amortizable intangible assets, primarily capitalized software and customer lists, and determined that they remained appropriate.

91

        In accordance with SFAS No. 142, we performed a transitional impairment test of goodwill and intangible assets with indefinite lives as of January 1, 2002. The first step of the transitional test of impairment was performed by comparing the fair value of our reporting units to the carrying values of the reporting units to which goodwill was assigned. Because we do not maintain balance sheets at the reporting unit level, we allocated all assets and liabilities to each of our reporting units based on various methodologies that included specific identification and allocations based primarily on revenue, voice grade equivalents (the amount of capacity required to carry one telephone call) and relative number of employees. Goodwill was allocated to reporting units based on the relative fair value of each reporting unit. We did not allocate any goodwill to our wireless and directory publishing reporting units because they were not expected to benefit significantly from the synergies of the Merger and are not considered sources of the goodwill which arose from the Merger.

        Upon implementation of SFAS No. 142, we identified 13 reporting units. Goodwill was allocated to four of these reporting units on a relative fair value basis. Reporting units that were non-revenue producing or that were not expected to benefit significantly from the synergies of the Merger were not allocated goodwill. In addition, insignificant reporting units were not allocated goodwill. As discussed in Note 15—Segment Information, operating segments were changed in the fourth quarter of 2002 after goodwill had already been reduced to zero through the impairments discussed in the following paragraphs.

        We estimated the implied fair value of goodwill for each reporting unit by subtracting the fair value of the reporting unit's assets, including any unrecognized intangibles, from the total fair value of the reporting unit. The excess was deemed the implied fair value of goodwill. The implied fair value of the goodwill was then compared to the carrying amount of goodwill for the reporting unit. Based on this analysis, we recorded a charge for the cumulative effect of adopting SFAS No. 142 of $22.8 billion on January 1, 2002. This charge related to the reporting units in the table below:

Reporting Unit		Impairment Charge
		(Dollars in millions)
Global		$	5,151
National			2,147
Consumer			4,856
Wholesale			10,646
	Total	$	22,800

        Due to changes in market conditions, downward revisions to our projections of future operating results and other factors, we preformed an impairment analysis as of June 30, 2002 and determined that goodwill was impaired. We recorded an impairment charge to write-off the remaining goodwill balance of $8.483 billion on June 30, 2002. We performed the annual impairment test for 2003 and no further impairment was indicated.

92

        The following table adjusts loss from continuing operations, net loss and the related per share amounts in 2001 to exclude amortization, net of any related tax effects, of goodwill and indefinite lived intangible assets.

		Year Ended December 31, 2001
		(Dollars in millions, except per share amounts)
Reported loss from continuing operations		$	(6,117	)
	Amortization associated with goodwill		797
	Amortization associated with excess basis in investment in KPNQwest		205
	Amortization associated with trade name		9
	Amortization associated with assembled workforce		20
	Amortization associated with wireless spectrum licenses		1
	Total amortization associated with intangible assets with indefinite lives		1,032
Adjusted loss from continuing operations		$	(5,085	)
Reported net loss		$	(5,603	)
	Amortization associated with goodwill		797
	Amortization associated with excess basis in investment in KPNQwest		205
	Amortization associated with trade name		9
	Amortization associated with assembled workforce		20
	Amortization associated with wireless spectrum licenses		1
	Total amortization associated with intangible assets with indefinite lives		1,032
Adjusted net loss		$	(4,571	)
Basic and diluted loss per share:
Reported loss per share from continuing operations		$	(3.68	)
	Amortization associated with goodwill		0.48
	Amortization associated with excess basis in investment in KPNQwest		0.12
	Amortization associated with trade name		0.01
	Amortization associated with assembled workforce		0.01
	Amortization associated with wireless spectrum licenses		—
	Total amortization associated with intangible assets with indefinite lives		0.62
Adjusted loss per share from continuing operations		$	(3.06	)
Reported net loss per share		$	(3.37	)
	Amortization associated with goodwill		0.48
	Amortization associated with excess basis in investment in KPNQwest		0.12
	Amortization associated with trade name		0.01
	Amortization associated with assembled workforce		0.01
	Amortization associated with wireless spectrum licenses		—
	Total amortization associated with intangible assets with indefinite lives		0.62
Adjusted net loss per share		$	(2.75	)

93

Intangible Asset Impairment

        In June 2002, as discussed in Note 4—Property, Plant and Equipment, we recorded an asset impairment charge to property, plant and equipment of $10.493 billion which includes impairment to capitalized software development costs of $411 million and customer lists of $812 million. Also, in September 2003, as discussed in Note 4—Property, Plant and Equipment, we recorded an asset impairment charge to property, plant and equipment for $230 million which includes impairment to capitalized software development costs of $15 million.

        We recorded asset impairment charges of $4 million and $101 million in 2002 and 2001, respectively, related to internal software projects that we terminated.

        In 2002, realization of a $396 million tax benefit ($647 million on a pre-tax basis) became probable as a result of the completion of the first phase of the sale of our directory publishing business. The tax benefit existed at the time of the Merger, but was not recognized in the purchase because at that time it was not apparent that the temporary difference would be realized in the foreseeable future. In 2002, in accordance with SFAS No. 109, "Accounting for Income Taxes", ("SFAS No. 109"), we recorded the tax benefit, on a pre-tax basis, as a $555 million reduction to our trade name intangible asset and as a $92 million reduction to our customer lists intangible asset. The tax benefits were applied to these two non-current intangible assets because these assets were created in connection with the original purchase price allocation.

Note 6: Assets Held for Sale Including Discontinued Operations

        The following table presents the summarized results of operations for each of the years in the three-year period ended December 31, 2003 related to our discontinued operations. These results primarily relate to our directory publishing business.

		Years Ended December 31,
		2003			2002			2001
		(Dollars in millions)
Revenue		$	648		$	1,549		$	1,621
Costs and expenses:
	Cost of sales		232			524			586
	Selling, general and administrative		93			400			198
	Depreciation and amortization		—			29			31
Income from operations			323			596			806
	Gain on sale of directory publishing business		4,065			2,615			—
	Other expense		(111	)		(26	)		(5	)
Income before income taxes			4,277			3,185			801
	Income tax provision		1,658			1,235			311
Income from and gain on sale of discontinued operations		$	2,619		$	1,950		$	490

94

        The following table presents the assets and liabilities associated with our discontinued operations, primarily our directory publishing business, as of December 31, 2003 and 2002:

		December 31,
		2003		2002
		(Dollars in millions)
Current assets held for sale		$	—	$	239
Property, plant and equipment, net			—		58
Other assets			—		18
	Total assets held for sale	$	—	$	315
Current portion of liabilities associated with discontinued operations		$	—	$	175
Other long-term liabilities			—		50
	Total liabilities associated with discontinued operations	$	—	$	225

Discontinued Directory Publishing Business

        During the second quarter of 2002, we began actively pursuing the sale of our directory publishing business ("Dex"). On November 8, 2002, we completed the first stage of the sale of our directory publishing business to a new entity formed by the private equity firms of The Carlyle Group and Welsh, Carson, Anderson & Stowe (the "Dex Sale"). The sales price for the first stage of the Dex Sale, which involved the sale of Dex operations in the states of Colorado, Iowa, Minnesota, Nebraska, New Mexico, North Dakota and South Dakota ("Dex East") was $2.75 billion and was paid in cash. We recognized a gain of $1.6 billion (net of $1.0 billion in taxes) from the Dex East sale.

        The sale of Dex in the remaining states of Arizona, Idaho, Montana, Oregon, Utah, Washington and Wyoming ("Dex West") was completed in September 2003. We received approximately $4.3 billion in gross cash proceeds and recognized a gain of $2.5 billion (net of $1.6 billion in taxes) from the Dex West sale.

Excess Network Supplies Held for Sale

        We periodically review our network supplies against our usage requirements to identify potential excess supplies for disposal. During the second quarter of 2002, we identified $359 million of excess supplies and engaged a third-party broker to conduct a sale of those assets. An impairment charge of $348 million was recorded on June 30, 2002 to reduce the carrying amount of the supplies to their net estimated fair value. Fair value was based upon market values of similar equipment. The impairment charge of $348 million is included in asset impairment charges in our 2002 consolidated statement of operations.

Other Assets Held for Sale

        Prior to and during 2000, U S WEST agreed to sell approximately 800,000 access lines to third-party telecommunications services providers, including approximately 570,000 access lines in nine states to Citizens Communications Company ("Citizens"). Because these access lines were "held for sale", U S WEST discontinued recognizing depreciation expense on the related assets and carried them at the

95

lower of their cost or fair value, less estimated cost to sell. These access lines are part of our wireline segment.

        On July 20, 2001, we terminated the agreement with Citizens under which the majority of the remaining access lines in eight states were to have been sold and ceased actively marketing the remaining access lines. As a result, the remaining access lines and related assets were reclassified to "held for use" as of June 30, 2001. In connection with the change in use and this reclassification, the access lines and related assets were measured individually at the lower of their (a) carrying value before they were classified as held for sale, adjusted for any depreciation expense or impairment losses that would have been recognized had the assets been continuously classified as held for use, or (b) their fair value at June 30, 2001. This resulted in a charge to depreciation in 2001 of $222 million to "catch up" the depreciation on these access lines and related assets for the period they were classified as held for sale. The required adjustments to the carrying value of the individual access lines and related assets were included in our 2001 consolidated statement of operations.

        In 2001, we sold approximately 41,000 access lines in Utah and Arizona resulting in $94 million in cash proceeds and a gain of $51 million.

Note 7: Investments

        The following table summarizes the carrying value of our investments as of December 31, 2003 and 2002:

		December 31,
		2003		2002
		(Dollars in millions)
Short-term publicly traded marketable debt securities		$	174	$	—
Non-current investments:
	Publicly traded marketable debt securities		24		—
	Publicly traded marketable equity securities		—		1
	Investments in private companies		6		22
Total investments		$	204	$	23

Equity Method Investments

        As discussed in Note 2—Summary of Significant Accounting Policies, investments where we exercise significant influence, but do not control the investee, are accounted for under the equity method of accounting. Under the equity method, investments are stated at initial cost and are adjusted for contributions, distributions, our share of the investee's income or losses as well as impairment write-downs for other-than-temporary declines in value. The following table summarizes the 2002 and 2001

96

changes in our investments that were accounted for using the equity method of accounting. At December 31, 2003, we did not have any significant equity method investments.

		KPNQwest			Qwest Digital Media			Total
		(Dollars in millions)
Balance as of December 31, 2000		$	7,803		$	113		$	7,916
	Equity share of loss		(96	)		(20	)		(116	)
	Purchase price allocation adjustment		(3,180	)		—			(3,180	)
	Impairment charges		(3,204	)		(9	)		(3,213	)
	Capital contributions		65			12			77
	Forgiveness of promissory note		—			(85	)		(85	)
	Amortization of excess basis		(205	)		—			(205	)
	Currency translation		(33	)		—			(33	)
Balance as of December 31, 2001			1,150			11			1,161
	Equity share of loss		(131	)		(14	)		(145	)
	Impairment charges		(1,059	)		(2	)		(1,061	)
	Capital contributions		—			5			5
	Currency translation		40			—			40
Balance as of December 31, 2002		$	—		$	—		$	—

        Investment in KPNQwest.    In April 1999, pre-Merger Qwest and KPN Telecom B.V. ("KPN") formed a joint venture, KPNQwest N.V. ("KPNQwest"), to create a pan-European Internet Protocol-based fiber optic broadband network, linked to our North American network, for data and multimedia services. We and KPN each initially owned 50% of KPNQwest. In November 1999, KPNQwest consummated an initial public offering in which 50.6 million shares of common stock were issued to the public generating approximately $1.0 billion in proceeds. As a result of KPNQwest's initial public offering, the public owned approximately 11% of KPNQwest's shares and the remainder was owned equally by us and KPN. Originally, contractual provisions restricted our ability to sell or transfer any of our shares through 2004. In November 2001, we purchased approximately 14 million additional shares and Anschutz Company purchased approximately six million shares of KPNQwest common stock from KPN for $4.58 per share. Anschutz Company's stock purchase was at our request and with the approval of the disinterested members of our Board of Directors (the "Board"). After giving effect to this transaction, we held approximately 47.5% of KPNQwest's outstanding shares. Because we have never had the ability to designate a majority of the members of the supervisory board or to vote a majority of the voting securities, we have accounted for our investment in KPNQwest using the equity method of accounting.

        In connection with the allocation of the Merger purchase price, we assigned a preliminary value of $7.935 billion to our investment in KPNQwest at June 30, 2000. Prior to the Merger, Qwest's investment in KPNQwest had a book value of $552 million. In accordance with APB Opinion No. 18, "The Equity Method of Accounting for Investments in Common Stock", the excess basis related to our investment in KPNQwest of $7.383 billion was attributed to goodwill. This goodwill was initially assigned an estimated life of 40 years and was being amortized ratably over that period. The final determination of the estimated fair value of our investment in KPNQwest was completed in June 2001. This final determination resulted in an estimated fair value of $4.755 billion, or $3.180 billion less than

97

our preliminary estimate of fair value. As a result, we recorded a $3.180 billion reduction to our investment in KPNQwest effective in the second quarter of 2001. Also at that time we changed the estimated life of the revised goodwill balance of $4.203 billion from 40 years to 10 years. Beginning January 1, 2002, in accordance with the adoption of SFAS No. 142, we ceased amortization of goodwill and other intangible assets with indefinite lives. In addition, as of December 31, 2002, all goodwill has been fully impaired. See discussion at Note 5—Goodwill and Intangible Assets.

        Beginning in June 2001, we performed periodic evaluations of our investment in KPNQwest and concluded that there had been a decline in fair value that was other than temporary. Factors considered in reaching our conclusions that the decline was other -than -temporary included, among others, the following: a decline in the price of KPNQwest's publicly traded stock and the period of time over which such price had been below the carrying value of our investment; the change in analysts' expectations released during the second quarter of 2001 indicating significant declines from their first quarter expectations; and the severe deterioration of the European telecommunications sector that began during the second quarter of 2001, including a number of bankruptcies, making the near-term prospects of a recovery of KPNQwest's stock less certain beginning on June 30, 2001. As a result of those evaluations, we recorded an impairment loss of $3.048 billion in June 2001 to write down the carrying amount of our investment in KPNQwest.

        After a similar evaluation in December 2001, we again concluded that a further other-than-temporary decline in value had occurred and recorded an additional impairment of $156 million, reducing the estimated fair value of our KPNQwest investment to $1.150 billion as of December 31, 2001.

        In 2002, we recorded a further impairment to our investment for an other-than-temporary decline in value in the first quarter of 2002. In May 2002, KPNQwest filed for bankruptcy protection and ceased operations. Consequently, we did not expect to recover any of our investment in KPNQwest and in the second quarter of 2002, we wrote-off our remaining investment in KPNQwest to our consolidated statement of operations.

        Investment in Qwest Digital Media, LLC.    In October 1999, pre-Merger Qwest and Anschutz Digital Media, Inc. ("ADMI"), a subsidiary of Anschutz Company, formed a joint venture called Qwest Digital Media, LLC ("QDM"), which provided advanced digital production, post-production and transmission facilities; digital media storage and distribution services; and telephony-based data storage and enhanced access and routing services. Pre-Merger Qwest contributed capital of approximately $84.8 million in the form of a promissory note payable over nine years at an annual interest rate of 6%. At inception, pre-Merger Qwest and ADMI each owned 50% equity and voting interest in QDM. In June 2000, pre-Merger Qwest acquired an additional 25% interest in QDM directly from ADMI and paid $48.2 million for the interest; $4.8 million in cash at closing and the remaining $43.4 million in the form of a promissory note payable in December 2000, with an annual interest rate of 8%. As a result of this transaction, subsequent to the Merger, we owned a 75% economic interest and 50% voting interest in QDM, and ADMI owned the remaining 25% economic interest and 50% voting interest. We paid the note associated with this additional 25% interest in full, including approximately $1.8 million in accrued interest, in January 2001. Because we have never controlled QDM, we have accounted for our investment in QDM using the equity method of accounting for all periods presented.

        Also in October 1999, pre-Merger Qwest entered into a long-term Master Services Agreement with QDM under which QDM agreed to purchase approximately $119 million of telecommunication services through October 2008 and we agreed to extend credit to QDM for the purpose of making payments to

98

us for the telecommunications services provided. Each October, QDM was required to pay an amount equal to the difference between certain specified annual commitment levels and the amount of services actually purchased under the Master Services Agreement at that time. In October 2001, we agreed to terminate the Master Services Agreement and release QDM from its obligation under such agreement to acquire telecommunications services from us. At the same time, QDM agreed to forgive the $84.8 million that we owed on the promissory note related to the original capital contribution from pre-Merger Qwest. Prior to the termination of the Master Services Agreement, we advanced QDM $3.8 million which was the amount owed to us under the agreement for accrued telecommunications services. QDM used that advance to pay us the amount owed, including interest on amounts past due. Concurrent with termination of the Master Services Agreement, QDM repaid us the $3.8 million advance under the Master Services Agreement with interest.

Marketable Securities

        We have investments in publicly traded equity securities and private company equity securities, which are classified as "available-for-sale" under SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS No. 115"). In accordance with SFAS No. 115, we are required to carry these investments at their fair value. Unrealized gains and losses on these securities are recorded in other comprehensive income (loss), net of related income tax effects, in the consolidated statement of stockholders' (deficit) equity.

        We also had investments in publicly traded debt securities made during 2003 which are classified as "held-to-maturity." In accordance with SFAS No. 115, held-to-maturity securities are stated at amortized cost, adjusted for amortization of premiums and accretion of discounts to maturity.

        In addition, we have investments in certain derivative instruments on marketable securities. As discussed in Note 2—Summary of Significant Accounting Policies, derivative financial instruments are measured at fair value and recognized as either assets or liabilities on our consolidated balance sheets. Changes in the fair values of derivative instruments that do not qualify as hedges and/or any portion of a hedge that is not effective as a hedge, are recognized as a gain or loss in the consolidated statement of operations in the current period.

99

        The following table summarizes information related to our investments in marketable equity securities for the years ended December 31, 2003, 2002 and 2001.

		Publicly Traded			Private Company			Total
		(Dollars in millions)
Balance as of December 31, 2000		$	87		$	144		$	231
	Additions		13			3			16
	Dispositions		(21	)		(3	)		(24	)
	Unrealized mark-to-market gains		62			—			62
	Unrealized mark-to-market losses		(29	)		—			(29	)
	Other-than-temporary declines in value and mark-to-market adjustment of warrants		(69	)		(115	)		(184	)
Balance as of December 31, 2001			43			29			72
	Dispositions		(50	)		—			(50	)
	Unrealized mark-to-market gains		41			—			41
	Unrealized mark-to-market losses		(5	)		—			(5	)
	Other-than-temporary declines in value and mark-to-market adjustment of warrants		(28	)		(7	)		(35	)
Balance as of December 31, 2002			1			22			23
	Additions		198			—			198
	Unrealized mark-to-market gains		—			3			3
	Other-than-temporary declines in value and mark-to-market adjustment of warrants		(1	)		(19	)		(20	)
Balance as of December 31, 2003		$	198		$	6		$	204

Investments in Publicly Traded Securities

        As of December 31, 2003, our portfolio of publicly traded marketable securities consisted principally of U.S. Government Agency debt securities which had an amortized cost and a fair market value of approximately $198 million. In accordance with SFAS No. 115, we accrete the discount of these bonds and recognize interest income in our consolidated statement of operations. Bonds of $174 million are classified as short-term and are included in prepaids and other current assets and $24 million is included as non-current in other assets on our consolidated balance sheet as of December 31, 2003.

        As of December 31, 2002 our portfolio of publicly traded marketable securities consisted principally of the warrants we held to purchase various public company equity securities. In accordance with SFAS No. 133 and SFAS No. 115, we mark the warrants to market and any changes in the fair value of these warrants are charged to the consolidated statement of operations. We recorded losses of $1 million, $20 million and $6 million, for the years ended December 31, 2003, 2002 and 2001, respectively, related to changes in the fair value of these warrants. We had no other significant derivative financial instruments as of December 31, 2003 or 2002.

        We recorded charges related to other-than-temporary declines in value relating to our investments in publicly traded marketable securities during 2002 and 2001 totaling $8 million and $63 million, respectively. There were no charges recorded during 2003. During 2002 and 2001, we sold various

100

holdings in our public and non-public investments for approximately $12 million and $2 million, respectively. We recorded a loss of $37 million in 2002 and a loss of $22 million in 2001 associated with these sales. We had no significant sales of investments in 2003.

Note 8: Borrowings

Current Borrowings

        As of December 31, 2003 and 2002, our current borrowings consisted of:

		December 31,
		2003		2002
		(Dollars in millions)
Short-term notes		$	—	$	750
Current portion of credit facility			—		750
Current portion of long-term borrowings			1,834		1,180
Current portion of capital lease obligations and other			35		92
	Total current borrowings	$	1,869	$	2,772

        In August 2002, Dex borrowed $750 million under a term loan agreement ("Dex Term Loan") due September 2004. Borrowings under the Dex Term Loan were completed in two tranches: Tranche A and Tranche B. As of December 31, 2002, Tranche A borrowings were $213 million and Tranche A bore interest at either (i) an adjusted London interbank offered rates ("LIBOR") plus 11.50% per annum, as calculated in accordance with the term loan agreement; or (ii) the base rate under the agreement plus 8.75% per annum. Tranche B borrowings were $537 million and bore a fixed interest rate of 14.0%. On August 12, 2003, the $750 million Dex Term Loan was paid in full. See Note 18—Subsequent Events—Debt-related matters, for a description of transactions affecting our current borrowings that occurred subsequent to December 31, 2003.

Long-term Borrowings

        At December 31, 2003, $133 million of our long-term borrowings, including the current portion, were held at Qwest and the remainder was held in four of our wholly owned subsidiaries: Qwest Corporation ("QC"), Qwest Services Corporation ("QSC"), Qwest Communications Corporation ("QCC") and Qwest Capital Funding ("QCF"). See Note 18—Subsequent Events—Debt-related matters, for a description of transactions affecting our long-term borrowings that occurred subsequent to December 31, 2003.

101

        As of December 31, 2003 and 2002, long-term borrowings consisted of the following (for all notes with unamortized discount or premium, the face amount of the notes and the unamortized discount or premium are presented separately):

		December 31,
		2003			2002
		(Dollars in millions)
Qwest Corporation:
	Notes with various rates ranging from 5.50% to 9.125% including LIBOR + 4.75% and maturities from 2004 to 2043	$	7,887		$	7,316
	Unamortized discount and other		(157	)		(142	)
	Capital lease obligations and other		25			97
	Less: current portion		(881	)		(1,255	)
Qwest Services Corporation:
	Notes with various rates ranging from 13.00% to 14.00% and maturities from 2007 to 2014		3,377			3,298
	Unamortized premium		174			70
	Credit facility due 2005 with rate of LIBOR + 3.50%		750			2,000
	Less: current portion		—			(750	)
Qwest Communications Corporation:
	7.25% Senior Notes due in 2007		314			350
	Unamortized discount and other		(7	)		(7	)
	Capital lease obligations and other		40			50
	Less: current portion		(2	)		(6	)
Qwest Capital Funding:
	Notes with various rates ranging from 5.875% to 7.90% and maturities from 2004 to 2031		4,952			7,665
	Unamortized discount		(11	)		(20	)
	Less: current portion		(963	)		—
Qwest Communications International Inc.:
	7.50% Senior Notes due in 2008		62			750
	7.25% Senior Notes due in 2008		8			300
	Unamortized discount and other		(2	)		(30	)
	Senior Notes with various rates ranging from 8.29% to 10.875% and maturities from 2007 to 2008		33			33
	Note payable to ADMI (Note 16—Related Party Transactions)		30			35
	Less: current portion		(4	)		(1	)
Other:
	Capital lease obligations		33			25
	Less: current portion		(19	)		(10	)
Total—net long-term borrowings		$	15,639		$	19,768

102

        Our long-term borrowings had the following interest rates and maturities at December 31, 2003:

			Maturities
Interest Rates
			2004		2005		2006		2007		2008		Thereafter		Total
			(Dollars in millions)
Up to 5%			$	—	$	750	$	—	$	—	$	—	$	—	$	750
Above 5% to 6%				1,084		46		6		77		328		—		1,541
Above 6% to 7%				—		595		—		1,340		171		2,872		4,978
Above 7% to 8%				750		—		485		314		71		3,364		4,984
Above 8% to 9%				—		—		—		—		22		250		272
Above 9% to 10%				—		—		—		11		—		1,500		1,511
Above 10%				—		—		—		504		—		2,873		3,377
	Total		$	1,834	$	1,391	$	491	$	2,246	$	592	$	10,859		17,413
		Capital leases and other														98
		Unamortized discount and other														(3	)
		Less current borrowings														(1,869	)
Total long-term debt															$	15,639

QC Notes

        At December 31, 2003 and 2002, QC had notes with aggregate principal amounts outstanding of $7.887 billion and $7.316 billion, excluding unamortized discounts of $157 million and $142 million, respectively, of unsecured notes at interest rates ranging from 5.50% to 9.125% including floating rate debt at LIBOR + 4.75% and with maturities from 2004 to 2043. The indentures governing these QC notes contain certain covenants including, but not limited to: (i) a prohibition on certain liens on the assets of QC and (ii) a limitation on mergers or sales of all, or substantially all, of the assets of QC, which limitation requires that a successor assume the obligation with regard to these notes. These indentures do not contain any cross-default provisions. We were in compliance with all of the covenants at December 31, 2003. Included in the amounts listed above are the following issuances:

        On June 9, 2003, QC completed a senior term loan in two tranches for a total of $1.75 billion principal amount of indebtedness. The term loan consists of a $1.25 billion floating rate tranche, due in 2007, and a $500 million fixed rate tranche, due in 2010. The term loan is unsecured and ranks equally with all of QC's current indebtedness. The floating rate tranche cannot be prepaid for two years and thereafter is subject to prepayment premiums through 2006. There are no mandatory prepayment requirements. The covenant and default terms are substantially the same as those associated with QC's other long-term debt. The net proceeds were used to refinance approximately $1.1 billion of QC's debt due in 2003 and fund or refinance our investment in telecommunications assets. Also, in connection with this QC issuance, we reduced the QSC Credit Facility (as described below) by approximately $429 million to a balance of $1.57 billion.

        The floating rate tranche bears interest at LIBOR plus 4.75% (with a minimum interest rate of 6.50%) and the fixed rate tranche bears interest at 6.95% per annum. The interest rate on the floating rate tranche was 6.50% at December 31, 2003. The lenders funded the entire principal amount of the loan subject to the original issue discount for the floating rate tranche of 1.00% and for the fixed rate tranche of 1.652%.

103

        In March 2002, QC issued $1.5 billion in bonds with a ten-year maturity and an 8.875% interest rate. At December 31, 2003, the interest rate was 9.125%. Once we have registered the notes with the Securities and Exchange Commission, ("SEC"), the interest rate will return to 8.875%, the original stated rate.

QSC Notes

        At December 31, 2003 and 2002, QSC had notes with aggregate principal amounts outstanding of $3.377 billion and $3.298 billion, consisting of 13.0% Notes due in 2007 ("2007 Notes"), 13.5% Notes due in 2010 ("2010 Notes") and 14.0% Notes due in 2014 ("2014 Notes") pursuant to an indenture issued on December 26, 2002. The total unamortized premium for these notes was $174 million and $70 million at December 31, 2003 and 2002, respectively. Since December 26, 2003, we have been incurring additional interest of 0.25% per annum on these notes. Once we register the notes with the SEC, the interest rates will return to the original stated rates. We will be required to pay an additional 0.25% per annum of interest starting March 25, 2004, for a total of 0.50% of additional interest, until the notes are registered. The 2007 Notes, 2010 Notes and 2014 Notes are callable on December 15 of 2005, 2006 and 2007 at 106.5%, 106.75% and 107%, respectively. The QSC notes are subordinated in right of payment to all senior debt of QSC, including the 2004 QSC Credit Facility, and the QSC guarantee of the 2009, 2011 and 2014 Qwest notes. The QSC notes are secured by a lien on the stock of QC, which lien is junior to the liens on such collateral securing QSC's senior debt, including the 2004 QSC Credit Facility and QSC's guarantee of the 2009, 2011 and 2014 Qwest notes (See Note 18—Subsequent Events, Debt-related matters, for a discussion of new debt issued in 2004). The QSC notes are guaranteed by QCF and Qwest on a senior basis and the guarantee by Qwest is secured by liens on the stock of QSC and QCF.

        The QSC indenture contains certain covenants including, but not limited to: (i) limitations on incurrence of indebtedness; (ii) limitations on restricted payments; (iii) limitations on dividends and other payment restrictions; (iv) limitations on asset sales; (v) limitations on transactions with affiliates; (vi) limitations on liens; and (vii) limitations on business activities. Under the QSC indenture we must repurchase the notes upon certain changes of control. This indenture also contains provisions for cross acceleration relating to any of our other debt obligations and the debt obligations of our restricted subsidiaries in the aggregate in excess of $100 million. We were in compliance with all of the covenants as of December 31, 2003.

        On December 22, 2003, we completed a cash tender offer (the "December 2003 Tender Offer") for the purchase of approximately $3 billion aggregate face amount of outstanding debt of Qwest, QSC and QCF for approximately $3 billion in cash. As a result, we recorded a loss of $15 million on the early retirement of this debt. In connection with the December 2003 Tender Offer, QSC purchased $327 million face amount of its debt for $386 million in cash resulting in a loss of $42 million. QSC also offered to purchase its notes for par under the asset sale repurchase requirement as required by the indentures governing the QSC notes. The details relating to Qwest's and QCF's portion of the December 2003 Tender Offer are discussed below in their respective sections.

        During 2003, we also exchanged $406 million of new QSC notes for $560 million face amount of QCF notes. These debt-for-debt exchanges were accounted for in accordance with the guidance in Emerging Issues Task Force Issue No. 96-19, "Debtors Accounting for a Modification or Exchange of Debt Instruments", ("EITF Issue No. 96-19"). On the date of the exchanges, the present value of the cash flows under the terms of the revised debt instruments were compared to the present value of the

104

remaining cash flows under the original debt instruments. The cash flows were not considered "substantially" different to that of the exchanged debt; therefore, no gain was recognized on the exchanges and the difference of $144 million between the face amount of the new debt and the carrying amount of the exchanged debt is being amortized as a credit to interest expense using the effective interest rate method over the life of the new debt. The new QSC notes have interest rates ranging from 13.0% to 13.5% with maturities of 2007 and 2010, while the QCF notes had interest rates ranging from 6.875% to 7.90%.

QSC Credit Facility

        Until February 2002, we maintained commercial paper programs to finance the short-term operating cash needs of our business. We had a $4.0 billion syndicated credit facility available to support our commercial paper programs. As a result of reduced demand for our commercial paper, in February 2002 we borrowed the full amount under this credit facility and used the proceeds to repay $3.2 billion or all of the commercial paper outstanding and terminated our commercial paper program. The remainder of the proceeds was used to pay maturities and capital lease obligations and to fund operations.

        At December 31, 2003 and 2002, we had $750 million and $2.0 billion, respectively, outstanding under the credit facility, which had been reconstituted as a revolving credit facility in August 2002, with QSC as the primary borrower ("QSC Credit Facility"). The QSC Credit Facility was secured by a senior lien on the stock of QC. The QSC Credit Facility was paid down by $429 million concurrently with QC's $1.75 billion term loan completed in June 2003. Proceeds from the completed sale of the Dex West business during September 2003 were used to reduce the QSC Credit Facility by another $321 million. In December 2003, the QSC Credit facility was reduced by an additional $500 million. At December 31, 2003, the QSC Credit Facility bore interest of 4.65%. We obtained extensions under the QSC Credit Facility for the delivery of certain annual and quarterly financial information. The waivers extended the compliance date to provide certain annual and quarterly financial information to March 31, 2004. On February 5, 2004, the QSC Credit Facility was paid off and terminated (See Note 18—Subsequent Events, Debt related matters, for a discussion of the payoff of the QSC Credit Facility).

QCC Notes

        At December 31, 2003 and 2002, QCC had notes with aggregate principal amounts outstanding of $314 million and $350 million, respectively, excluding unamortized discount of $7 million, in each year, of unsecured 7.25% Senior Notes, due 2007. During 2003, $36 million of these notes were exchanged for $33 million of cash resulting in a gain of $3 million.

        The indenture governing these notes contains certain covenants including, but not limited to: (i) a prohibition on certain liens on assets of QCC and (ii) a limitation on mergers or sales of all, or substantially all, of the assets of QCC, which requires that a successor assume the obligation with regard to these notes. This indenture contains provisions relating to acceleration upon an acceleration of any other debt obligations of QCC in the aggregate in excess of $25 million. We were in compliance with all of the covenants as of December 31, 2003.

105

QCF Notes

        At December 31, 2003 and 2002, QCF had notes with aggregate principal amounts outstanding of $4.952 billion and $7.665 billion, excluding unamortized discounts of $11 million and $20 million, respectively, of unsecured notes at rates ranging from 5.875% to 7.9% and with maturities from 2004 to 2031. The QCF notes are guaranteed by Qwest on a senior unsecured basis. The indentures governing these QCF notes contain certain covenants including, but not limited to: (i) a prohibition on certain liens on the assets of QCF and (ii) a limitation on mergers or sales of all, or substantially all, of the assets of QCF or us, which limitation requires that a successor assume the obligation with regard to these notes. These indentures do not contain any cross-default provisions. We were in compliance with all of the covenants as of December 31, 2003.

        In connection with the December 2003 Tender Offer, QCF purchased $1.735 billion face amount of its debt for $1.637 billion in cash resulting in a gain of $79 million.

        During 2003, we also exchanged $418 million face amount of existing QCF notes for $165 million of cash and 52.5 million shares of our common stock with an aggregate value of $202 million. The trading prices for our shares at the time the exchange transactions were consummated ranged from $3.22 per share to $5.11 per share. As a result, a gain of $50 million was recorded on this debt extinguishment. We also exchanged $406 million of new QSC notes for $560 million face amount of QCF notes. See the QSC section above for a discussion of this debt for debt exchange.

        On December 26, 2002, we completed an offer to exchange up to $12.9 billion in aggregate face amount of outstanding unsecured debt securities of QCF for new unsecured debt securities of QSC and Qwest. (Because of the amount tendered no Qwest notes were required to be issued.) We received valid tender offers of approximately $5.2 billion in total principal amount of the QCF notes and issued in exchange $3.3 billion in face amount of new debt securities of QSC under the indenture described above. This transaction was accounted for in accordance with the guidance in EITF Issue No. 96-19. On December 26, 2002, the present value of the cash flows under the terms of the revised debt instruments were compared to the present value of the remaining cash flows under the original debt instruments. The cash flows for nine of the new debt securities were considered "substantially" different to that of the exchanged debt securities. Accordingly, these debt exchanges were accounted for as debt extinguishments resulting in the recognition of a $1.8 billion gain in 2002. The cash flows for two of the new debt securities were not considered "substantially" different to that of the exchanged debt and therefore no gain was realized upon exchange. For these two debt instruments, the difference between the fair value of the new debt and the carrying amount of the exchanged debt of approximately $70 million is being amortized as a credit to interest expense using the effective interest method over the life of the new debt.

        During the first quarter of 2002, we exchanged $97 million in face amount of debt that was issued by QCF. In exchange for the debt, we issued approximately 9.88 million shares of our common stock with a fair value of $87 million. The trading prices for our shares at the time the exchange transactions were consummated ranged from $8.29 per share to $9.18 per share. As a result, a gain of $9 million was recorded on this extinguishment of debt.

Qwest 2008 Notes

        At December 31, 2003 and 2002, we had notes with aggregate principal amounts outstanding of $70 million and $1.05 billion, respectively, of senior notes due in 2008, excluding unamortized discount

106

of $2 million and $30 million, respectively. At December 31, 2002, these notes consisted of $750 million issued with an interest rate of 7.50% and $300 million issued with an interest rate of 7.25%. As of December 26, 2002, these senior notes have been secured equally and ratably with the QSC notes discussed above by a lien on the stock of QSC and QCF. These notes are also guaranteed on a senior basis by QCF and QSC and the QSC guarantee is secured by a junior lien on the stock of QC. In connection with the December 2003 Tender Offer, we purchased $981 million face amount of our 2008 notes for $1.006 billion in cash resulting in a loss of $52 million and amended the indentures governing the notes that remain outstanding to eliminate restrictive covenants and certain default provisions. At the same time, Qwest also offered to purchase these notes for par under the asset sale repurchase requirement as required by the indentures governing these notes and accepted $32 million that was tendered under this offer, which is included in the purchase and loss amounts above.

Other Qwest Notes

        At December 31, 2003 and 2002 we had notes with aggregate principal amounts of other notes outstanding of $33 million, consisting of 8.29% Senior Notes due in 2008, 9.47% Senior Notes due in 2007 and 10.875% Senior Notes due in 2007. In March 2001, we completed a cash tender offer to buy back some of these notes. In this tender offer, we purchased $995 million in principal of the outstanding notes in exchange for $1.1 billion in cash, resulting in a loss of $106 million. In connection with this tender offer, the remaining outstanding indentures governing the notes were amended to eliminate restrictive covenants and certain default provisions.

Interest

        The following table presents the amount of gross interest expense, capitalized interest and cash paid for interest during 2003, 2002 and 2001:

		Years Ended December 31,
		2003			2002			2001
		(Dollars in millions)
Gross interest expense		$	1,776		$	1,830		$	1,624
Capitalized interest			(19	)		(41	)		(187	)
	Net interest expense	$	1,757		$	1,789		$	1,437
Cash interest paid		$	1,839		$	1,829		$	1,260

Note 9: Restructuring and Merger-related Charges

        The restructuring reserve balances discussed below are included in our 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 December 31, 2003 and 2002, the amounts included as current liabilities are $147 million and $127 million and the long-term portions are $377 million and $420 million, respectively.

2003 Activities

        During the year ended December 31, 2003, as part of an ongoing effort of evaluating costs of operations, we reviewed employee levels in certain areas of our business. As a result, we established a

107

reserve and recorded a charge to our 2003 consolidated statement of operations for $131 million to cover the costs associated with these actions, as more fully described below.

        An analysis of activity associated with the 2003 restructuring reserve, as well as prior period restructuring and Merger reserves, is as follows:

				Year Ended December 31, 2003
		January 1, 2003 Balance								December 31, 2003 Balance
				Provisions		Utilization		Reversals
		(Dollars in millions)
2003 restructuring plan		$	—	$	131	$	14	$	—	$	117
2002 restructuring plan			164		—		62		6		96
2001 restructuring plan			361		—		38		12		311
Merger-related			22		—		22		—		—
	Total	$	547	$	131	$	136	$	18	$	524

        The 2003 restructuring reserve included charges of $107 million for severance benefits pursuant to established severance policies and $24 million for real estate exit obligations, which primarily include estimated future net payments on abandoned operating leases. We identified approximately 2,300 employees from various functional areas to be terminated as part of this restructuring. Through December 31, 2003, approximately 1,600 of the planned reductions had been completed. The remaining 700 reductions are expected to occur over the next year, with severance payments generally extending from two to 12 months. The real estate exit costs include the net present value of rental payments due over the remaining term of the leases, net of estimated sublease rentals and estimated costs to terminate the leases. Through December 31, 2003 we had utilized $12 million of the 2003 restructuring reserves for severance payments and $2 million for real estate exit costs.

        SFAS No. 146 establishes standards for reporting information about restructuring activities. Effective for exit or disposal activities initiated after December 31, 2002, SFAS No. 146 requires disclosure of the total amount of costs expected to be incurred in connection with these activities for each reportable segment. The 2003 restructuring provisions for our wireline, wireless and other segments are $87 million, $0 million and $44 million, respectively.

        During the year ended December 31, 2003, we utilized $43 million of the 2002 restructuring plan (as described below) reserves for employee severance payments and $19 million for real estate exit-related payments. We had identified 4,500 employees to be terminated as part of the 2002 restructuring plan and as of December 31, 2003, these employee reductions were complete. As the 2002 plan was complete and actual costs were less than originally estimated, we reversed $6 million of the restructuring reserve during the year ended December 31, 2003. This reversal included $4 million of severance reserves and $2 million of real estate exit reserves. The remaining restructuring reserve for the 2002 restructuring plan includes $7 million for severance payments, which we expect to utilize during 2004, and $89 million for real estate exit costs. The real estate exit costs are to be utilized over the next several years.

        During the year ended December 31, 2003, we utilized $38 million of the 2001 restructuring plan reserves. This utilization includes $4 million for severance-related costs and $34 million for real estate exit costs. As the employee severance-related activities related to the 2001 restructuring plan were complete and as actual costs were less than originally estimated, the remaining severance-related reserve of $11 million as well as $1 million of over-accrued real estate exit-related reserves were

108

reversed during the year ended December 31, 2003. The remaining restructuring reserve for 2001 of $311 million represents remaining real estate exit obligations, which will be utilized over the next several years.

        During the year ended December 31, 2003, we utilized the remaining Merger-related reserve established during 2000.

2002 Activities

        During the year ended December 31, 2002, in response to shortfalls in employee reductions as part of the 2001 restructuring plan (as discussed below) and due to continued declines in our revenue and general economic conditions, we identified employee reductions in various functional areas and permanently exited a number of operating and administrative facilities. In connection with that restructuring, we established a restructuring reserve and recorded a charge of $299 million to our 2002 consolidated statement of operations to cover the costs associated with these actions, as more fully described below.

				Year Ended December 31, 2002
		January 1, 2002 Balance								December 31, 2002 Balance
				Provisions		Utilization		Reversals
		(Dollars in millions)
2002 restructuring plan		$	—	$	299	$	135	$	—	$	164
2001 restructuring plan			790		71		365		135		361
Merger-related			111		—		36		53		22
	Total	$	901	$	370	$	536	$	188	$	547

        The 2002 restructuring reserve included $179 million related to severance and $120 million for real estate exit costs. During the year ended December 31, 2002, $123 million of the reserve was utilized for severance benefits and $12 million was utilized for real estate exit costs. Relative to our 2001 plan, $172 million of the reserve was utilized for severance payments and $193 million was utilized for real estate exit costs. Also, during the year ended December 31, 2002, we accrued an additional $71 million for additional 2001 restructuring plan real estate exit costs and reversed $135 million of the 2001 restructuring plan reserves. The 2001 restructuring plan reversal was comprised of $113 million of severance costs and $22 million of over accrued real estate exit costs. The 2001 plan included 10,000 anticipated terminations and as of December 31, 2002, we had terminated 7,000 employees.

        During the year ended December 31, 2002, we utilized $36 million of Merger-related reserves established during 2000, primarily for contractual and legal settlements and reversed $53 million of the Merger-related reserves as the employee reductions and contractual settlements were complete. The remaining Merger-related reserve represents contractual obligations paid in 2003.

2001 Activities

        During the year ended December 31, 2001, we established a reserve and charged to our consolidated statement of operations $825 million for restructuring activities in conjunction with our 2001 restructuring plan. This reserve was comprised of $332 million for severance-related costs and $493 million for real estate exit costs. This reserve was partially offset by a reversal of $9 million of other restructure-related real estate exit costs. During the year ended December 31, 2001, in relation to the Merger as earlier described, we charged to our consolidated statement of operations $321 million,

109

which is comprised of $115 million for additional contractual settlement, legal contingency and other related costs, $132 million for additional severance charges and $74 million for other Merger-related costs, net of reserve reversals. The additional provisions and reversals of Merger-related costs were due to additional Merger-related activities and modifications to previously accrued Merger-related activities.

        The following table outlines our cumulative utilization of the 2003, 2002 and 2001 restructuring and Merger-related plans through December 31, 2003.

		December 31, 2003— Cumulative Utilization
		Severance and Related		Real Estate Exit and Related		Total
		(Dollars in millions)
2003 restructuring plan		$	12	$	2	$	14
2002 restructuring plan			166		31		197
2001 restructuring plan			208		230		438
Merger-related			736		1,013		1,749
	Total cumulative utilization	$	1,122	$	1,276	$	2,398

Note 10: Other Financial Information

Accrued Expenses and Other Current Liabilities

        Accrued expenses and other current liabilities consist of the following:

		December 31,
		2003		2002
		(Dollars in millions)
Accrued interest		$	285	$	402
Employee compensation			543		333
Accrued property and other taxes			392		456
Accrued facilities costs			358		199
Current portion of state regulatory and legal liabilities			196		182
Restructuring and Merger-related reserves			147		127
Other			345		492
	Total accrued expenses and other current liabilities	$	2,266	$	2,191

Other Long-Term Liabilities

        Other long-term liabilities include a deferred credit associated with our November 12, 2003 settlement of the disputes with certain of our insurance carriers related to, among other things, the investigations and securities and derivative actions described in Note 17—Commitments and Contingencies. The settlement involved, among other things, an additional payment by us of $157.5 million, and in return, the insurance carriers paid $350 million into trust. Of the $350 million, $150 million in cash is available for our benefit and has been used in large part to reimburse defense costs incurred by us in connection with these matters. Another $143 million in cash and $57 million in irrevocable letters of credit, totaling $200 million, is set aside to cover losses we may incur and the

110

losses of current and former directors and officers and others who have released the insurance carriers in connection with the settlement. The use and allocation of these proceeds has yet to be resolved between us and individual insureds. We consolidated the trust assets and related deferred credit into our consolidated balance sheet as of December 31, 2003. We have also recorded a reserve in our consolidated financial statements for the estimated minimum liability associated with certain of these matters. We have classified the assets, deferred credit and loss reserve as non-current.

        Other long-term liabilities also includes $221 million related to the termination of our Calpoint LLC ("Calpoint") services agreement. We entered into a services agreement with Calpoint in 2001. In connection with this arrangement, we also agreed to pay monthly services fees directly to the trustee that serves as a paying agent on debt instruments issued by special purpose entities sponsored by Calpoint. This unconditional purchase obligation required us to pay at least 75% of the monthly service fees for the entire term of the agreement, regardless of whether Calpoint provided us service. In September 2003, we terminated our services arrangement with Calpoint. We paid to terminate the services agreement, but will continue to make payments to a trustee related to the unconditional purchase obligation. As a result of this transaction, in September 2003, we recorded a liability of $346 million for the net present value of the remaining obligation which will be paid through 2006. Our total remaining liability related to the Calpoint transaction is $322 million as of December 31, 2003.

Note 11: Employee Benefits

Pension, Post-retirement and Other Post-employment Benefits

        We have a noncontributory defined benefit pension plan (the "Pension Plan") for substantially all management and occupational (union) employees. In addition to this qualified Pension Plan we also operate a non-qualified pension plan for certain highly compensated employees and executives (the "Non-Qualified Pension Plan"). We maintain post-retirement healthcare and life insurance plans that provide medical, dental, vision and life insurance benefits for certain retirees. We also provide post-employment benefits for certain other former employees. As of December 31, 2003 and 2002, shares of our common stock and ownership of our debt accounted for less than 0.5% of the assets held in the pension plans and post-retirement benefit plans.

        Management employees who retain the retiree medical and life benefits and retire after September 6, 2000 will begin paying contributions toward retiree medical and life benefits in 2004. The current collective bargaining agreement for our occupational (union) employees provides that those who retire after December 31, 1990 will begin paying contributions toward retiree medical benefits once they exceed our healthcare cost caps, but no sooner than January 2006.

        We modified the Pension Plan benefits, effective January 1, 2001, for all former U S WEST management employees who did not have 20 years of service by December 31, 2000 or who would not be service pension eligible by December 31, 2003. For employees who did not meet these criteria (the "unprotected group"), no additional years of service will be credited under the defined lump sum formula for years worked after December 31, 2000. These employees' pension benefits will only be adjusted for changes in the employees' future compensation levels. Future benefits for the unprotected group are based on 3% of pay while actively employed plus a return as defined in the Pension Plan. The minimum return an employee can earn on their account in a given year is based upon the Treasury Rate and the employee's account balance at the beginning of the year. All management employees, other than those who remain eligible under the previous formulas, will be eligible to participate in the 3%-of-pay plan.

111

        Effective August 11, 2000, the Pension Plan was amended to provide additional pension benefits to certain plan participants who were involuntarily separated from us between August 11, 2000 and June 30, 2001. The Pension Plan was subsequently amended to provide termination benefits through June 30, 2003. The amount of the benefit is based on pay and years of service. For 2003, 2002 and 2001, the amounts of additional termination benefits paid were $73 million, $226 million and $154 million, respectively. In addition, special termination benefits of $0 million, $3 million and $6 million were paid from the Non-Qualified Pension Plan to certain executives during 2003, 2002 and 2001, respectively.

        Pension and post-retirement health care and life insurance benefits earned by employees during the year, as well as interest on projected benefit obligations, are accrued currently. Prior service costs and credits resulting from changes in plan benefits are amortized over the average remaining service period of the employees expected to receive benefits. Pension and post-retirement costs are recognized over the period in which the employee renders services and becomes eligible to receive benefits as determined using the projected unit credit method.

        Our funding policy is to make contributions with the objective of accumulating sufficient assets to pay all qualified pension benefits when due. No pension funding was required in 2003 or 2002 and as of December 31, 2003 and 2002, the fair value of the assets in the qualified pension trust exceeded the accumulated benefit obligation of the qualified Pension Plan. During 2003, we made contributions of $8 million to the post-retirement healthcare plan; however, we did not contribute to the post-retirement healthcare or life insurance plans in 2002. We expect to contribute approximately $13 million to the post-retirement healthcare plan during 2004.

        The components of the net pension credit, non-qualified pension benefit cost and post-retirement benefit cost are as follows:

		Pension Cost (Credit) Years Ended December 31,									Non-Qualified Pension Cost Years Ended December 31,						Post-retirement Benefit Cost Years Ended December 31,
		2003			2002			2001			2003		2002		2001		2003			2002			2001
		(Dollars in millions)
Service Cost		$	170		$	154		$	187		$	4	$	3	$	2	$	23		$	27		$	29
Interest Cost			601			601			686			3		5		5		389			328			307
Expected return on plan assets			(858	)		(925	)		(1,101	)		—		—		—		(135	)		(191	)		(224	)
Amortization of transition asset			(71	)		(76	)		(79	)		2		2		2		—			—			—
Amortization of prior service cost			—			—			—			—		—		—		(20	)		(20	)		(20	)
Plan settlement			—			11			—			—		2		6		—			—			—
Special termination benefits			—			—			—			—		3		6		—			—			—
Recognized net actuarial (gain) loss			—			—			(53	)		—		2		1		101			(23	)		(91	)
	Net (credit) cost included in current earnings (loss)	$	(158	)	$	(235	)	$	(360	)	$	9	$	17	$	22	$	358		$	121		$	1

        The net pension cost (credit) is allocated between cost of sales and selling, general and administrative expense in the consolidated statements of operations.

        The measurement dates used to determine pension and other postretirement benefit measurements for the plans are December 31, 2003, 2002 and 2001. The actuarial assumptions used to compute the

112

net pension cost (credit), non-qualified pension benefit cost and post-retirement benefit cost are based upon information available as of the beginning of the year, as presented in the following table.

	Pension Cost (Credit)						Non-Qualified Pension Cost						Post-retirement Benefit Cost
	2003		2002		2001		2003		2002		2001		2003		2002		2001
Beginning of the year:
Discount rate	6.75	%	7.25	%	7.75	%	6.75	%	7.25	%	7.75	%	6.75	%	7.25	%	7.75	%
Rate of compensation increase	4.65	%	4.65	%	4.65	%	4.65	%	4.65	%	4.65	%	N/A		N/A		N/A
Expected long-term rate of return on plan assets	9.00	%	9.40	%	9.40	%	N/A		N/A		N/A		9.00	%	9.40	%	9.40	%
Initial healthcare cost trend rate	N/A		N/A		N/A		N/A		N/A		N/A		10.00	%	8.25	%	8.25	%
Ultimate healthcare cost trend rate	N/A		N/A		N/A		N/A		N/A		N/A		5.00	%	5.00	%	5.00	%
Year ultimate trend rate is reached	N/A		N/A		N/A		N/A		N/A		N/A		2013		2007		2007

N/A—not applicable

        Following is an analysis of the change in the projected benefit obligation for the pension, non-qualified pension plans and post-retirement benefit plan obligation for the years ended December 31, 2003 and 2002:

		Pension Plan Years Ended December 31,						Non-Qualified Pension Plan Years Ended December 31,						Post-retirement Benefit Plan Years Ended December 31,
		2003			2002			2003			2002			2003			2002
		(Dollars in millions)
Benefit obligation accrued at beginning of year		$	8,741		$	9,625		$	71		$	70		$	5,708		$	4,700
	Service cost		170			154			4			3			23			27
	Interest cost		601			601			3			5			389			328
	Actuarial loss (gain)		513			(164	)		(18	)		3			378			1,012
	Plan amendments		(40	)		—			—			—			(15	)		—
	Special termination benefits		73			226			—			3			—			—
	Plan settlements		8			—			—			—			—			—
	Business divestitures		(91	)		(88	)		—			—			(24	)		(27	)
	Benefits paid		(1,015	)		(1,613	)		(12	)		(13	)		(383	)		(332	)
Benefit obligation accrued at end of year		$	8,960		$	8,741		$	48		$	71		$	6,076		$	5,708
Accumulated benefit obligation		$	8,470		$	8,129		$	41		$	41		$	6,076		$	5,708

113

        The actuarial assumptions used to compute the funded (unfunded) status for the plans are based upon information available as of the end of the respective year and are as follows:

	Pension Plan				Non-Qualified Pension Plan				Post-retirement Benefit Plan
	2003		2002		2003		2002		2003		2002
End of the year:
Discount rate	6.25	%	6.75	%	6.25	%	6.75	%	6.25	%	6.75	%
Rate of compensation increase	4.65	%	4.65	%	4.65	%	4.65	%	N/A		N/A
Initial healthcare cost trend rate	N/A		N/A		N/A		N/A		10.00	%	10.00	%
Ultimate healthcare cost trend rate	N/A		N/A		N/A		N/A		5.00	%	5.00	%
Year ultimate trend rate is reached	N/A		N/A		N/A		N/A		2014		2013

N/A—not applicable

        Following is an analysis of the change in the fair value of plan assets for the pension, non-qualified pension and post-retirement benefit plans for the years ended December 31, 2003 and 2002:

		Pension Plan Years Ended December 31,						Non-Qualified Pension Plan Years Ended December 31,						Post-retirement Benefit Plan Years Ended December 31,
		2003			2002			2003			2002			2003			2002
		(Dollars in millions)
Fair value of plan assets at beginning of year		$	8,427		$	11,121		$	—		$	—		$	1,565		$	2,045
	Actual gain (loss) on plan assets		1,702			(1,001	)		—			—			333			(191	)
	Net employer contributions		—			—			12			13			144			43
	Business divestitures		(104	)		(80	)		—			—			—			—
	Benefits paid		(1,015	)		(1,613	)		(12	)		(13	)		(383	)		(332	)
Fair value of plan assets at year end		$	9,010		$	8,427		$	—		$	—		$	1,659		$	1,565

        The following table presents the funded status of the pension, non-qualified pension and post-retirement benefit plans as of December 31, 2003 and 2002:

		Pension Plan Years Ended December 31,						Non-Qualified Pension Plan Years Ended December 31,						Post-retirement Benefit Plan Years Ended December 31,
		2003			2002			2003			2002			2003			2002
		(Dollars in millions)
Funded (unfunded) status		$	50		$	(314	)	$	(48	)	$	(71	)	$	(4,417	)	$	(4,143	)
Unrecognized net actuarial loss			1,142			1,460			6			24			1,312			1,257
Unamortized prior service cost (benefit)			(40	)		—			1			1			(113	)		(118	)
Unrecognized transition (asset) obligation			(63	)		(134	)		7			9			—			—
	Prepaid benefit (accrued cost)	$	1,089		$	1,012		$	(34	)	$	(37	)	$	(3,218	)	$	(3,004	)

114

        The weighted-average asset allocations for the benefit plans at December 31, 2003 and 2002, by asset category are as follows:

		Pension Plan Years Ended December 31,				Non-Qualified Pension Plan Years Ended December 31,		Post-Retirement Benefit Plan Years Ended December 31,
		2003		2002		2003	2002	2003		2002
Equity Securities		63	%	59	%	N/A	N/A	59	%	57	%
Debt Securities		24	%	29	%	N/A	N/A	35	%	38	%
Real Estate		6	%	6	%	N/A	N/A	1	%	1	%
Other		7	%	6	%	N/A	N/A	5	%	4	%
	Total	100	%	100	%	N/A	N/A	100	%	100	%

N/A—not applicable

        The investment objective for the benefit plans is to provide an attractive risk-adjusted return that will ensure the payment of benefits and protect against the risk of substantial investment losses. The asset mix, or the percent of the trust held in each asset class, is the primary determinant of the total fund return. The asset mix takes into account benefit obligations, risk/return requirements and the outlook for the financial markets. As of year-end, the actual asset mix is within the 50%-70% policy allocation range for equities and 30%-50% for non-equities (debt, real estate and other).

        In computing the pension and post-retirement benefit costs, we must make numerous assumptions about such things as employee mortality and turnover, expected salary and wage increases, discount rate, expected rate of return on plan assets and expected future cost increases. Two of these items generally have the most significant impact on the level of cost: (1) discount rate and (2) expected rate of return on plan assets.

        Annually, we set our discount rate primarily based upon the yields on high-quality fixed-income investments available at the measurement date and expected to be available during the period to maturity of the pension benefits. In making this determination we consider, among other things, the yields on Moody's AA corporate bonds as of year-end.

        The expected rate of return on plan assets is the long-term rate of return we expect to earn on trust assets. The rate of return is determined by the investment composition of the plan assets and the long-term risk and return forecast for each asset category. The forecasts for each asset class are generated using historical information as well as an analysis of current and expected market conditions. The expected risk and return characteristics for each asset class are reviewed annually and revised, as necessary, to reflect changes in the financial markets.

        To compute the expected return on Pension Plan assets, we apply an expected rate of return to the market-related asset value of the Pension Plan assets. The market-related asset value is a computed value that recognizes changes in fair value of plan assets over a period of time, not to exceed five years. This method has the effect of smoothing market volatility that may be experienced from year to year. As a result, our expected return is not significantly impacted by the actual return on Pension Plan assets experienced in any given year.

115

        A change of one percent in the assumed initial healthcare cost trend rate would have had the following effects in 2003:

	One Percent Change
	Increase		Decrease
	(Dollars in millions)
Effect on the aggregate of the service and interest cost components of net periodic post-retirement benefit cost (statement of operations)	$	27	$	(23	)
Effect on accumulated post-retirement benefit obligation (balance sheet)	$	459	$	(389	)

        On January 5, 2001, we announced an agreement with our major unions, the Communications Workers of America ("CWA") and the International Brotherhood of Electrical Workers ("IBEW"), to extend the existing union contracts for another two years, through August 2003. The extensions include a 3.5% wage increase in 2001, a 5% wage increase in 2002, a 6% pension increase in 2002 and a 10% pension increase in 2003. The appropriate changes were reflected in the pension and post-retirement benefit computations. In August 2003, we reached an agreement with the CWA and IBEW on a new two-year contract expiring on August 13, 2005. The new agreements did not have a material impact on our pension and post-retirement benefit computations.

Medicare Prescription Drug, Improvement and Modernization Act of 2003

        In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 ("the Act") became law in the United States. The Act introduces a prescription drug benefit under Medicare as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to the Medicare benefit. In accordance with FASB Staff Position No. 106-1. "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003", we elected to defer recognition of the effects of the Act in any measures of the benefit obligation or cost. Specific authoritative guidance on the accounting for the federal subsidy is pending and that guidance, when issued, could require us to change previously reported information. Currently, we do not believe we will need to amend our plan to benefit from the Act. The measurement date used to determine pension and other postretirement benefit measures for the pension plan and the postretirement benefit plan is December 31.

Other Benefit Plans

401(k) Plan

        We currently sponsor a defined contribution benefit plan covering substantially all management and occupational (union) employees. Under this plan, employees may contribute a percentage of their annual compensation to the plan up to certain maximums, as defined by the plan and by the Internal Revenue Service ("IRS"). Currently, we match a percentage of employee contributions in our common stock. As a result of our failure to file in a timely manner various of our quarterly reports on Form 10-Q and our failure to file our Annual Report on Form 10-K, beginning in August 2002, we temporarily suspended the investment of employee contributions in our common stock. During the fourth quarter of 2003, we filed with the SEC our 2003 quarterly reports on Form 10-Q and our annual report on Form 10-K for the year ended December 31, 2002, (the "2002 Form 10-K"). We then

116

restored the discretionary investment of employee contributions in our common stock beginning in February 2004. As of December 31, 2003, the assets of the plan included approximately 88 million shares of our common stock as a result of the combination of our employer match and participant directed contributions. We made cash contributions in connection with our 401(k) plan of $8 million and $83 million for 2002 and 2001, respectively. In addition, we made contributions of our common stock of $76 million and $77 million in 2003 and 2002, respectively.

Deferred Compensation Plans

        We sponsor several deferred compensation plans for a group that includes certain of our current and former management and highly compensated employees, certain of which are open to new participants. Participants in these plans may, at their discretion, invest their deferred compensation in various investment choices including our common stock.

        Our deferred compensation obligation is included in our consolidated balance sheet in other long-term liabilities. Shares of our common stock owned inside the plans are treated as treasury stock and are included at cost in the consolidated balance sheet in treasury stock. Investment earnings, administrative expenses, changes in investment values and increases or decreases in the deferred compensation liability resulting from changes in the investment values are recorded in our consolidated statement of operations. The deferred compensation liability as of December 31, 2003 and 2002 was $24 million and $36 million, respectively. The value of the deferred compensation plans' assets were $33 million and $41 million at December 31, 2003 and 2002, respectively and are included in other long-term assets in the consolidated balance sheets.

Deferred Compensation Plan for Non-employee Directors

        We sponsor a deferred directors' fees plan for members of our current and former Board. Under this plan, directors may, at their discretion, elect to defer all or any portion of the directors' fees for the upcoming year for services they perform as directors of the Company. In the plan for the members of the current Board, we match 50% of the fees that are contributed to the plan. Participants in the plan are fully vested in both their deferred fees and the matching contribution. Participants can suspend or change the amount of deferred fees at their discretion.

        Quarterly, we credit the director's account with "phantom units", which are held in a notational account. Each phantom unit represents a value equivalent to one share of our common stock and is subject to adjustment for cash dividends payable to our stockholders as well as stock dividends and splits, consolidations and the like that affect shares of our common stock outstanding. The account is ultimately distributed at the time elected by the director or at the end of the plan and is paid, at the director's election, either in: (1) a lump-sum payment; (2) annual cash installments over periods up to 10 years; or (3) some other form selected by our Executive Vice President—Human Resources (or his or her designee). A change in our stock price of one dollar would not result in a significant expense impact to our consolidated financial statements.

        Investment earnings, administrative expenses, changes in investment values and increases or decreases in the deferred compensation liability resulting from changes in the value of our common stock are recorded in our consolidated statement of operations. The deferred compensation liability as of December 31, 2003, for the plan was $6 million and the expense associated with this plan was not significant during 2003. However, depending on the extent of appreciation in the value of our common stock, expenses incurred under this plan could become significant in subsequent years.

117

Note 12: Stock Incentive Plans

Stock Options

        Prior to the Merger, U S WEST adopted stock plans under which it could grant awards in the form of stock options, stock appreciation rights, restricted stock and phantom units, as well as substitute stock options and restricted stock awards. In connection with the Merger, all U S WEST options outstanding prior to the Merger announcement became fully vested. Options granted after that date and prior to June 30, 2000 continue to vest according to the vesting requirements in the plan.

        On June 23, 1997, pre-Merger Qwest adopted the Equity Incentive Plan. This plan was most recently amended and restated on October 4, 2000 and permits the grant of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, stock units and other stock grants. The maximum number of shares of our common stock that may be issued under the Equity Incentive Plan at any time pursuant to awards is equal to 10% of the aggregate number of our common shares issued and outstanding reduced by the aggregate number of options and other awards then outstanding under the Equity Incentive Plan or otherwise. Issued and outstanding shares are determined as of the close of trading on the New York Stock Exchange on the preceding trading day. Since the Merger, all option grants have been issued from this plan. As of December 31, 2003, the maximum number of shares of our common stock available for issuance under the Equity Incentive Plan was 177 million, with 126 million shares underlying outstanding options and 51 million shares available for issuance pursuant to new awards.

        As a result of our failure to file with the SEC various of our quarterly reports on Form 10-Q and our failure to file our 2002 Form 10-K, beginning in August 2002, we temporarily suspended the ability of option holders to exercise their vested options. During the fourth quarter of 2003, we filed with the SEC our 2003 quarterly reports on Form 10-Q and our 2002 Form 10-K. We then restored the ability of option holders to exercise vested options beginning in January 2004.

        The Compensation and Human Resources Committee of our Board, or its delegate, approves the exercise price for each option. Stock options generally have an exercise price that is at least equal to the fair market value of the common stock on the date the stock option is granted, subject to certain restrictions. Stock option awards generally vest in equal increments over the vesting period of the granted option (generally three to five years). Unless otherwise provided by the Compensation and Human Resources Committee, our Equity Incentive Plan provides that, on a "change in control", all awards granted under the Equity Incentive Plan will vest immediately. Options that we granted to our employees from June 1999 to September 2002 typically provide for accelerated vesting if the optionee is terminated without cause following a change in control. Since September 2002, options that we grant to our executive officers (vice president level and above) typically provide for accelerated vesting and an extended exercise period upon a change of control and options that we grant to all other employees typically provide for accelerated vesting if the optionee is terminated without cause following a change in control. Options granted in 2003, 2002 and 2001 have ten-year terms.

        On October 31, 2001, we announced a voluntary stock option exchange offer. Under the terms of the offer and subject to certain restrictions, our employees could exchange all or a portion of their stock options that had an exercise price of $35 or more. The offer was available only to our full-time, non-union employees (excluding 15 senior executives), for options granted by us or U S WEST. Options surrendered by employees were cancelled on November 30, 2001 and new options were issued on June 3, 2002 on a share-for-share basis. On June 3, 2002, 9,655 employees received 26 million stock

118

options in the exchange. The exercise price on the new options is $5.10, the closing market price on the day the new options were granted. The new options vest ratably over a four-year period commencing on June 3, 2002.

        Our stock incentive plans are accounted for using the intrinsic-value method under which no compensation expense is recognized for options granted to employees with a strike price that equals or exceeds the value of the underlying security on the measurement date. In certain instances, the strike price has been established prior to the measurement date, in which event any excess of the stock price on the measurement date over the exercise price is recorded as deferred compensation and amortized over the service period during which the stock option award vests, in accordance with FIN No. 28. We recorded stock-based compensation expense of $6 million, $18 million and $34 million in the years ended December 31, 2003, 2002 and 2001, respectively.

        Summarized below is the activity of our stock option plans for the three years ended December 31, 2003:

		Number of Shares		Weighted Average Exercise Price
		(in thousands)
Outstanding January 1, 2001		133,610		$	32.32
	Granted	33,015			24.21
	Exercised	(12,280	)		20.62
	Tendered for cancellation	(29,129	)		43.45
	Canceled or expired	(19,722	)		37.92
Outstanding December 31, 2001		105,494			27.01
	Granted	49,701			4.66
	Exercised	(34	)		5.90
	Canceled or expired	(42,841	)		19.97
Outstanding December 31, 2002		112,320			19.81
	Granted	31,549			3.60
	Exercised	—			—
	Canceled or expired	(18,145	)		18.13
Outstanding December 31, 2003		125,724		$	15.98

        Options to purchase 54.0 million, 49.3 million and 45.4 million shares of Qwest common stock at weighted-average exercise prices of $25.38, $28.62 and $28.40 were exercisable at December 31, 2003, 2002 and 2001, respectively.

119

        The outstanding options at December 31, 2003 have the following characteristics (shares in thousands):

		Outstanding Options				Exercisable Options
Range of Exercise Price		Number Outstanding	Weighted Average Remaining Life (Years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$  0.01 - $  5.00		35,379	9.10	$	3.36	1,997	$	2.69
$  5.01 - $10.00		30,501	7.65		5.22	6,602		5.25
$10.01 - $20.00		15,090	4.84		16.58	11,422		16.83
$20.01 - $30.00		18,484	4.97		27.33	11,268		26.74
$30.01 - $40.00		16,381	5.87		33.41	14,269		33.30
$40.01 - $60.00		9,889	6.30		43.34	8,467		42.79
	Total	125,724	6.99	$	15.98	54,025	$	25.38

        As required by SFAS No. 123 and SFAS No. 148, "Accounting for Stock-based Compensation—Transition and Disclosure—an Amendment of FASB Statement No. 123", we have disclosed in Note 2—Summary of Significant Accounting Policies the pro forma amounts as if the fair value method of accounting had been used. These pro forma amounts may not be representative of the effects on 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.

        Following are the weighted-average assumptions used with the Black-Scholes option-pricing model to estimate the fair value of options granted in 2003, 2002 and 2001:

	Years Ended December 31,
	2003			2002			2001
Risk-free interest rate		2.7	%		4.1	%		4.1	%
Expected dividend yield		0.0	%		0.0	%		0.2	%
Expected option life (years)		4.4			4.4			4.4
Expected stock price volatility		88.0	%		57.6	%		41.4	%
Weighted-average grant date fair value	$	2.37		$	2.25		$	9.40

        Two of the more significant assumptions used in this estimate are the expected option life and the expected volatility, both of which we estimated based on historical information.

Restricted Stock

        In 2003, we did not grant any shares of restricted stock under the Equity Incentive Plan. In 2002 and 2001, we granted 400,000 and 650,000 shares of restricted stock under the Equity Incentive Plan with weighted-average grant date fair values of $6.85 and $16.81 per share, respectively. Restricted stock awards granted in 2002 and 2001 generally vest ratably over four years. Compensation expense of $2 million, $13 million and $6 million was recognized for restricted stock grants in 2003, 2002 and 2001, respectively.

120

Growth Share Plan

        Pre-Merger Qwest had a Growth Share Plan for certain of its employees and directors. A "Growth Share" was a unit of value based on the increase in value of our common stock over a specified measurement period. Upon vesting, settlement of each Growth Share was made in our common stock. All Growth Share grants were made based on a beginning value of our common stock that was greater than or equal to the fair value of our common stock at the grant date.

        Due to the change in control as a result of the Merger, all Growth Shares were vested at June 30, 2000. In the first quarter of 2001, we issued 356,723 shares of our common stock in settlement of all remaining vested Growth Shares.

Employee Stock Purchase Plan

        We have an Employee Stock Purchase Plan ("ESPP") that we are authorized to issue shares of our common stock to eligible employees. As a result of our failure to file with the SEC various of our quarterly reports on Form 10-Q and our failure to file our 2002 Form 10-K, we temporarily suspended the ESPP in August 2002. In December 2003, an amended and restated ESPP was approved by the shareholders. Under the amended plan, we are authorized to issue 27 million shares of our common stock to eligible employees. Enrollment in the amended ESPP plan began in January 2004, with the first distribution of stock scheduled to occur during the first week of March 2004. Under the terms of the ESPP, eligible employees may authorize payroll deductions of up to 15% of their base compensation, as defined, to purchase our common stock at a price of 85% of the fair market value of our common stock on the last trading day of the month in which our common stock is purchased. No shares were purchased under this plan in the year ended December 31, 2003 due to the suspension; however, 3,680,443 and 1,761,470 shares were purchased under this plan at weighted-average purchase prices of $4.12 and $21.24 per share, respectively, during the years ended December 31, 2002 and 2001, respectively. In accordance with APB No. 25, we do not recognize compensation expense for the difference between the employees' purchase price and the fair market value of the stock.

Note 13: Stockholders' Equity

Common Stock ($0.01 par value)

        We are authorized to issue up to 5.0 billion shares of common stock, par value $0.01 per share. As of December 31, 2003 and 2002, there were 1.770 billion and 1.714 billion shares issued and 1.770 billion and 1.699 billion shares outstanding, respectively.

Preferred Stock ($1.00 par value)

        Under our charter, our Board has the authority, without stockholder approval, to (1) create one or more classes or series within a class of preferred stock, (2) issue shares of preferred stock in such class or series up to the maximum number of shares of the relevant class or series of preferred stock authorized and (3) determine the preferences, rights, privileges and restrictions of any such class or series, including the dividend rights, voting rights, the rights and terms of redemption, the rights and terms of conversion, liquidation preferences, the number of shares constituting any such class or series and the designation of such class or series. One of the effects of authorized but unissued and unreserved shares of capital stock may be to render more difficult or discourage an attempt by a potential acquirer to obtain control of us by means of a merger, tender offer, proxy contest or

121

otherwise and thereby protect the continuity of our management. The issuance of such shares of capital stock may have the effect of delaying, deferring or preventing a change in control of us without any further action by our stockholders. We have no present intention to adopt a stockholder rights plan, but could do so without stockholder approval at any future time.

        As of December 31, 2003, 2002 and 2001, there were 200 million shares of preferred stock authorized but no shares issued or outstanding.

Treasury Stock

BellSouth Repurchase

        In January 2001, we repurchased 22.22 million shares of our common stock at fair value from BellSouth Corporation ("BellSouth") for $1.0 billion in cash. As part of this transaction, we entered into an agreement with BellSouth in January 2001 under which BellSouth agreed to purchase services valued at $250 million from us over a five-year period (the "2001 Agreement"). The 2001 Agreement included provisions that allowed for termination of the arrangement prior to satisfaction of the entire purchase commitment. The 2001 Agreement also provided that BellSouth could make payments for the services in our common stock based upon values as specified in the 2001 Agreement. This provision in the 2001 Agreement represented a written put option. For accounting purposes the written put option vests as we provide services pursuant to the 2001 Agreement. Based on services performed, the value of put options vested in 2001 was $38 million, which was recorded in our consolidated statement of operations as a reduction in revenue and an increase in additional paid-in capital in our consolidated statement of stockholders' (deficit) equity.

        During 2001, BellSouth acquired services valued at approximately $92 million related to the 2001 Agreement. We recognized net revenue for such services of approximately $54 million. BellSouth paid for these services by remitting cash throughout the year of $18 million and, on December 10, 2001, tendering 1.2 million shares of our common stock. The fair value of the tendered shares at December 10, 2001 of $15 million was recorded in treasury stock. The $43 million difference between (i) the fair value of the shares at December 10, 2001 and (ii) the value of $58 million assigned to the shares under the 2001 Agreement was recorded as a reduction to additional paid-in capital. The unpaid balance of $16 million was recorded in accounts receivable. At December 31, 2001, we reclassified $16 million from stockholders' equity to share repurchase commitment, a temporary equity classification in our consolidated balance sheet, to reflect the value of receivables that could be satisfied by BellSouth delivering shares of our common stock.

        During the first quarter of 2002, we received approximately 278,000 shares of our common stock valued at $13 million from BellSouth in partial satisfaction of the $16 million accounts receivable outstanding at December 31, 2001. In addition, in accordance with the 2001 Agreement, we used $12 million of the $18 million in cash received from certain BellSouth affiliates to purchase approximately 253,000 shares of our common stock. The fair value of the stock tendered in the first quarter of 2002 of $5 million was recorded in treasury stock. The $20 million difference between (i) the fair value of the shares and (ii) the value assigned to the shares in the 2001 Agreement of $25 million was recorded as a reduction to additional paid-in capital.

        The 2001 Agreement was cancelled as of January 16, 2002. At that time, we entered into a second agreement with BellSouth under which BellSouth committed to purchase from us $350 million in services payable in cash over a four-year period. In consideration for terminating the 2001 Agreement,

122

we gave BellSouth a non-cash credit of $71 million that we have included in our consolidated balance sheet as a deferred sales discount. The deferred sales discount will reduce revenue from BellSouth proportionately as we provide services under the new agreement. We reduced our revenue by $17 million in 2003 and 2002 related to the amortization of the deferred sales discount.

Debt for Equity Exchange

        During the first quarter of 2002, we issued 9.88 million shares of our common stock in exchange for certain outstanding debt. During 2003, the remaining treasury shares related to the BellSouth repurchase were issued in connection with certain debt-for-stock exchanges. The weighted-average cost of treasury shares issued was $42.53 per share.

        During 2003, we issued 52.5 million shares of our common stock with an aggregate value of $202 million in exchange for certain outstanding debt.

Deferred Compensation—Rabbi Trust

        Rabbi trusts established in 2000 for two of our deferred compensation plans held 327,000 and 387,000 shares of our common stock with a cost of $15 million and $18 million at December 31, 2003 and 2002, respectively. Our shares held by the Rabbi trusts are accounted for as treasury stock, which are considered outstanding for legal purposes.

Other Comprehensive (Loss) Income

        Other comprehensive (loss) income in the consolidated statement of stockholders' (deficit) equity includes the following components:

		Years Ended December 31,
		2003			2002			2001
		(Dollars in millions)
Unrealized gains on available-for-sale marketable securities, net of reclassification adjustments		$	3		$	36		$	33
Foreign currency translation (losses) gains			(4	)		40			(33	)
Income tax (provision) benefit related to items of other comprehensive income			(1	)		(30	)		—
	Other comprehensive (loss) income	$	(2	)	$	46		$	—

        Embedded in net unrealized gains and losses on available-for-sale marketable securities are reclassification adjustments. Reclassification adjustments are comprised of amounts that have been removed from other comprehensive income (loss) in the consolidated statement of stockholders' deficit

123

and recognized in income or loss from operations in our consolidated statements of operations during the periods cited below:

		Years Ended December 31,
		2003			2002			2001
		(Dollars in millions)
Reversal of unrealized net gains on investments sold during the period		$	3		$	39		$	19
Other-than-temporary gains charged to income or loss			—			—			44
Reversal of foreign currency translation gain			—			40			—
Income tax expense related to items reclassified into income or loss			(1	)		(31	)		(24	)
	Total reclassification adjustments	$	2		$	48		$	39

Earnings Per Share

        The weighted-average number of shares used in computing basic and diluted income (loss) per share for the years ended December 31, 2003, 2002 and 2001 was 1.739 billion, 1.682 billion and 1.661 billion, respectively. For the years ended December 31, 2003, 2002 and 2001, the effect of approximately 126 million, 112 million and 105 million, respectively of outstanding stock options were excluded from the calculation of diluted income (loss) per share because the effect was anti-dilutive.

Dividends

        We did not declare any dividends during 2003 and 2002. We declared and paid dividends of $0.05 per share of common stock during 2001.

Note 14: Income Taxes

        The components of the income tax benefit from continuing operations are as follows:

		Years Ended December 31,
		2003			2002			2001
		(Dollars in millions)
Current tax (benefit) provision:
	Federal	$	—		$	(239	)	$	(492	)
	State and local		6			6			—
			6			(233	)		(492	)
Deferred tax (benefit) provision:
	Federal		(607	)		(3,299	)		(569	)
	State and local		(113	)		(642	)		(184	)
	Change in valuation allowance		195			1,677			—
			(525	)		(2,264	)		(753	)
Income tax benefit		$	(519	)	$	(2,497	)	$	(1,245	)

124

        The effective tax rate for our continuing operations differs from the statutory tax rate as follows:

		Years Ended December 31,
		2003		2002		2001
		(in percent)
Federal statutory income tax rate		35.0	%	35.0	%	35.0	%
State income taxes—net of federal effect		3.8		2.1		1.6
Non-deductible KPNQwest investment write down and losses		—		(1.5	)	(16.7	)
Non-deductible goodwill impairment and amortization		—		(14.8	)	(3.8	)
Other		0.1		(0.1	)	0.8
Change in valuation allowance, state and federal		(10.6	)	(8.3	)	—
	Effective income tax rate	28.3	%	12.4	%	16.9	%

        The components of the deferred tax assets and liabilities are as follows:

		December 31,
		2003			2002
		(Dollars in millions)
Net operating loss carryforwards		$	1,615		$	2,028
Post-retirement benefits and pensions			822			737
State deferred taxes-net of federal effect			281			372
Property, plant and equipment			—			164
Other			648			496
			3,366			3,797
Valuation allowance on deferred tax assets			(1,872	)		(1,677	)
	Net deferred tax assets		1,494			2,120
Property, plant and equipment			(805	)		—
State deferred taxes-net of federal effect			(126	)		(80	)
Other			(525	)		(744	)
	Total deferred tax liabilities		(1,456	)		(824	)
	Net deferred tax assets	$	38		$	1,296

        We received $67 million, $272 million and $574 million in net income tax refunds in 2003, 2002 and 2001, respectively.

        As of December 31, 2003, we had a net operating loss carryforward of $4.6 billion that will expire between 2004 and 2023. Unused net operating losses generated by pre-Merger Qwest are subject to special rules in the Internal Revenue Code ("IRC"). IRC Section 382 limits the amount of income that may be offset each year by unused net operating losses arising prior to a merger. The annual limitations are based upon the value of the acquired company at the time of the Merger multiplied by the federal long-term tax-exempt interest rate in effect at that date. Any unused limitation may be carried forward and added to the next year's limitations. We do not expect this limitation to impact Qwest's ability to utilize its net operating losses against future taxable income.

125

        Prior to the purchase of an additional equity interest in KPNQwest in November 2001, our investment in KPNQwest was deemed a foreign corporate joint venture whose basis difference was exempt from the recording of a deferred tax liability. At the end of 2001, the remaining unrecorded deferred tax liability associated with that exempt basis difference was $320 million. In 2002, the remaining book investment in KPNQwest was written off resulting in a $124 million recognized deferred tax asset. We also own a foreign subsidiary with a deductible temporary basis difference for which a $19 million deferred tax asset has not been recorded because the basis difference is essentially permanent in duration and it is not apparent that it will be deducted in the foreseeable future.

        In the second quarter of 2002, we recorded a non-cash charge of $1.677 billion, to establish a valuation allowance against the 2002 net federal and state deferred tax assets. In 2003, we charged an additional $195 million to maintain the valuation allowance at a level sufficient to reduce our 2003 deferred tax assets to an amount we believe is recoverable. The valuation allowance is determined in accordance with the provisions of SFAS No. 109, which requires an assessment of both negative and positive evidence when measuring the need for a valuation allowance.

        We had unamortized investment tax credits of $97 million and $104 million as of December 31, 2003 and 2002, respectively, included in other long-term liabilities on our consolidated balance sheets and as discussed in Note 2—Summary of Significant Accounting Policies. These investment tax credits are amortized over the lives of the related assets. At the end of 2003 we also have $62 million ($38 million net of federal income tax) of state investment tax credit carryforwards that will expire between 2010 and 2016, if not utilized.

Note 15: Segment Information

        Our three segments are (1) wireline, (2) wireless and (3) other services. Until September 2003, we operated a fourth segment, our directory publishing business which, as described in Note 6—Assets Held for Sale including Discontinued Operations, has been classified as discontinued operations and accordingly is not presented in our segment results below. Our chief operating decision maker ("CODM"), regularly reviews the results of operations at a segment level to evaluate the performance of each segment and allocate capital resources based on segment income as defined below.

        Segment income consists of each segment's revenue and direct expenses. Segment revenue is based on the types of products and services offered as described below. Segment expenses include employee and service-related costs, facility costs, network expenses and non-employee related costs such as customer support, collections and marketing. We manage indirect administrative services costs such as finance, information technology, real estate and legal centrally; consequently, these costs are allocated to the other services segments. Our network infrastructure is designed to be scalable and flexible to handle multiple products and services. As a result, we do not allocate network infrastructure costs, which include all engineering expense, design, repair and maintenance costs and all third-party facilities costs, to individual products. We manage depreciation, amortization, interest expense, interest income and other income (expense) on a total company basis. As a result, these charges are not allocated to any segment.

        SFAS No. 146 establishes standards for reporting information about restructuring activities. Effective for exit or disposal activities initiated after December 31, 2002, SFAS No. 146 requires disclosure of the total amount of costs expected to be incurred in connection with these activities for each reportable segment. We do not include restructuring costs in the segment results which are reviewed by our CODM. As a result, we have excluded restructuring costs from our presentation below.

126

For additional information on restructuring costs by segment, see Note 9—Restructuring and Merger-related Charges.

        Our wireline segment includes revenue from the provision of voice services and data and Internet services. Voice services consist of local voice services (such as basic local exchange services), long-distance voice services (such as IntraLATA long-distance services and InterLATA long-distance services) and other voice services (such as operator services, public telephone service, enhanced voice services, CPE and collocation services). Voice services revenue is also generated on a wholesale basis from network transport and billing services, wholesale long-distance service revenue (included in long-distance services revenue) and wholesale access revenue (included in local voice services revenue). Data and Internet services include data services (such as traditional private lines, wholesale private lines, frame relay, asynchronous transfer mode and related CPE) and Internet services (such as DSL, dedicated Internet access ("DIA"), virtual private network ("VPN"), Internet dial access, web hosting, professional services and related CPE). Revenue from optical capacity transactions are also included in revenue from data services. Depending on the product or service purchased, a customer may pay an up-front fee, a monthly fee, a usage charge or a combination of these fees and charges.

        Our wireless services are provided through our wholly owned subsidiary, Qwest Wireless. In August 2003, Qwest Wireless entered into a services agreement with a subsidiary of Sprint that allows us to resell Sprint wireless services, including access to Sprint's nationwide PCS wireless network, to consumer and business customers, primarily within our local service area. We began offering these Sprint services under our brand name in March 2004. Through Qwest Wireless, we continue to operate a PCS wireless network that serves select markets within our local service area, including Denver, Seattle, Phoenix, Minneapolis, Portland, Salt Lake City and other smaller markets. Our wireless customers who are currently being serviced through our proprietary wireless network will be transitioned onto Sprint's network over time.

        Our other services segment consists of revenue and expenses from other operating segments and functional departments that do not meet quantitative threshold requirements. Other services revenue is predominately derived from subleases of some of our unused real estate assets, such as space in our office buildings, warehouses and other properties. Our other services segment expenses include unallocated corporate expenses for functions such as finance, information technology, real estate, legal, marketing services and human resources, which we centrally manage.

        Other than as already described herein, the accounting principles used are the same as those used in our consolidated financial statements. The revenue shown below for each segment is derived from transactions with external customers. Internally, we do not separately track the total assets of our wireline or other segments. As such, total asset information for the three segments shown below is not presented.

127

        Segment information for the three years ended December 31, 2003 is summarized as follows:

			Years Ended December 31,
			2003			2002			2001
			(Dollars in millions)
Operating revenues:
	Wireline		$	13,650		$	14,635		$	15,803
	Wireless			594			694			688
	Other services			44			42			39
		Total operating revenue	$	14,288		$	15,371		$	16,530
Operating expenses:
	Wireline		$	7,840		$	8,130		$	8,996
	Wireless			349			507			751
	Other services			2,843			2,614			2,383
		Total segment expenses	$	11,032		$	11,251		$	12,130
Segment income (loss):
	Wireline		$	5,810		$	6,505		$	6,807
	Wireless			245			187			(63	)
	Other services			(2,799	)		(2,572	)		(2,344	)
		Total segment income	$	3,256		$	4,120		$	4,400
Capital expenditures:
	Wireline		$	1,560		$	1,833		$	7,146
	Wireless			13			55			310
	Other services			554			903			967
		Total capital expenditures		2,127			2,791			8,423
	Non-cash investing activities			(39	)		(27	)		(381	)
		Total cash capital expenditures	$	2,088		$	2,764		$	8,042

128

        The following table reconciles segment operating income to net loss for each of the years ended December 31, 2003, 2002 and 2001:

		Years Ended December 31,
		2003			2002			2001
		(Dollars in millions)
Segment income		$	3,256		$	4,120		$	4,400
	Depreciation		(2,739	)		(3,268	)		(3,704	)
	Goodwill and other intangible assets amortization		(428	)		(579	)		(1,660	)
	Goodwill impairment charge		—			(8,483	)		—
	Asset impairment charges		(230	)		(10,525	)		(251	)
	Restructuring and other charges		(113	)		(235	)		(816	)
	Merger-related (charges) credits		—			53			(321	)
	Total other expense—net		(1,578	)		(1,198	)		(5,010	)
	Income tax benefit		519			2,497			1,245
	Income and gain from sale of discontinued operations		2,619			1,950			490
	Cumulative effect of accounting change		206			(22,800	)		24
Net income (loss)		$	1,512		$	(38,468	)	$	(5,603	)

        Set forth below is revenue information for the years ended December 31, 2003, 2002 and 2001 for revenue derived from external customers for our products and services.

		Years Ended December 31,
		2003		2002		2001
		(Dollars in millions)
Operating revenues:
	Wireline voice services	$	9,859	$	10,838	$	11,897
	Wireline data and Internet services		3,791		3,797		3,906
	Wireless services		594		694		688
	Other services		44		42		39
Total operating revenues		$	14,288	$	15,371	$	16,530

        We provide a variety of telecommunications services on a national and international basis to global and national businesses, small businesses, governmental agencies and residential customers. It is impractical for us to provide revenue information about geographic areas.

        We do not have any single major customer that provides more than ten percent of the total of our revenues derived from external customers.

Note 16: Related Party Transactions

        As discussed in Note 7—Investments, pre-Merger Qwest and ADMI, a subsidiary of Anschutz Company, formed QDM in October 1999. At inception, pre-Merger Qwest and ADMI each owned 50% equity and voting interest in QDM. In June 2000, pre-Merger Qwest acquired an additional 25% interest in QDM directly from ADMI. Following this transaction, pre-Merger Qwest owned a 75% economic interest and 50% voting interest in QDM and ADMI owned the remaining 25% economic interest and 50% voting interest. During 2002 and 2001, in connection with the operation and

129

subsequent shutdown of QDM's business, ADMI and we made several loans to QDM generally in accordance with our respective economic interests in QDM. Neither ADMI or us made any loans to QDM during 2003. As of December 31, 2003, the aggregate principal balance and accrued interest outstanding on loans to QDM from ADMI and us was $4.4 million and $12.3 million, respectively. All outstanding balances on loans we made to QDM have been written off as of December 31, 2002.

        Also in October 1999, pre-Merger Qwest entered into a long-term Master Services Agreement with QDM under which QDM agreed to purchase approximately $119 million of telecommunication services through October 2008 and we agreed to extend credit to QDM for the purpose of making payments to us for the telecommunications services provided. Each October, QDM was required to pay an amount equal to the difference between certain specified annual commitment levels and the amount of services actually purchased under the Master Services Agreement at that time. In October 2001, we agreed to terminate the Master Services Agreement and release QDM from its obligation under such agreement to acquire telecommunications services from us. At the same time, QDM agreed to forgive the $84.8 million that we owed on the promissory note related to the original capital contribution from pre-Merger Qwest. Prior to the termination of the Master Services Agreement, we advanced QDM $3.8 million which was the amount owed to us under the agreement for accrued telecommunications services. QDM used that advance to pay us the amount owed, including interest on amounts past due. Concurrent with termination of the Master Services Agreement, QDM repaid us the $3.8 million advance under the Master Services Agreement with interest. QDM made purchases of $700,000 and $3.3 million during 2002 and 2001, respectively.

        In October 1999, we agreed to purchase certain telephony-related assets and all of the stock of Precision Systems, Inc., a telecommunications solutions provider, from ADMI in exchange for a promissory note in the amount of $34 million. The note bears interest at 6% annually with semi-annual interest payments and annual principal payments due through 2008. During 2003, 2002 and 2001, respectively, we paid $4.0 million, $0 and $2.0 million in interest and $3.4 million, $0 and $340,000 in principal, on the note. At December 31, 2003, the outstanding accrued interest on the note was approximately $350,000 and the outstanding principal balance on the note was $30.3 million.

        As discussed in Note 7—Investments, pre-Merger Qwest and KPN formed a joint venture, KPNQwest, in April 1999. In November 2001, we purchased approximately 14 million additional shares and Anschutz Company purchased approximately six million shares of KPNQwest common stock from KPN for $4.58 per share. Anschutz Company's stock purchase was at our request and with the approval of the disinterested members of our Board. After giving effect to this transaction, we held approximately 47.5% of KPNQwest's outstanding shares.

        During 2002 and 2001, we entered into several transactions with KPNQwest for the purchase and sale of optical capacity assets and the provisioning of services, including but not limited to private line, web hosting, Internet protocol transit and DIA. We made purchases of these assets and services from KPNQwest totaling $169 million and $218 million in 2002 and 2001, respectively. We recognized revenue on products and services sold to KPNQwest in the amount of $12 million and $18 million in 2002 and 2001, respectively. Pricing for these services was based on what we believed to be the fair market value at the time the transactions were consummated. Some of KPNQwest's sales to us were in accordance with the distribution agreement with KPNQwest, whereby we were, in certain circumstances, the exclusive distributor of certain of KPNQwest's services in North America. As of December 31, 2001, we had a remaining commitment to purchase up to 81 million Euros (or $72 million based on a conversion rate at December 31, 2001) worth of network capacity through 2002

130

from KPNQwest. In connection with KPNQwest's bankruptcy, as discussed in Note 7—Investments, the purchase commitment terminated during June 2002.

        In March 2002, KPNQwest acquired certain assets of Global TeleSystems Europe B.V. ("GTS") for convertible notes of KPNQwest with a face amount of 211 million Euros ($186 million based on a conversion rate at March 18, 2002), among other consideration, under an agreement entered into in October 2001. As disclosed to our Board, a subsidiary of Anschutz Company had become a creditor of GTS in 2001. We understand that in 2002 and 2001, as part of a group of GTS bondholders, an Anschutz Company subsidiary also provided interim financing to GTS. In connection with the consummation of KPNQwest's acquisition of the GTS assets, the Anschutz Company subsidiary received a distribution of notes with a face amount of approximately 37 million Euros ($33 million based on a conversion rate at March 18, 2002). We understand that the allocation of notes to the Anschutz Company subsidiary was determined by a creditor committee for GTS which did not include any representatives of Anschutz Company and neither the KPNQwest notes nor the shares referenced above, both of which are still held by Anschutz Company, have any current value.

Note 17: Commitments and Contingencies

Commitments

Future Contractual Obligations

        The following table summarizes our future commitments, excluding repayments of debt, as of December 31, 2003:

			Payments Due by Period
			2004		2005		2006		2007		2008		Thereafter		Total
			(Dollars in millions)
Capital leases and other			$	47	$	28	$	5	$	5	$	5	$	34	$	124
Operating leases				325		313		268		247		219		1,534		2,906
Purchase commitment obligations:
	Telecommunications commitments			706		517		158		65		60		10		1,516
	IRU operating and maintenance obligations			54		52		52		52		52		776		1,038
	Advertising and promotion			53		50		32		26		26		219		406
	Services			282		259		234		199		196		254		1,424
		Total commitments	$	1,467	$	1,219	$	749	$	594	$	558	$	2,827	$	7,414

Capital Leases

        We lease certain office facilities and equipment under various capital lease arrangements. Assets acquired through capital leases during 2003, 2002 and 2001 were $36 million, $36 million and $1.215 billion, respectively. Assets recorded under capitalized lease agreements included in property, plant and equipment consisted of $183 million, $391 million and $2.011 billion of cost less accumulated amortization of $80 million, $191 million and $362 million at December 31, 2003, 2002 and 2001, respectively.

131

        The future minimum payments under capital leases as of December 31, 2003 are reconciled to our balance sheet as follows:

	Capital Lease Obligations
	(Dollars in millions)
Total minimum payments	$	124
Less: amount representing interest		(26	)
Present value of minimum payments		98
Less: current portion		(35	)
Long-term portion	$	63

Operating Leases

        Certain office facilities, real estate and equipment are subject to operating leases. We also have easement (or right-of-way) agreements with railroads and public transportation authorities that are accounted for as operating leases. Rent expense under these operating leases was $479 million, $504 million and $696 million during 2003, 2002 and 2001, respectively, net of sublease rentals of $33 million, $25 million and $21 million respectively. Minimum operating lease payments have not been reduced by minimum sublease rentals of $173 million due in the future under non-cancelable subleases. In 2003, 2002 and 2001, contingent rentals representing the difference between the fixed and variable rental payments were not material.

Purchase Commitment Obligations

        We have purchase commitments with competitive local exchange carriers ("CLECs"), interexchange carriers ("IXCs") and third-party vendors that require us to make payments to purchase network services, capacity and telecommunications equipment. These commitments require us to maintain minimum monthly and/or annual billings, in certain cases based on usage.

        Also included in the telecommunications commitments are purchase commitments that we entered into with KMC Telecom Holdings, Inc. ("KMC") in connection with sales of equipment at the time we entered into facilities management service agreements with them. In connection with the KMC arrangements, we also agreed to pay the monthly service fees directly to a trustee that serves as paying agent on debt instruments issued by special purpose entities sponsored by KMC. These unconditional purchase obligations require us to pay at least 75% of the monthly service fees for the entire term of the agreements, regardless of whether KMC provides us services. Our remaining unconditional purchase obligations under these agreements were $418 million as of December 31, 2003.

        A portion of our fiber optic broadband network includes facilities that were purchased or are leased from third parties in the form of IRUs. These agreements are generally 20 to 25 years in length and generally include the requirement for us to pay operating and maintenance fees to a third party for the term of the agreement.

        We have various long-term, non-cancelable purchase commitments for advertising and promotion services, including advertising and marketing at sports arenas, and other venues and events. We have service-related commitments with various vendors for data processing, technical and software support.

132

Future payments under certain services contracts will vary depending on our actual usage. In the table above, we estimated payments for these service contracts based on the level of services we expect to use.

Letters of Credit and Guarantees

        We maintain letter of credit arrangements with various financial institutions for up to $67 million. At December 31, 2003, the amount of letters of credit outstanding was $67 million and we had outstanding guarantees of approximately $2 million.

Contingencies

Investigations, Securities Actions and Derivative Actions

        The investigations and securities actions described below present material and significant risks to us. The size, scope and nature of the recent restatements of our consolidated financial statements for fiscal 2001 and 2000 affect the risks presented by these matters, and we can give no assurance as to the impacts on our financial results or financial condition that may ultimately result from these matters. As we have previously disclosed, we have engaged in preliminary discussions for purposes of resolving certain of these matters. Our most recent preliminary discussions and further analysis have led us to conclude that a reserve should be provided. Accordingly, we have recorded a reserve in our consolidated financial statements for the estimated minimum liability associated with these matters. However, the ultimate outcomes of these matters are still uncertain and there is a significant possibility that the amount of loss we ultimately incur could be substantially more than the reserve we have provided.

        At this time, we believe that it is probable that all but $100 million of the recorded reserve will be recoverable out of a portion of the insurance proceeds, consisting of cash and letters of credit, which were placed in a trust to cover our losses and the losses of individual insureds. However, the use and allocation of these proceeds has yet to be resolved between us and individual insureds. See Note 10—Other Financial Information.

        The securities actions are in a preliminary phase and we continue to defend against these matters vigorously. None of the plaintiffs or the defendants in the securities actions has advanced evidence concerning possible recoverable damages and we have not yet conducted discovery on these and other relevant issues. We are currently unable to provide any estimate as to the timing of the resolution of any of these matters. Any settlement of or judgment in one or more of these matters in excess of our recorded reserves could be significant, and we can give no assurance that we will have the resources available to pay any such judgment. In the event of an adverse outcome in one or more of these matters, our ability to meet our debt service obligations and our financial condition could be materially and adversely affected.

Investigations

        On April 3, 2002, the SEC issued an order of investigation that made formal an informal investigation of Qwest initiated on March 8, 2002. The investigation includes, without limitation, inquiry into several specifically identified Qwest accounting practices and transactions and related disclosures that are the subject of the various adjustments and restatements described in our 2002 Form 10-K. The investigation also includes inquiry into disclosure and other issues related to transactions between us

133

and certain of our vendors and certain investments in the securities of those vendors by individuals associated with us.

        On July 9, 2002, we were informed by the U.S. Attorney's Office for the District of Colorado of a criminal investigation of Qwest's business. We believe the U.S. Attorney's Office is investigating various matters that include the subjects of the investigation by the SEC.

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

        We have engaged in discussions with the SEC staff in an effort to resolve the issues raised in the SEC's investigation of us, and we continue to evaluate any possible range of loss. Such discussions are preliminary and we cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. However, settlements typically involve, among other things, the SEC making claims under the federal securities laws in a complaint filed in United States District Court that, for purposes of the settlement, the defendant neither admits nor denies. Were such a settlement to occur, we would expect such claims to address many of the accounting practices and transactions and related disclosures that are the subject of the various restatements we have made as well as additional transactions. In addition, any settlement with the SEC may also involve, among other things, the imposition of disgorgement and a civil penalty, the amounts of which could be substantially in excess of our recorded reserve, and the entry of a court order that would require, among other things, that we and our officers and directors comply with provisions of the federal securities laws as to which there have been allegations of prior violations.

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

        Also, as previously announced in July 2002 by the General Services Administration, ("GSA"), the GSA is conducting a review of all contracts with Qwest for purposes of determining present responsibility. On September 12, 2003, we were informed that the Inspector General of the GSA had referred to the GSA Suspension/Debarment Official the question of whether Qwest and its subsidiaries should be considered for debarment. We have been informed that the basis for the referral was the February 2003 indictment against four former Qwest 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. ("Genuity") in 2000. We are cooperating fully with the GSA and believe that Qwest and its subsidiaries will remain suppliers of the government, although we cannot predict the outcome of this referral.

134

Securities Actions and Derivative Actions

        Since July 27, 2001, 13 putative class action complaints have been filed in federal district court in Colorado against Qwest alleging violations of the federal securities laws. One of those cases has been dismissed. By court order, the remaining actions have been consolidated into a consolidated securities action, which we refer to herein as the "consolidated securities action."

        On August 21, 2002, plaintiffs in the consolidated securities action filed their Fourth Consolidated Amended Class Action Complaint ("Fourth Consolidated Complaint"), which defendants moved to dismiss. On January 13, 2004, the United States District Court for the District of Colorado granted the defendants' motions to dismiss in part and denied them in part. In that order, the court allowed plaintiffs to file a proposed amended complaint seeking to remedy the pleading defects addressed in the court's dismissal order and ordered that discovery, which previously had been stayed during the pendency of the motions to dismiss, proceed regarding the surviving claims. On February 6, 2004, plaintiffs filed a Fifth Consolidated Amended Class Complaint ("Fifth Consolidated Complaint"). The Fifth Consolidated Complaint attempts to expand the putative class period previously alleged in the Fourth Consolidated Complaint, seeks to restore the claims dismissed by the court, including claims against certain individual defendants who were dismissed as defendants by the court's dismissal order, and to add additional individual defendants who have not been named as defendants in plaintiffs' previous complaints. The Fifth Consolidated Complaint also advances allegations related to a number of matters and transactions that were not pleaded in the earlier complaints. The Fifth Consolidated Complaint is purportedly brought on behalf of purchasers of publicly traded securities of Qwest between May 24, 1999 and July 28, 2002, and names as defendants Qwest, Qwest's former Chairman and Chief Executive Officer, Joseph P. Nacchio, Qwest's former Chief Financial Officers, Robin R. Szeliga and Robert S. Woodruff, other of Qwest's former officers and current directors and Arthur Andersen LLP. The Fifth Consolidated Complaint alleges, among other things, that during the putative class period, Qwest and certain of the individual defendants made materially false statements regarding the results of Qwest's operations in violation of section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), that certain of the individual defendants are liable as control persons under section 20(a) of the Exchange Act and that certain of the individual defendants sold some of their shares of Qwest's common stock in violation of section 20(a) of the Exchange Act. The Fifth Consolidated Complaint further alleges that Qwest and certain other defendants violated section 11 of the Securities Act of 1933, as amended, (the "Securities Act") by preparing and disseminating false registration statements and prospectuses for the registration of Qwest common stock to be issued to U S WEST shareholders in connection with the merger of the two companies, and for the exchange of $3 billion of Qwest's notes pursuant to a registration statement dated January 17, 2001, $3.25 billion of Qwest's notes pursuant to a registration statement dated July 12, 2001, and $3.75 billion of Qwest's notes pursuant to a registration statement dated October 30, 2001. Additionally, the Fifth Consolidated Complaint alleges that certain of the individual defendants are liable as control persons under section 15 of the Securities Act by reason of their stock ownership, management positions and/or membership or representation on the Company's Board. The Fifth Consolidated Complaint seeks unspecified compensatory damages and other relief. However, counsel for plaintiffs has indicated that the purported class will seek damages in the tens of billions of dollars.

        Since March 2002, seven putative class action suits were filed in federal district court in Colorado purportedly on behalf of all participants and beneficiaries of the Qwest Savings and Investment Plan and predecessor plans (the "Plan") from March 7, 1999 until the present. By court order, five of these putative class actions have been consolidated and the claims made by the plaintiff in the sixth case were

135

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

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

        On December 10, 2002, the California State Teachers' Retirement System ("CalSTRS"), filed suit against Qwest, certain of Qwest's former officers and certain of Qwest's current directors and several other defendants, including Arthur Andersen LLP and several investment banks, in the Superior Court of the State of California in and for the County of San Francisco. CalSTRS alleges that the defendants engaged in fraudulent conduct that caused CalSTRS to lose in excess of $150 million invested in Qwest's equity and debt securities. The complaint alleges, among other things, that defendants engaged in a scheme to falsely inflate Qwest's revenue and decrease its expenses so that Qwest would appear more successful than it actually was during the period in which CalSTRS purchased and sold Qwest securities. The complaint purported to state causes of action against Qwest for (i) violation of California Corporations Code section 25400 et seq. (securities laws); (ii) violation of California Corporations Code section 17200 et seq. (unfair competition); (iii) fraud, deceit and concealment; and (iv) breach of fiduciary duty. Among other requested relief, CalSTRS sought compensatory, special and

136

punitive damages, restitution, pre-judgment interest and costs. Qwest and the individual defendants filed a demurrer, seeking dismissal of all claims. In response, CalSTRS voluntarily dismissed the unfair competition claim but maintained the balance of the complaint. The court denied the demurrer as to the California securities law and fraud claims, but dismissed the breach of fiduciary duty claim against Qwest with leave to amend. The court also dismissed the claims against Robert S. Woodruff and Robin R. Szeliga on jurisdictional grounds. On or about July 25, 2003, plaintiff filed a First Amended Complaint. The material allegations and the relief sought remain largely the same, but plaintiff no longer alleges claims against Mr. Woodruff and Ms. Szeliga following the court's dismissal of the claims against them. CalSTRS reasserted its claim against Qwest for breach of fiduciary duty as a claim of aiding and abetting breach of fiduciary duty. Qwest filed a second demurrer to that claim and on November 17, 2003, the court dismissed that claim without leave to amend. Discovery is proceeding in the CalSTRS litigation.

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

        On January 10, 2003, the State Universities Retirement System of Illinois ("SURSI"), filed a lawsuit similar to the CalSTRS and New Jersey lawsuits in the Circuit Court of Cook County, Illinois. SURSI filed suit against Qwest, certain of Qwest's former officers and certain current directors and several other defendants, including Arthur Andersen LLP and several investment banks. On October 29, 2003, SURSI filed a second amended complaint which alleges, among other things, that defendants engaged in fraudulent conduct that caused it to lose in excess of $12.5 million invested in Qwest's common stock and debt and equity securities and that defendants engaged in a scheme to falsely inflate Qwest's revenues and decrease its expenses by improper conduct related to transactions with the Arizona School Facilities Board, Genuity, Calpoint, KMC, KPNQwest and Koninklijke KPN, N.V. The second amended complaint purports to state the following causes of action against Qwest: (i) violation of the Illinois Securities Act; (ii) common law fraud; (iii) common law negligent misrepresentation; and (iv) violation of section 11 of the Securities Act. SURSI seeks, among other relief, punitive and exemplary damages, costs, equitable relief, including an injunction to freeze or prevent disposition of the defendants' assets, and disgorgement. All the individual defendants have moved to dismiss the action against them for lack of personal jurisdiction. To date, neither Qwest nor the individual defendants have filed a response to the second amended complaint, and the Illinois' court's schedule does not contemplate that answers or motions to dismiss be filed until after the challenges to jurisdiction have been resolved.

        On October 22, 2001, a purported derivative lawsuit was filed in the United States District Court for the District of Colorado (the "Federal Derivative Litigation"). On February 6, 2004, a third amended complaint was filed in the Federal Derivative Litigation, naming as defendants certain of Qwest's present and former directors and certain former officers and naming Qwest as a nominal

137

defendant. The Federal Derivative Litigation is based upon the allegations made in the consolidated securities action and alleges, among other things, that the defendants breached their fiduciary duties to Qwest by engaging in self-dealing, insider trading, usurpation of corporate opportunities, failing to oversee implementation of securities laws that prohibit insider trading, failing to maintain appropriate financial controls within Qwest, and causing or permitting Qwest to commit alleged securities violations, thus (1) causing Qwest to be sued for such violations and (2) subjecting Qwest to adverse publicity, increasing its cost of raising capital and impairing earnings. The Federal Derivative Litigation has been consolidated with the consolidated securities action. Plaintiff seeks, among other remedies, disgorgement of alleged insider trading profits.

        On August 9, 2002, a purported derivative lawsuit was filed in the Court of Chancery of the State of Delaware. A separate alleged derivative lawsuit was filed in the Court of Chancery of the State of Delaware on or about August 28, 2002. On October 30, 2002, these two alleged derivative lawsuits were consolidated (collectively the "Delaware Derivative Litigation"). The Second Amended Complaint in the Delaware Derivative Litigation was filed on or about January 23, 2003, naming as defendants certain of Qwest's current and former officers and directors and naming Qwest as a nominal defendant. In the Second Amended Complaint, the plaintiffs allege, among other things, that the individual defendants (i) breached their fiduciary duties by allegedly engaging in illegal insider trading in Qwest's stock; (ii) failed to ensure compliance with federal and state disclosure, anti-fraud and insider trading laws within Qwest, resulting in exposure to it; (iii) appropriated corporate opportunities, wasted corporate assets and self-dealt in connection with investments in initial public offering securities through Qwest's investment bankers; and (iv) improperly awarded severance payments to Qwest's former Chief Executive Officer, Mr. Nacchio and Qwest's former Chief Financial Officer, Mr. Woodruff. The plaintiffs seek recovery of incentive compensation allegedly wrongfully paid to certain defendants, all severance payments made to Messrs. Nacchio and Woodruff, disgorgement, contribution and indemnification, repayment of compensation, injunctive relief, and all costs including legal and accounting fees. On March 17, 2003, defendants moved to dismiss the Second Amended Complaint, or, in the alternative, to stay the action. As described below, a proposed settlement of the Delaware Derivative Litigation has been reached.

        On each of March 6, 2002 and November 22, 2002, a purported derivative action was filed in Denver District Court (collectively, the "Colorado Derivative Litigation"). On February 5, 2004, plaintiffs in one of these cases filed an amended complaint naming as defendants certain of Qwest's current and former officers and directors and Anschutz Company, and naming Qwest as a nominal defendant. The two purported derivative actions were consolidated on February 17, 2004. The amended complaint alleges, among other things, that various of the individual defendants breached their legal duties to Qwest by engaging in various kinds of self-dealings, failing to oversee compliance with laws that prohibit insider trading and self-dealing, and causing or permitting Qwest to commit securities laws violations, thereby causing Qwest to be sued for such violations and subjecting Qwest to adverse publicity, increasing its cost of raising capital and impairing earnings.

        Beginning in May 2003, the parties to the Colorado Derivative Litigation and the Delaware Derivative Litigation participated in a series of mediation sessions with former United States District Judge Layn R. Phillips. On November 14, 2003, as a result of this process, the parties agreed in principle upon a settlement of the claims asserted in the Colorado Derivative Litigation and the Delaware Derivative Litigation, subject to approval and execution of formal settlement documents, approval by the Denver District Court and dismissal with prejudice of the Colorado Derivative Litigation, the Delaware Derivative Litigation and the Federal Derivative Litigation. From

138

November 14, 2003 until February 17, 2004, the parties engaged in complex negotiations to resolve the remaining issues concerning the potential settlement. On February 17, 2004, the parties reached a formal Stipulation of Settlement, which was filed with the Denver District Court. The stipulation of settlement provides, among other things, that if approved by the Denver District Court and upon dismissal with prejudice of the Delaware Derivative Litigation and the Federal Derivative Litigation, $25 million of the $200 million from the insurance settlement with certain of our insurance carriers (See Note 10—Other Financial Information) will be designated for the exclusive use of Qwest to pay losses and Qwest will implement a number of corporate governance changes. The Stipulation of Settlement also provides that the Denver District Court may enter awards of attorney's fees and costs to derivative plaintiffs' counsel from the $25 million in amounts not to exceed $7.5 million and $125,000, respectively. On February 17, 2004, the Denver District Court entered a Preliminary Approval Order and scheduled a hearing to take place on June 15, 2004, to consider final approval of the proposed settlement and derivative plaintiffs' counsels' request for an award of fees and costs. Pursuant to the Preliminary Approval Order, Qwest mailed, on February 27, 2004, notice of the proposed settlement and hearing to stockholders of its Common stock as of February 17, 2004.

        On or about February 23, 2004, plaintiff in the Federal Derivative Litigation filed a motion in the United States District Court for the District of Colorado to enjoin further proceedings relating to the proposed settlement of the Colorado Derivative Litigation, or alternatively, to enjoin the enforcement of a provision in the Preliminary Approval Order of the Denver District Court which plaintiffs claims would prevent the Federal Derivative Litigation from being prosecuted pending a final determination of whether the settlement of the Colorado Derivative Litigation shall be approved.

Regulatory Matters

        On February 14, 2002, the Minnesota Department of Commerce filed a formal complaint against us with the Minnesota Public Utilities Commission ("Minnesota Commission") alleging that we, in contravention of federal and state law, failed to file interconnection agreements with the Minnesota Commission relating to certain of our wholesale customers and thereby allegedly discriminated against other CLECs. On November 1, 2002, the Minnesota Commission issued a written order adopting in full a proposal by an administrative law judge that we committed 26 individual violations of federal law by failing to file, as required under section 252 of the Telecommunications Act, 26 distinct provisions found in 12 separate agreements with individual CLECs for regulated services in Minnesota. The order also found that we agreed to provide and did provide to McLeod USA Inc. ("McLeod") and Eschelon Telecom, Inc. ("Eschelon") discounts on regulated wholesale services of up to 10% that were not made available to other CLECs, thereby unlawfully discriminating against them. The order found we also violated state law, that the harm caused by our conduct extended to both customers and competitors, and that the damages to CLECs would amount to several million dollars for Minnesota alone.

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

•

grant a 10% discount off all intrastate Minnesota wholesale services to all CLECs other than Eschelon and McLeod; this discount would be applicable to purchases made by these CLECs during the period beginning on November 15, 2000 and ending on May 15, 2002;

139

•

grant all CLECs other than Eschelon and McLeod monthly credits of $13 to $16 per unbundled network element—platform line (subject to certain offsets) purchased during the months of November 2000 through February 2001;



•

pay all CLECs other than Eschelon and McLeod monthly credits of $2 per access line (subject to certain offsets) purchased during the months of July 2001 through February 2002; and



•

allow CLECs to opt-in to agreements the Minnesota Commission determined should have been publicly filed.

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

        Arizona, Colorado, New Mexico, Washington, Iowa and South Dakota have also initiated formal proceedings regarding our alleged failure to file required agreements in those states. On July 25, 2003, we entered into a settlement with the staff of the Arizona Corporation Commission ("Arizona Commission") to settle this and several other proceedings. The proposed settlement, which must be approved by the Arizona Commission, requires that we provide approximately $21 million in consideration in the form of a voluntary contribution to the Arizona State Treasury, contributions to certain organizations and/or infrastructure investments and refunds in the form of bill credits to CLECs. On December 1, 2003, an administrative law judge issued a recommended decision denying the proposed settlement. The judge also recommended final orders requiring us to pay approximately $11 million in penalties and to issue credits to CLECs for a 24-month period from October 2000 to September 2002 equal to 10% of all sales of wholesale intrastate services sold by us. We filed exceptions to the recommended decisions with the full Arizona Commission. New Mexico has issued an order providing its interpretation of the standard for filing these agreements, identified certain of our contracts as coming within that standard and opened a separate docket to consider further proceedings. Colorado has also opened an investigation into these matters, and on February 27, 2004, the Staff of the Colorado Public Utility Commissions ("PUC") submitted its Initial Comments. The Colorado Staff's Initial Comments recommended that the PUC open a show cause proceeding based upon the Staff's view that Qwest and CLECs had willfully and intentionally violated federal and state law and Commission rules. The Staff also detailed a range of remedies available to the Commission, including but not limited to an assessment of penalties and an obligation to extend credits to CLECs. On June 26, 2003, we received from the Federal Communications Commission ("FCC") a letter of inquiry seeking information about related matters. We submitted our initial response to this inquiry on July 31, 2003. The proceedings and investigations in New Mexico, Colorado and Washington and at the FCC could result in the imposition of fines and other penalties against us that could be material. Iowa and South Dakota have concluded their inquiries resulting in no imposition of penalties or obligations to issue credits to CLECs in those states. 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.

        Illuminet, Inc. ("Illuminet"), a traffic aggregator and several of its customers have filed complaints with regulatory agencies in Idaho, Nebraska, Iowa, North Dakota and New Mexico, alleging that they are entitled to refunds due to our purported improper implementation of tariffs governing certain signaling services we provide in those states. The commissions in Idaho and Nebraska have ruled in favor of Illuminet and awarded it $1.5 million and $4.8 million, respectively. We sought reconsideration

140

in both states, which was denied and subsequently we perfected appeals in both states. The proceedings in the other states and in states where Illuminet has not yet filed complaints could result in agency decisions requiring additional refunds.

        As a part of the approval by the FCC of the Merger, the FCC required us to engage an independent auditor to perform an attestation review of our compliance with our divestiture of in-region InterLATA services and our ongoing compliance with Section 271 of the Telecommunications Act ("Section 271"). In 2001, the FCC began an investigation of our compliance with the divestiture of in-region InterLATA services and our ongoing compliance with Section 271 for the audit years 2000 and 2001. In connection with this investigation, Qwest disclosed certain matters to the FCC that occurred in 2000, 2001, 2002 and 2003. These matters were resolved with the issuance of a consent decree on May 7, 2003, by which the investigation was concluded. As part of the consent decree, Qwest made a voluntary payment to the U.S. Treasury in the amount of $6.5 million and agreed to a compliance plan for certain future activities. Separate from this investigation, Qwest disclosed matters to the FCC in connection with its 2002 compliance audit, including a change in traffic flow related to wholesale transport for operator services traffic and certain toll-free traffic, certain bill mis-labeling for commercial credit card bills and certain billing errors for public telephone services originating in South Dakota and for toll free services. The FCC has not yet instituted an investigation into the latter categories of matters. If it does so, an investigation could result in the imposition of fines and other penalties against us. The FCC has also instituted an investigation into whether we may have impermissibly engaged in the marketing of InterLATA services in Arizona prior to receiving FCC approval of our application to provide such services in that state.

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

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

141

        Several purported class actions relating to the installation of fiber optic cable in certain rights-of-way were filed in various courts against Qwest on behalf of landowners in Alabama, California, Colorado, Georgia, Illinois, Indiana, Kansas, Louisiana, Mississippi, Missouri, North Carolina, Oregon, South Carolina, Tennessee and Texas. Class certification was denied in the Louisiana proceeding and, subsequently, summary judgment was granted in Qwest's favor. A new Louisiana class action complaint has recently been filed. Class certification was also denied in the California proceeding, although plaintiffs have filed a motion for reconsideration. Class certification was granted in the Illinois proceeding. Class certification has not been resolved yet in the other proceedings. The complaints challenge Qwest's right to install its fiber optic cable in railroad rights-of-way and, in Colorado, Illinois and Texas, also challenge Qwest's right to install fiber optic cable in utility and pipeline rights-of-way. In Alabama, the complaint challenges Qwest's right to install fiber optic cable in any right-of-way, including public highways. The complaints allege that the railroads, utilities and pipeline companies own a limited property right-of-way that did not include the right to permit Qwest to install Qwest's fiber optic cable on the plaintiffs' property. The Indiana action purports to be on behalf of a national class of landowners adjacent to railroad rights-of-way over which Qwest's network passes. The Alabama, California, Colorado, Georgia, Kansas, Louisiana, Mississippi, Missouri, North Carolina, Oregon, South Carolina, Tennessee and Texas actions purport to be on behalf of a class of such landowners in those states, respectively. The Illinois action purports to be on behalf of landowners adjacent to railroad rights-of-way over which Qwest's network passes in Illinois, Iowa, Kentucky, Michigan, Minnesota, Nebraska, Ohio and Wisconsin. Plaintiffs in the Illinois action have filed a motion to expand the class to a nationwide class. The complaints seek damages on theories of trespass and unjust enrichment, as well as punitive damages. Together with some of the other telecommunication carrier defendants, in September 2002, Qwest filed a proposed settlement of all these matters (except those in Louisiana) in the United States District Court for the Northern District of Illinois. On July 25, 2003, the court granted preliminary approval of the settlement and entered an order enjoining competing class action claims, except those in Louisiana. The settlement and the court's injunction are opposed by some, but not all, of the plaintiffs' counsel and are on appeal before the Seventh Circuit Court of Appeals. At this time, Qwest cannot determine whether such settlement will be ultimately approved or the final cost of the settlement if it is approved.

        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 alleging that the defendants violated state and federal securities laws and breached their fiduciary duty in connection with an investment by the plaintiff in securities of KPNQwest. Qwest is a defendant in this lawsuit along with Qwest B.V., Joseph Nacchio and John McMaster, the former President and Chief Executive Officer of KPNQwest. The plaintiff trust claims to have lost $10 million in its investment in KPNQwest. On January 27, 2004, the Arizona Superior Court granted Qwest's motion to dismiss the state and federal securities law claims. The claim for breach of fiduciary duty remains pending.

        We have built our International Network outside North America primarily by entering into long-term agreements to acquire optical capacity assets. We have also acquired some capacity from other telecommunications service carriers within North America under similar contracts. Several of the companies from which we have acquired capacity appear to be in financial difficulty or have filed for bankruptcy protection. Bankruptcy courts have wide discretion and could deny us the continued use of the assets under the optical capacity agreements without relieving us of our obligation to make payments or requiring the refund of amounts previously paid. If such an event were to occur, we would be required to write-off the cost of the related optical capacity assets and accrue a loss based on the

142

remaining obligation, if any. We believe that we are taking appropriate actions to protect our investments and maintain ongoing use of the acquired optical capacity assets. At this time, it is too early to determine what effect the bankruptcies will have with respect to the acquired capacity or our ability to use this acquired optical capacity.

        The IRS has proposed a tax adjustment for tax years 1994 through 1996. The principal issue involves our 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 us. The IRS disputes our allocation of the costs between us and third parties for whom we were building similar network assets during the same time period. Similar claims have been asserted against us with respect to 1997 and 1998 and it is possible that claims could be made against us for other periods. We are contesting these claims and do not believe they will be successful. Even if they are, we believe that any significant tax obligations will be substantially offset as a result of available net operating losses and tax sharing arrangements. However, the ultimate outcomes of these matters are uncertain and we can give no assurance as to whether they will have a material effect on our financial results.

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

Intellectual Property

        We frequently receive offers to take licenses for patent and other intellectual rights, including rights held by competitors in the telecommunications industry, in exchange for royalties or other substantial consideration. We also regularly are the subject of allegations that our products or services infringe upon various intellectual property rights, and receive demands that we discontinue the alleged infringement. We normally investigate such offers and allegations and respond appropriately, including defending our self vigorously when appropriate. There can be no assurance that, if one or more of these allegations proved to have merit and involved significant rights, damages or royalties, this would not have a material adverse effect on us. We have provided for certain of the above intellectual property matters in our consolidated financial statements as of December 31, 2003. Although the ultimate resolution of these claims is uncertain, we do not expect any material adverse impacts as a result of the resolution of these matters.

Rights of Way

        We have transferred optical capacity assets on our network primarily to other telecommunications service carriers in the form of IRU transactions involving specific channels on our "lit" network or specific dark fiber strands. These IRUs provide for the exclusive right to use a specified amount of capacity or fiber for a specified period reflecting the estimated useful life of the optical capacity asset, typically 20 years or more. Typically, at or before the end of the IRU term, ownership of the optical capacity asset will have passed to the customer. Our fiber optic broadband network is generally located in real property pursuant to an agreement with the property owner or another person with rights to the property. It is possible that we may lose our rights under one or more of such agreements, due to their termination or their expiration. If we lose any such rights of way and are unable to renew them, we may find it necessary to move or replace the affected portions of the network. However, we do not expect any material adverse impacts as a result of the loss of any such rights.

143

Note 18: Subsequent Events

Contingencies

Debt-related Matters

        On February 5, 2004, Qwest issued a total of $1.775 billion of senior notes which consisted of $750 million in floating rate notes due in 2009 with interest at LIBOR plus 3.50%, $525 million fixed rate notes due in 2011 with an interest rate of 7.25%, and $500 million fixed rate notes due in 2014 with an interest rate of 7.50%. These notes are guaranteed by QCF and QSC. The guarantee by QCF is on a senior unsecured basis and the guarantee by QSC is on a senior subordinated secured basis. The QSC guarantee is secured by a lien on the stock of QC. This collateral also secures other obligations of QSC, but the lien securing the QSC guarantee is (1) junior to the lien securing senior debt secured by the collateral, including the 2004 QSC Credit Facility, and (2) senior to the lien securing the 2007, 2010 and 2014 QSC notes and certain other obligations. Upon the release of the liens securing the 2007, 2010 and 2014 QSC notes and certain other obligations, subject to certain conditions, this collateral will be released and the subordinated provisions will terminate such that the 2009, 2011 and 2014 Qwest notes will be guaranteed on a senior unsecured basis by QSC. The covenant and default terms of these notes include but are not limited to: (i) limitations on incurrence of indebtedness; (ii) limitations on restricted payments; (iii) limitations on dividends and loans and other payment restrictions; (iv) limitations on asset sales or transfers; (v) limitations on transactions with affiliates; (vi) limitations on liens; (vii) limitations on mergers and consolidations and (viii) limitations on business activities. If the notes receive investment grade ratings, most of the covenants with respect to the notes will be subject to suspension or termination. Under the indenture governing the notes, we must repurchase the notes upon certain changes of control. This indenture also contains provisions for cross acceleration relating to any of our other debt obligations and the debt obligations of our restricted subsidiaries in the aggregate in excess of $100 million.

        The net proceeds from the notes were used for general corporate purposes, including repayment of indebtedness. Concurrent with the issuance of the notes, QSC paid off in full the outstanding balance of $750 million and terminated the QSC Credit Facility and QSC also established a new three-year $750 million revolving credit facility, (the "2004 QSC Credit Facility"). If drawn, the 2004 QSC Credit Facility would, at our election, bear interest at a rate of adjusted LIBOR or a base rate, in each case plus an applicable margin. Such margin varies based upon the credit ratings of the facility and is currently 3% for LIBOR based borrowings and 2% for base rate borrowings. The 2004 QSC Credit Facility is guaranteed by Qwest Communications International Inc.

        The 2004 QSC Credit Facility contains financial covenants that (i) require Qwest and its consolidated subsidiaries to maintain a debt-to-Consolidated EBITDA ratio (Consolidated EBITDA as defined in the 2004 QSC Credit Facility is a measure of EBITDA that starts with our net income (loss) and adjusts for taxes, interest and non-cash and certain non-recurring items) of not more than 6.0-to-1.0 and (ii) require QC and its consolidated subsidiaries to maintain a debt-to-consolidated EBITDA ratio of not more than 2.5-to-1.0. These financial covenants will be suspended while the 2004 QSC Credit Facility remains undrawn. The 2004 QSC Credit Facility contains certain other covenants including, but not limited to: (i) limitations on incurrence of indebtedness; (ii) limitations on restricted payments; (iii) limitations on using any proceeds to pay settlements or judgments relating to investigations and securities actions discussed in "Contingencies" in Note 17; (iv) limitations on dividends and other payment restrictions; (v) limitations on mergers, consolidations and asset sales; (vi) limitations on investments; and (vii) limitations on liens. We must pay down the 2004 QSC Credit

144

Facility upon certain changes of control. The 2004 QSC Credit Facility also contains provisions for cross acceleration and cross payment default relating to any other of our debt obligations and the debt obligations of our subsidiaries in the aggregate in excess of $100 million. We have not borrowed against the 2004 QSC Credit Facility. The 2004 QSC Credit Facility is secured by a senior lien on the stock of QC.

        On February 26, 2004, we completed a cash tender offer for the purchase of up to $963 million of aggregate principal amount of QCF's 5.875% notes due in August 2004. We received and accepted tenders of approximately $921 million in total principal amount of the QCF notes for $939 million in cash.

Legal Matters

        On February 9, 2004, Stichting Pensioenfonds ABP ("SPA"), filed suit against us, certain of our current and former directors, officers, and employees, as well as several other defendants, including Arthur Andersen LLP, Citigroup Inc. and various affiliated corporations of Citigroup Inc., in the United States District Court for the District of Colorado. SPA alleges that the defendants engaged in fraudulent conduct that caused SPA to lose more than $100 million related to SPA's investments in Qwest's equity securities purchased between July 5, 2000 and March 11, 2002. The complaint alleges, among other things, that defendants created a false perception of Qwest's revenues and growth prospects. SPA alleges claims against Qwest and certain of the individual defendants for violations of sections 18 and 10(b) of the Exchange Act, and SEC Rule 10b-5, violations of the Colorado Securities Act and common law fraud, misrepresentation and conspiracy. The complaint also contends that certain of the individual defendants are liable as "control persons" because they had the power to cause Qwest to engage in the unlawful conduct alleged by plaintiffs in violation of section 20(a) of the Exchange Act and alleges other claims against defendants other than Qwest. SPA seeks among other things, compensatory and punitive damages, rescission or rescissionary damages, pre-judgment interest, fees and costs.

        On October 4, 2002, a putative class action was filed in the federal district court for the Southern District of New York against Willem Ackermans, the former Executive Vice President and Chief Financial Officer of KPNQwest, in which we were a major shareholder. The complaint alleges, on behalf of certain purchasers of KPNQwest securities, that Ackermans engaged in a fraudulent scheme and deceptive course of business in order to inflate KPNQwest revenue and securities. Ackermans was the only defendant named in the original complaint. On January 9, 2004, plaintiffs filed an amended complaint adding as defendants us, certain of our former executives who were also on the supervisory board of KPNQwest, and others.

Legal Matters (Unaudited)

        On March 8, 2004, Qwest and other defendants filed motions to dismiss the Fifth Consolidated Complaint described in Note 17—Commitments and Contingencies—Securities Actions and Derivative Actions.

        On March 8, 2004, the individual defendants in the Federal Derivative Litigation filed a motion to stay all proceedings in that action pending a determination by the Denver District Court whether to approve the proposed settlement of the derivative claims asserted in the Colorado Derivative Litigation, which would resolve the derivative claims asserted in the Federal Derivative Litigation. See Note 17—Commitments and Contingencies—Securities Actions and Derivative Actions for additional information regarding the Federal Derivative Litigation.

145

Note 19: Quarterly Financial Data (Unaudited)

		Quarterly Financial Data
		First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total
		(Dollars in millions, except per share amounts)
2003
Operating revenue		$	3,624		$	3,596		$	3,570		$	3,498		$	14,288
Operating income (loss)			183			177			(523	)		(91	)		(254	)
Loss from continuing operations*			(120	)		(125	)		(686	)		(382	)		(1,313	)
Net income (loss)			152			(64	)		1,831			(407	)		1,512
Basic and diluted earnings (loss) per share:
	Loss from continuing operations*		(0.07	)		(0.07	)		(0.39	)		(0.22	)		(0.76	)
	Net income (loss)		0.09			(0.04	)		1.05			(0.23	)		0.87
2002
Operating revenue		$	3,983		$	3,911		$	3,772		$	3,705		$	15,371
Operating (loss) income			(94	)		(19,276	)		76			377			(18,917	)
(Loss) income from continuing operations*			(975	)		(17,458	)		(238	)		1,053			(17,618	)
Net (loss) income			(23,650	)		(17,430	)		(123	)		2,735			(38,468	)
Basic and diluted earnings (loss) per share:
	(Loss) income from continuing operations*		(0.59	)		(10.41	)		(0.14	)		0.62			(10.48	)
	Net (loss) income		(14.19	)		(10.39	)		(0.07	)		1.61			(22.87	)

*

Income (loss) from continuing operations is before results from discontinued operations and cumulative effect of changes in accounting principle.

First Quarter 2003

        Included in net income (loss) is after-tax gain of $13 million on the early retirement of debt; an after-tax income of $66 million primarily related to the operation of our directory publishing business that was recorded as income from discontinued operations and an after-tax gain of $206 million resulting from the adoption of SFAS No. 143, relating to the reversal of net removal costs where there was not a legal removal obligation.

Second Quarter 2003

        Included in net income (loss) is after-tax income of $61 million primarily related to the operation of our directory publishing business that was recorded as income from discontinued operations.

Third Quarter 2003

        Included in net income (loss) is an after-tax charge of $140 million for impairment of assets (primarily cell sites, switches, related tools and equipment inventory and certain information technology systems supporting the wireless network); after-tax income of $2.517 billion primarily related to the operation and gain associated with the sale of the remaining part of our directory publishing business that was recorded as income from discontinued operations; an after-tax charge of $241 million resulting

146

from the termination of services arrangements with Calpoint and another service provider and includes an after-tax charge of $23 million for restructuring charges.

Fourth Quarter 2003

        Included in net income (loss) is an after-tax charge of $29 million for restructuring charges and an after-tax charge of $61 million for litigation related losses.

First Quarter 2002

        Included in net income (loss) is an after-tax charge of $614 million for losses and impairment of investment in KPNQwest; after-tax income of $125 million related to the operation of our directory publishing business which was recorded as income from discontinued operations; and an after-tax charge of $22.8 billion relating to the reduction in the carrying value of goodwill recorded as a cumulative effect of adopting SFAS No. 142 effective January 1, 2002.

Second Quarter 2002

        Included in net income (loss) is an after-tax charge of $8.483 billion for impairment under SFAS No. 142 of the entire remaining balance of goodwill; an after-tax charge of $6.429 billion for the impairment of assets (primarily property, plant and equipment) under SFAS No. 144; an after-tax charge of $576 million for losses and impairment of the investment in KPNQwest; a non-cash charge of $1.7 billion to establish a valuation allowance against the 2002 deferred tax assets; and after-tax income of $28 million related to the operation of our directory publishing business which was recorded as income from discontinued operations.

Third Quarter 2002

        Included in net income (loss) is an after-tax charge of $83 million for restructuring charges and after-tax income of $115 million related to the operation of our directory publishing business that was recorded as income from discontinued operations.

Fourth Quarter 2002

        Included in net income (loss) is an after-tax gain of $1.117 billion on the early retirement of debt and after-tax income and gain of $1.682 billion related to the operation and partial sale of our directory publishing services business that was recorded as income and gain from discontinued operations.

147

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

        Prior to May 29, 2002, we had not engaged independent auditors for 2002. Based on the recommendation of the Audit Committee of our Board of Directors, on May 29, 2002 our Board of Directors decided, effective immediately, not to re-engage Arthur Andersen LLP ("Andersen") as our independent auditor.

        Effective May 29, 2002, our Board of Directors engaged KPMG LLP ("KPMG") to serve as our independent auditor for 2002.

        Andersen's reports on our consolidated financial statements for the years ended December 31, 2001 and 2000 did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During the years ended December 31, 2001 and 2000 and through May 29, 2002, there were (1) no disagreements with Andersen on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to Andersen's satisfaction, would have caused it to make reference to the subject matter in connection with its report on our consolidated financial statements, and (2) no reportable events, as listed in Item 304(a)(1)(v) of Regulation S-K.

        During the years ended December 31, 2001 and 2000 and prior to May 29, 2002, we did not consult KPMG with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our consolidated financial statements, or any other matters or reportable events listed in Items 304(a)(2)(i) and (ii) of Regulation S-K.

        Following our decision not to re-engage Andersen and the engagement of KPMG, we decided to revise certain of our previous accounting practices and policies. Prior to making these revisions, we sought Andersen's input and cooperation and notified Andersen of our determinations prior to their public announcement. During August 2002, we received a letter from Andersen, indicating its disagreement with our proposed restatement to revise the accounting for: (1) contemporaneous sales and purchases of optical capacity; (2) optical capacity asset sales and (3) revenue recognition for our directory publishing business. Although we continued to seek Andersen's input following Andersen's letter as we made further determinations about the restatement of these and other issues, we have not responded to the August correspondence from Andersen. Following our notification to Andersen of certain restatement issues we contemplated discussing with the staff of the SEC, during February 2003, we received a second letter from Andersen indicating it had not received a response to its positions, noting Andersen's continued disagreement with our proposed restatement for the items listed above and expressing Andersen's disagreement with the other restatement issues that we had identified. Andersen has not withdrawn its previously issued opinion related to our financial statements for the three years ended December 31, 2001.

ITEM 9A. CONTROLS AND PROCEDURES

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

148

        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 the Company's 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 December 31, 2003. On the basis of this review, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that the Company's disclosure controls and procedures are designed, and are effective, to give reasonable assurance that the information required to be disclosed by the Company in reports that it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to the date we performed our evaluation.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        The information required by Item 10 of this annual report on Form 10-K is incorporated by reference to our 2004 Proxy Statement anticipated to be filed with the Securities and Exchange Commission within 120 days of December 31, 2003 under the headings "Proposal No. 1—Election of Class I Directors", "Executive Officers and Management", "Audit Committee" and "Section 16(a) Beneficial Ownership Reporting Compliance" and to Item 1 of this annual report under the heading "Website Access".

ITEM 11. EXECUTIVE COMPENSATION

        The information required by Item 11 of this annual report on Form 10-K is incorporated by reference to our 2004 Proxy Statement anticipated to be filed with the Securities and Exchange Commission within 120 days of December 31, 2003 under the headings "Director Compensation," "Executive Compensation," "Stock Option Grants," "Option Exercises and Holdings," "Pension Plans," "Employment Contracts and Termination of Employment and Change-In-Control Arrangements" and "Compensation Committee Interlocks and Insider Participation."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

        The information required by Item 12 of this annual report on Form 10-K is incorporated by reference to our 2004 Proxy Statement anticipated to be filed with the Securities and Exchange Commission within 120 days of December 31, 2003 under the heading "Beneficial Ownership of Shares of Common Stock".

Equity Compensation Plan Information

        We currently maintain four compensation plans under which shares of our common stock are authorized for issuance to employees and non-employees: our Equity Incentive Plan; our Employee Stock Purchase Plan; our Nonqualified Employee Stock Purchase Plan and our Equity Compensation Plan for Non-Employee Directors. Our Equity Incentive Plan and Employee Stock Purchase Plan have been approved by our stockholders. Our Nonqualified Employee Stock Purchase Plan and our Equity Compensation Plan for Non-Employee Directors, each of which is described in more detail below, have

149

not been approved by our stockholders. The following table provides information as of December 31, 2003 about outstanding options and shares reserved for future issuance under these plans:

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights(1)	Weighted-average exercise price of outstanding options, warrants and rights(1)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)		(c)
Equity compensation plans approved by security holders	125,724,478	$	15.98	71,140,458	(2)
Equity compensation plans not approved by security holders	—		—	10,083,267	(3)
Total	125,724,478			81,223,725

(1)

Includes 32,913,219 shares issuable upon the exercise of outstanding options we assumed in connection with acquisitions, including the U S WEST merger. The weighted-average exercise price of these options is $29.19. We do not intend to grant any new options under the plans pursuant to which these options were originally granted.

(2)

Includes 50,650,603 shares available for future issuance under our Equity Incentive Plan and 20,489,855 shares available for future issuance under our Employee Stock Purchase Plan.

(3)

Includes 10,000,000 shares available for future issuance under our Nonqualified Employee Stock Purchase Plan and 83,267 shares available for future issuance under our Equity Compensation Plan for Non-Employee Directors.

        In 1997, our Board of Directors adopted an Equity Compensation Plan for Non-Employee Directors, under which directors who are not officers or employees of Qwest may receive shares of our common stock. Under the plan, eligible directors may elect on a quarterly basis to receive any or all of their annual and meeting fees for that quarter in shares of our common stock. With respect to each quarter for which an election is made, the total number of shares granted to the electing director equals the amount of the director's total annual and meeting fees divided by the fair market value of our common stock on the last business day of that quarter. Shares issued under the plan are to be issued as soon as practicable after the end of each quarter.

        In 2002, our Board of Directors adopted a Nonqualified Employee Stock Purchase Plan; however we have not commenced any offers nor issued any shares of our common stock under the plan. If used, the Nonqualified Employee Stock Purchase Plan will provide eligible employees of Qwest with an opportunity to purchase shares of our common stock. The maximum number of shares of common stock that may be purchased under the Nonqualified Employee Stock Purchase Plan is, in the aggregate, 10,000,000. Under the plan, offers to purchase common stock will be made on the first day of each calendar month and last for a period of one calendar month, unless otherwise determined by the Compensation and Human Resources Committee of our Board of Directors. An eligible employee may participate in any offer under the plan by authorizing payroll deductions of up to 15% of his or her base salary and commissions paid per pay period. Amounts withheld will be held for the credit of the participant as part of our general funds and will not accrue interest. On the last day of each calendar month, the entire account balance of a participating employee will be applied to purchase shares of our common stock at a purchase price equal to 85% of the fair market value of the common stock on the last trading day of that month. In no event, however, will an employee be permitted to purchase more than 20,000 shares of common stock through the plan in any single offer. Participants may not transfer shares of common stock purchased under the plan until after the last day of the sixth month following the month in which the shares were purchased. We have the right to terminate or

150

amend the plan at any time. If not previously terminated by our Board of Directors, the plan will terminate on the date as of which participants have purchased a number of shares equal to or greater than the number of shares then subject to the plan.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        The information required by Item 13 of this annual report on Form 10-K is incorporated by reference to our 2004 Proxy Statement anticipated to be filed with the Securities and Exchange Commission within 120 days of December 31, 2003 under the headings "Certain Transactions and Legal Proceedings" and "Compensation Committee Interlocks and Insider Participation."

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

        The information required by Item 14 of this annual report on Form 10-K is incorporated by reference to our 2004 Proxy Statement anticipated to be filed with the Securities and Exchange Commission within 120 days of December 31, 2003 under the heading "Independent Auditor."

151

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)

Documents filed as part of this report:

(1) Independent Auditors' Report
	Financial Statements covered by the Report of Independent Public Accountants:
		Consolidated Statements of Operations for the years ended December 31, 2003, 2002 and 2001
		Consolidated Balance Sheets as of December 31, 2003 and 2002
		Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001
		Consolidated Statements of Stockholders' (Deficit) Equity for the years ended December 31, 2003, 2002 and 2001
		Notes to the Consolidated Financial Statements for the years ended December 31, 2003, 2002 and 2001

(b)

Reports on Form 8-K:

We filed the following reports on Form 8-K during the fourth quarter of 2003:

(1)

On November 19, 2003, we filed a report on Form 8-K announcing our financial results for the third quarter of 2003. Included as exhibits to the Form 8-K were the following financial statements: condensed consolidated statements of operations for the three and nine months ended September 30, 2003 and 2002—as reported; condensed consolidated balance sheets as of September 30, 2003 and December 31, 2002; condensed consolidated statements of cash flows for the nine months ended September 30, 2003 and 2002; and certain selected consolidated financial data.



(2)

On November 19, 2003, we filed a report on Form 8-K announcing that we and our wholly owned subsidiaries, Qwest Capital Funding, Inc. ("QCF") and Qwest Services Corporation ("QSC"), commenced a cash tender offer for up to $2.25 billion aggregate principal amount of our outstanding debt securities.



(3)

On December 8, 2003, we filed a report on Form 8-K stating that we and our wholly owned subsidiaries, QCF and QSC, had increased the size of our offers to purchase specified series of outstanding debt securities for cash from $2.25 billion to $3.0 billion aggregate principal amount of notes and that we had received an amendment on the QSC credit facility in order to facilitate the offer.



(4)

On December 19, 2003, we filed a report on Form 8-K announcing that we signed an agreement to purchase certain assets and associated revenue streams from Allegiance Telecom, Inc.



(5)

On December 23, 2003, we filed a report on Form 8-K announcing that we and our wholly owned subsidiaries, QCF and QSC, successfully completed the purchase of $3 billion of our outstanding debt securities under our cash tender offers, which commenced on November 19, 2003.



(c)

Exhibits required by Item 601 of Regulation S-K:

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

152

Exhibit Number	Description
(2.1)	Agreement and Plan of Merger, dated as of July 18, 1999 between U S WEST, Inc. and Qwest (incorporated by reference to Qwest's Form S-4/A filed on August 13, 1999, File No. 333-81149).
(3.1)	Restated Certificate of Incorporation of Qwest (incorporated by reference to Qwest's Registration Statement on Form S-4/A, filed September 17, 1999, File No. 333-81149).
(3.2)***	Amended and Restated Bylaws of Qwest, adopted as of July 1, 2002.
(4.1)	Indenture, dated as of October 15, 1997, with Bankers Trust Company (including form of Qwest's 9.47% Senior Discount Notes due 2007 and 9.47% Series B Senior Discount Notes due 2007 as an exhibit thereto)(incorporated by reference to exhibit 4.1 of Qwest's Form S-4 as declared effective on January 5, 1998, File No. 333-42847).
(4.2)**	Indenture, dated as of August 28, 1997, with Bankers Trust Company (including form of Qwest's 107/8% Series B Senior Discount Notes due 2007 as an exhibit thereto).
(4.3)**	Indenture, dated as of January 29, 1998, with Bankers Trust Company (including form of Qwest's 8.29% Senior Discount Notes due 2008 and 8.29% Series B Senior Discount Notes due 2008 as an exhibit thereto).
(4.4)	Indenture, dated as of November 4, 1998, with Bankers Trust Company (including form of Qwest's 7.50% Senior Discount Notes due 2008 and 7.50% Series B Senior Discount Notes due 2008 as an exhibit thereto) (incorporated by reference to Qwest's Registration Statement on Form S-4, filed February 2, 1999, File No. 333-71603).
(4.5)	Indenture, dated as of November 27, 1998, with Bankers Trust Company (including form of Qwest's 7.25% Senior Discount Notes due 2008 and 7.25% Series B Senior Discount Notes due 2008 as an exhibit thereto) (incorporated by reference to Qwest's Registration Statement on Form S-4, filed February 2, 1999, File No. 333-71603).
(4.6)	Indenture, dated as of June 23, 1997, between LCI International, Inc. and First Trust National Association, as trustee, providing for the issuance of Senior Debt Securities, including Resolutions of the Pricing Committee of the Board of Directors establishing the terms of the 7.25% Senior Notes due June 15, 2007 (incorporated by reference to LCI's Current Report on Form 8-K, dated June 23, 1997, File No. 001-12683).
(4.7)	Indenture, dated as of June 29, 1998, by and among U S WEST Capital Funding, Inc., U S WEST, Inc., and The First National Bank of Chicago (now known as Bank One Trust Company, N. A.), as Trustee (incorporated by reference to U S WEST's Current Report on Form 8-K, dated November 18, 1998, File No. 1-14087).
(4.8)	First Supplemental Indenture, dated as of June 30, 2000, by and among U S WEST Capital Funding, Inc., U S WEST, Inc., Qwest Communications International Inc., and Bank One Trust Company, as Trustee (incorporated by reference to Qwest's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).
(4.9)	First Supplemental Indenture, dated as of February 16, 2001, to the Indenture, dated as of January 29, 1998, with Bankers Trust Company (including form of Qwest's 8.29% Senior Discount Notes due 2008 and 8.29% Series B Senior Discount Notes due 2008 as an exhibit thereto) (incorporated by reference to Qwest's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001).
(4.10)	First Supplemental Indenture, dated as of February 16, 2001, to the Indenture, dated as of October 15, 1997, with Bankers Trust Company (including form of Qwest's 9.47% Senior Discount Notes due 2007 and 9.47% Series B Senior Discount Notes due 2007 as an exhibit thereto) (incorporated by reference to Qwest's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001).

153

(4.11)	First Supplemental Indenture, dated as of February 16, 2001, to the Indenture, dated as of August 28, 1997, with Bankers Trust Company (including form of Qwest's 107/8% Series B Senior Discount Notes due 2007 as an exhibit thereto) (incorporated by reference to Qwest's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001).
(4.12)	Indenture, dated as of December 26, 2002, between Qwest, Qwest Services Corporation, Qwest Capital Funding, Inc. and Bank One Trust Company, N.A., as Trustee (incorporated by reference to Qwest's Current Report on Form 8-K filed on January 10, 2003, File No. 1-15577).
4.13	First Supplemental Indenture, dated as of December 26, 2002, by and among Qwest, Qwest Services Corporation, Qwest Capital Funding, Inc. and Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company), supplementing the Indenture, dated as of November 4, 1998, with Bankers Trust Company.
4.14	First Supplemental Indenture, dated as of December 26, 2002, by and among Qwest, Qwest Services Corporation, Qwest Capital Funding, Inc. and Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company), supplementing the Indenture, dated as of November 27, 1998, with Bankers Trust Company.
4.15	Second Supplemental Indenture, dated as of December 4, 2003, by and among Qwest, Qwest Services Corporation, Qwest Capital Funding, Inc. and Bank One Trust Company, N.A. (as successor in interest to Bankers Trust Company), supplementing the Indenture, dated as of November 4, 1998, with Bankers Trust Company.
4.16	Second Supplemental Indenture, dated as of December 4, 2003, by and among Qwest, Qwest Services Corporation, Qwest Capital Funding, Inc. and Bank One Trust Company, N.A. (as successor in interest to Bankers Trust Company), supplementing the Indenture, dated as of November 27, 1998, with Bankers Trust Company.
4.17	Indenture, dated as of February 5, 2004, among Qwest, Qwest Services Corporation, Qwest Capital Funding, Inc. and J.P. Morgan Trust Company.
(10.1)	Equity Incentive Plan, as amended (incorporated by reference to Qwest's 2000 Proxy Statement for the Annual Meeting of Stockholders).*
(10.2)	Employee Stock Purchase Plan (incorporated by reference to Qwest's 2003 Proxy Statement for the Annual Meeting of Stockholders).*
(10.3)***	Nonqualified Employee Stock Purchase Plan.*
(10.4)	Deferred Compensation Plan (incorporated by reference to Qwest's Annual Report on Form 10-K for the year ended December 31, 1998, File No. 000-22609).*
(10.5)**	Equity Compensation Plan for Non-Employee Directors.*
(10.6)	Deferred Compensation Plan for Nonemployee Directors (incorporated by reference to Qwest's Annual Report on Form 10-K for the year ended December 31, 2000).*
(10.7)	Qwest Savings & Investment Plan, as amended and restated (incorporated by reference to Qwest's Form S-8 filed on January 15, 2004, File No. 333-11923).*
(10.8)	Registration Rights Agreement, dated as of April 18, 1999, with Anschutz Company and Anschutz Family Investment Company LLC (incorporated by reference to Qwest's Current Report on Form 8-K/A, filed April 28, 1999, File No. 000-22609).
(10.9)	Common Stock Purchase Agreement, dated as of April 19, 1999, with BellSouth Enterprises, Inc. (incorporated by reference to Qwest's Current Report on Form 8-K/A, filed April 28, 1999, File No. 000-22609).
(10.10)	Securities Purchase Agreement, dated January 16, 2001, with BellSouth Corporation (incorporated by reference to Qwest's Annual Report on Form 10-K for the year ended December 31, 2000).

154

(10.11)	Employee Matters Agreement between MediaOne Group and U S WEST, dated June 5, 1998 (incorporated by reference to U S WEST's Current Report on Form 8-K/A, dated June 26, 1998, File No. 1-14087).
(10.12)	Tax Sharing Agreement between MediaOne Group and U S WEST, dated June 5, 1998 (incorporated by reference to U S WEST's Current Report on Form 8-K/A, dated June 26, 1998, File No. 1-14087).
(10.13)	Purchase Agreement, dated July 3, 2000, among Qwest, Qwest Capital Funding, Inc. and Salomon Smith Barney Inc. (incorporated by reference to Qwest's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).
(10.14)	Purchase Agreement, dated August 16, 2000, among Qwest, Qwest Capital Funding, Inc., Salomon Smith Barney Inc. and Lehman Brothers Inc., as Representatives of the several initial purchasers listed therein (incorporated by reference to Qwest's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).
(10.15)	Purchase Agreement, dated February 7, 2001, among Qwest, Qwest Capital Funding, Inc., Banc of America Securities LLC and Chase Securities Inc. as Representatives of the several initial purchasers listed therein (incorporated by reference to Qwest's Annual Report on Form 10-K for the year ended December 31, 2000).
(10.16)	Purchase Agreement, dated July 25, 2001, among Qwest, Qwest Capital Funding, Inc., Lehman Brothers Inc. and Merrill Lynch & Co., Inc., as Representatives of the several initial purchasers listed therein (incorporated by reference to Qwest's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001).
(10.17)	Registration Rights Agreement, dated July 30, 2001, among Qwest, Qwest Capital Funding, Inc., Lehman Brothers Inc. and Merrill Lynch & Co., Inc., as Representatives of the several initial purchasers listed therein (incorporated by reference to Qwest's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001).
(10.18)	Registration Rights Agreement, dated as of December 26, 2002, among Qwest, Qwest Services Corporation, Qwest Capital Funding, Inc. and Bank One Trust Company, N.A., as Trustee (incorporated by reference to Qwest's Current Report on Form 8-K, dated January 10, 2003, File No. 1-15577).
(10.19)	Purchase Agreement, dated as of August 19, 2002, between Qwest, Qwest Service Corporation, Qwest Dex, Inc. and Dex Holdings LLC (incorporated by reference to Qwest's Current Report on Form 8-K, dated August 22, 2002, File No. 1-15577).
(10.20)	Purchase Agreement, dated as of August 19, 2002, between Qwest, Qwest Service Corporation, Qwest Dex, Inc. and Dex Holdings LLC (incorporated by reference to Qwest's Current Report on Form 8-K, dated August 22, 2002, File No. 1-15577).
(10.21)	Second Amended and Restated Credit Agreement, dated as of August 30, 2002, by and among Qwest, Qwest Services Corporation, Qwest Dex Holdings, Inc., Qwest Dex, Inc., the Banks listed therein and Bank of America, N.A., as Agent (incorporated by reference to Qwest's Current Report on Form 8-K, dated September 5, 2002, File No. 1-15577).
(10.22)	Term Loan Agreement, dated as of August 30, 2002, by and among Qwest Services Corporation, Qwest Dex Holdings, Inc., Qwest Dex, Inc., the Lenders listed therein and Bank of America, N.A., as Agent (incorporated by reference to Qwest's Current Report on Form 8-K, dated September 5, 2002, File No. 1-15577).
(10.23)	Security and Pledge Agreement, dated as of August 30, 2002, by and among Qwest Services Corporation, Qwest Dex Holdings, Inc., Qwest Dex, Inc. and Bank of America, N.A., as Agent (incorporated by reference to Qwest's Current Report on Form 8-K, dated September 5, 2002, File No. 1-15577).

155

(10.24)	Amendment No. 1, dated as of November 6, 2002, to Second Amended and Restated Credit Agreement dated as of August 30, 2002, by and among Qwest, Qwest Services Corporation, Qwest Dex Holdings, Inc., Qwest Dex, Inc., the Banks listed therein and Bank of America, N.A., as Agent (incorporated by reference to Qwest's Current Report on Form 8-K, dated November 26, 2002, File No. 1-15577).
(10.25)	Term Loan Agreement, dated as of June 9, 2003, by and among Qwest Corporation, the Lenders listed therein, and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, as sole book-runner, joint lead arranger and syndication agent, and Credit Suisse First Boston, acting through its Cayman Islands branch as joint lead arranger and administrative agent, and Deutsche Bank Trust Company Americas, as documentation agent and Deutsche Bank Securities, Inc. as arranger (incorporated by reference to Qwest's Current Report on Form 8-K, dated June 10, 2003, File No. 1-15577).
(10.26)	Amendment No. 2 to Credit Agreement and Amendment No. 1 to Security and Pledge Agreement, dated as of December 5, 2003, by and among Qwest, Qwest Services Corporation, Qwest Dex Holdings, Inc., Qwest Dex, Inc., the Banks listed therein and Bank of America, N.A., as Agent (incorporated by reference to Qwest's Current Report on Form 8-K, dated December 8, 2003, File No. 1-15577).
10.27	Purchase Agreement, dated January 30, 2004, by and among Qwest, Qwest Services Corporation, Qwest Capital Funding, Inc. and the Initial Purchasers listed therein.
10.28	Registration Rights Agreement, dated February 5, 2004, among Qwest, Qwest Services Corporation, Qwest Capital Funding, Inc. and the Initial Purchasers listed therein.
10.29	Credit Agreement, dated as of February 5, 2004, among Qwest, Qwest Services Corporation, the Lenders listed therein and Bank of America, N.A., as Administrative Agent.
(10.30)***	Employment Agreement, dated May 14, 2003, by and between Richard C. Notebaert and Qwest Services Corporation.*
(10.31)	Aircraft Time Sharing Agreement, dated November 11, 2003, by and between Qwest Business Resources, Inc. and Richard C. Notebaert (incorporated by reference to Qwest's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003).
(10.32)***	Employment Agreement, dated May 14, 2003, by and between Oren G. Shaffer and Qwest Services Corporation.*
(10.33)***	Retention Agreement, dated May 8, 2002, by and between Qwest and Richard N. Baer.*
(10.34)***	Severance Agreement, dated July 21, 2003, by and between Qwest and Richard N. Baer.*
(10.35)***	Severance Agreement, dated July 21, 2003, by and between Qwest and Clifford S. Holtz.*
(10.36)***	Letter Agreement, dated April 19, 2001, by and between Qwest and Annette M. Jacobs.*
(10.37)***	Severance Agreement and General Release, dated September 17, 2003, by and between Qwest and Annette M. Jacobs.*
(10.38)***	Letter Agreement, dated August 20, 2003, by and between Qwest and Paula Kruger.*
(10.39)***	Severance Agreement, dated September 8, 2003, by and between Qwest and Paula Kruger.*
12	Calculation of Ratio of Earnings to Fixed Charges.
(16)	Letter from Arthur Andersen LLP to the Securities and Exchange Commission dated June 11, 2002 (incorporated by reference to Qwest's Current Report on Form 8-K/A, filed June 11, 2002, File No. 1-15577).

156

21	Subsidiaries of Qwest.
23	Consent of KPMG LLP.
24	Power of Attorney.
31.1	Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(

)     Previously filed.

*

Executive Compensation Plans and Arrangements.

**

Incorporated by reference to Qwest's Annual Report on Form 10-K for the year ended December 31, 1997, File No. 000-22609.

***

Incorporated by reference to Qwest's Annual Report on Form 10-K for the year ended December 31, 2002, File No. 001-15577.

157

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Denver, State of Colorado, on March 11, 2004.

QWEST COMMUNICATIONS INTERNATIONAL INC., A DELAWARE CORPORATION
By:	/s/  OREN G. SHAFFER Oren G. Shaffer Vice Chairman and Chief Financial Officer (Principal Financial and Accounting Officer)

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 11th day of March 2004.

Signature	Titles
/s/  RICHARD C. NOTEBAERT Richard C. Notebaert	Director, Chairman and Chief Executive Officer (Principal Executive Officer)
/s/  OREN G. SHAFFER Oren G. Shaffer	Vice Chairman and Chief Financial Officer (Principal Financial and Accounting Officer)
* Philip F. Anschutz	Director
* Linda G. Alvarado	Director
* Craig R. Barrett	Director
* Thomas J. Donohue	Director
* Jordan L. Haines	Director

158

* Cannon Y. Harvey	Director
* Peter S. Hellman	Director
* Vinod Khosla	Director
* Frank P. Popoff	Director
* Craig D. Slater	Director
* W. Thomas Stephens	Director

*By:
/s/  RICHARD C. NOTEBAERT Richard C. Notebaert
As Attorney-In-Fact

159

Independent Auditors' Report

The Board of Directors and Stockholders
Qwest Communications International Inc.:

        Under date of March 2, 2004, we reported on the consolidated balance sheets of Qwest Communications International Inc. and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of operations, stockholders' (deficit) equity, and cash flows for each of the years in the three-year period ended December 31, 2003, as contained in the December 31, 2003, annual report on Form 10-K. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related accompanying consolidated financial statement schedule, Schedule II—Valuation and Qualifying Accounts. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits.

        In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ KPMG LLP

Denver, Colorado
March 2, 2004

S-1

QWEST COMMUNICATIONS INTERNATIONAL INC.

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

(DOLLARS IN MILLIONS)

	Balance at beginning of period		Charged to expense		Deductions		Balance at end of period
Allowance for doubtful accounts:
2003	$	360	$	304	$	384	$	280
2002		402		511		553		360
2001		305		615		518		402

S-2

EX-4.13

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 4.13

QWEST COMMUNICATIONS INTERNATIONAL INC.,
Issuer

QWEST SERVICES CORPORATION,
Guarantor

QWEST CAPITAL FUNDING, INC.
Guarantor

And

DEUTSCHE BANK TRUST COMPANY AMERICAS,
Trustee

FIRST SUPPLEMENTAL INDENTURE

Dated as of December 26, 2002

7.50% Senior Notes Due 2008

FIRST SUPPLEMENTAL INDENTURE

        This FIRST SUPPLEMENTAL INDENTURE, dated as of December 26, 2002 (the "Supplemental Indenture"), is by and between:

        QWEST COMMUNICATION INTERNATIONAL INC., a corporation duly organized and existing under the laws of the State of Delaware (the "Company");

        QWEST SERVICES CORPORATION, a corporation duly organized and existing under the laws of the State of Colorado ("QSC");

        QWEST CAPITAL FUNDING, INC., a corporation duly organized and existing under the laws of the State of Colorado, ("QCF"); and

        DEUTSCHE BANK TRUST COMPANY AMERICAS (formerly known as Bankers Trust Company), a banking corporation organized under the laws of the State of New York, as trustee (in such capacity, together with it successors in such capacity, the "Trustee").

PRELIMINARY STATEMENT

        The Company and the Trustee are parties to that certain Indenture dated as of November 4, 1998 (the "Indenture") pursuant to which the following notes (the "Notes") are issued and outstanding: 7.50% Senior Notes due 2008 and 7.50% Series B Senior Notes due 2008.

        QSC has entered into that certain Indenture, dated as of the date hereof, by and among QSC, the Guarantors named therein, including QCF, and Bank One Trust Company, N.A., as trustee (the "New QSC Indenture"), pursuant to which the following notes will be issued on the date hereof: (i) 13% Senior Subordinated Secured Notes due 2007, Series A, (ii) 13¹/2% Senior Subordinated Secured Notes due 2010, Series A, and (iii) 14% Senior Subordinated Secured Notes due 2014, Series A (all such notes and any additional notes that may be issued under the New Indenture, collectively referred to as the "New QSC Notes").

        The New QSC Indenture provides that QSC shall issue the New QSC Notes and such notes shall be guaranteed by the Company and QCF. Due to issuance of the New QSC Notes and the guarantees thereto and pursuant to Section 10.16 of the Indenture, the Company is required to simultaneously execute and deliver a supplemental indenture to the Indenture providing for a guarantee of the Notes by QSC and QCF.

        The Company and the Trustee desire to modify and amend the Indenture to the extent and as set forth in this Supplemental Indenture.

        The Company and the Trustee are duly authorized pursuant to Section 9.01 of the Indenture to execute and deliver this Supplemental Indenture and to modify and amend the Indenture as provided herein.

        All things necessary to make this Supplemental Indenture a valid agreement of each of the Company, QSC, QCF and the Trustee in accordance with its terms have been done.

ARTICLE 1
AMENDMENTS TO INDENTURE

        Section 1.1 Addition of Definitions to Section 1.01. Section 1.01 of the Indenture is hereby amended by inserting the following definition, which shall be inserted in alphabetical order:

        "Note Guarantee" means, in respect of any Guarantor, the unconditional guarantee by such Guarantor of the Company's Obligations under the Notes.

1

        Section 1.2 Addition of Article Thirteen to Indenture. The Indenture is hereby amended by inserting Article Thirteen with the following language:

ARTICLE THIRTEEN

NOTES GUARANTEES

        SECTION 13.01 Notes Guarantees. Each Guarantor hereby jointly and severally unconditionally and irrevocably guarantees as a primary obligor and not merely as a surety, to each Holder and to the Trustee and its successors and assigns (a) the full and punctual payment of principal of, premium, if any, and interest, on the Securities when due, whether at maturity, by acceleration, by redemption or otherwise, subject to any applicable grace period, and all other monetary obligations of the Company under this Indenture (including obligations to the Trustee) and the Securities and (b) the full and punctual performance within applicable grace periods of all other Obligations of the Company whether for expenses, indemnification or otherwise under this Indenture and the Securities (all of the foregoing being hereinafter collectively called the "Guaranteed Obligations"). Each Guarantor further agrees that the Guaranteed Obligations may be extended or renewed, in whole or in part, without notice or further assent from each such Guarantor, and that each such Guarantor shall remain bound under this Article Thirteen notwithstanding any extension or renewal of any Guaranteed Obligation.

        Each Guarantor waives presentation to, demand of, payment from and protest to the Company of any of the Guaranteed Obligations and also waives notice of protest for nonpayment. Each Guarantor waives notice of any default under the Securities or the Guaranteed Obligations. The obligations of each Guarantor hereunder shall not be affected by (a) the failure of any Holder or the Trustee to assert any claim or demand or to enforce any right or remedy against the Company or any other Person under this Indenture, the Securities or any other agreement or otherwise; (b) any extension or renewal of any Guaranteed Obligations; (c) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Securities or any other agreement; (d) the release of any security held by any Holder or the Trustee for the Guaranteed Obligations or any of them; (e) the failure of any Holder or Trustee to exercise any right or remedy against any other guarantor of the Guaranteed Obligations; or (f) any change in the ownership of such Guarantor.

        Each Guarantor further agrees that its Note Guarantee herein constitutes a Guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any Holder or the Trustee to any security held for payment of the Guaranteed Obligations.

        The obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any Holder or the Trustee to assert any claim or demand or to enforce any remedy under this Indenture, the Securities or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Guaranteed Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of any Guarantor or would otherwise operate as a discharge of any Guarantor as a matter of law or equity.

        Each Guarantor further agrees that its Note Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Guaranteed Obligation is rescinded or must otherwise be restored by any Holder or the Trustee upon the bankruptcy or reorganization of the Company or otherwise.

2

        In furtherance of the foregoing and not in limitation of any other right which any Holder or the Trustee has at law or in equity against any Guarantor by virtue hereof, upon the failure of the Company to pay the principal of or interest or premium, if any, on any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Guaranteed Obligation, each Guarantor hereby promises to and shall, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal to the sum of (i) the unpaid principal amount of such Guaranteed Obligations, (ii) accrued and unpaid interest, premium, if any, on such Guaranteed Obligations (but only to the extent not prohibited by law) and (iii) all other monetary Guaranteed Obligations of the Company to the Holders and the Trustee.

        Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any Guaranteed Obligations guaranteed hereby until payment in full of all Guaranteed Obligations. Each Guarantor further agrees that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Guaranteed Obligations guaranteed hereby may be accelerated as provided in Article Five for the purposes of any Note Guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Guaranteed Obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such Guaranteed Obligations as provided in Article Five, such Guaranteed Obligations (whether or not due and payable) shall forthwith become due and payable by such Guarantor for the purposes of this Section.

        Each Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys' fees and expenses) incurred by the Trustee or any Holder in enforcing any rights under this Section.

        SECTION 13.02 Limitation on Liability; Release. Any term or provision of this Indenture to the contrary notwithstanding, the maximum, aggregate amount of the obligations guaranteed hereunder by any Guarantor shall not exceed the maximum amount that can be guaranteed without rendering this Indenture, as it relates to any Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally.

        SECTION 13.03 Successors and Assigns. This Article Thirteen shall be binding upon each Guarantor and its successors and assigns and shall ensure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges conferred upon that party in this Indenture and in the Securities shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture.

        SECTION 13.04 No Waiver. Neither a failure nor a delay on the part of either the Trustee or the Holders in exercising any right, power or privilege under this Article Thirteen shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article Thirteen at law, in equity, by statute or otherwise.

        SECTION 13.05. Modification. No modification, amendment or waiver of any provision of this Article Thirteen, nor the consent to any departure by any Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Guarantor in any case shall entitle such Guarantor to any other or further notice or demand in the same, similar or other circumstances.

        SECTION 13.06. Evidence of Guarantee. To evidence their guarantees to the Holders set forth in this Article Thirteen, each of the Guarantors hereby agrees to execute the notation of Note Guarantee

3

in substantially the form included in Exhibit A. Each such notation of Note Guarantee shall be signed on behalf of each Guarantor by an Officer.

        Each Guarantor hereby agrees that its Note Guarantee set forth in Section 13.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee.

        If an Officer whose signature is on this Indenture or on the Note Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Note Guarantee is endorsed, the Note Guarantee shall be valid nevertheless.

ARTICLE 2
MISCELLANEOUS

        Section 2.1 Definitions. Capitalized terms used and not otherwise defined in this Supplemental Indenture shall have the meaning ascribed thereto in the Indenture.

        Section 2.2 Indenture in Full Force and Effect. Except to the extent expressly modified or amended by this Supplemental Indenture, the Indenture and all of its covenants, agreements and other provisions remain in full force and effect, and are unchanged by this Supplemental Indenture.

        Section 2.3 Effect of Heading. The Article and Section headings herein are for convenience only and shall not affect the construction hereof.

        Section 2.4 Successors and Assigns. All covenants and agreements in this Supplemental Indenture by the Company, QSC and QCF shall bind their respective successors and assigns, whether so expressed or not.

        Section 2.5 Separability. In case any provision in this Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

        Section 2.6 Benefits of Supplemental Indenture. Nothing in this Supplemental Indenture, expressed or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Noteholders, any benefit or any legal or equitable right, remedy or claim under this Supplemental Indenture or the Indenture.

        Section 2.7 Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.

4

        IN WITNESS WHEREOF, we have set our hands on this Supplemental Indenture as of the 26^th day of December 2002.

QWEST COMMUNICATIONS INTERNATIONAL INC., as Issuer
By:	Name: Title:
QWEST SERVICES CORPORATION, as Guarantor
By:	Name: Title:
QWEST CAPITAL FUNDING, INC., as Guarantor
By:	Name: Title:
DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee
By:	Name: Title:

S-1

Exhibit A

Form of Note Guarantee

A-1

QuickLinks

FIRST SUPPLEMENTAL INDENTURE

EX-4.14

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 4.14

QWEST COMMUNICATIONS INTERNATIONAL INC.,
Issuer

QWEST SERVICES CORPORATION,
Guarantor

QWEST CAPITAL FUNDING, INC.
Guarantor

And

DEUTSCHE BANK TRUST COMPANY AMERICAS,
Trustee

FIRST SUPPLEMENTAL INDENTURE

Dated as of December 26, 2002

7.25% Senior Notes Due 2008

FIRST SUPPLEMENTAL INDENTURE

        This FIRST SUPPLEMENTAL INDENTURE, dated as of December 26, 2002 (the "Supplemental Indenture"), is by and between:

        QWEST COMMUNICATION INTERNATIONAL INC., a corporation duly organized and existing under the laws of the State of Delaware (the "Company");

        QWEST SERVICES CORPORATION, a corporation duly organized and existing under the laws of the State of Colorado ("QSC");

        QWEST CAPITAL FUNDING, INC., a corporation duly organized and existing under the laws of the State of Colorado, ("QCF"); and

        DEUTSCHE BANK TRUST COMPANY AMERICAS (formerly known as Bankers Trust Company), a banking corporation organized under the laws of the State of New York, as trustee (in such capacity, together with it successors in such capacity, the "Trustee").

PRELIMINARY STATEMENT

        The Company and the Trustee are parties to that certain Indenture dated as of November 27, 1998 (the "Indenture") pursuant to which the following notes (the "Notes") are issued and outstanding: 7.25% Senior Notes due 2008 and 7.25% Series B Senior Notes due 2008.

        QSC has entered into that certain Indenture, dated as of the date hereof, by and among QSC, the Guarantors named therein, including QCF, and Bank One Trust Company, N.A., as trustee, (the "New QSC Indenture"), pursuant to which the following notes will be issued on the date hereof: (i) 13% Senior Subordinated Secured Notes due 2007, Series A, (ii) 13¹/2% Senior Subordinated Secured Notes due 2010, Series A, and (iii) 14% Senior Subordinated Secured Notes due 2014, Series A (all such notes and any additional notes that may be issued under the New Indenture, collectively referred to as the "New QSC Notes").

        The New QSC Indenture provides that QSC shall issue the New QSC Notes and such notes shall be guaranteed by the Company and QCF. Due to issuance of the New QSC Notes and the guarantees thereto and pursuant to Section 10.16 of the Indenture, the Company is required to simultaneously execute and deliver a supplemental indenture to the Indenture providing for a guarantee of the Notes by QSC and QCF.

        The Company and the Trustee desire to modify and amend the Indenture to the extent and as set forth in this Supplemental Indenture.

        The Company and the Trustee are duly authorized pursuant to Section 9.01 of the Indenture to execute and deliver this Supplemental Indenture and to modify and amend the Indenture as provided herein.

        All things necessary to make this Supplemental Indenture a valid agreement of each of the Company, QSC, QCF and the Trustee in accordance with its terms have been done.

ARTICLE 1
AMENDMENTS TO INDENTURE

        Section 1.1 Addition of Definitions to Section 1.01. Section 1.01 of the Indenture is hereby amended by inserting the following definition, which shall be inserted in alphabetical order:

        "Note Guarantee" means, in respect of any Guarantor, the unconditional guarantee by such Guarantor of the Company's Obligations under the Notes.

        Section 1.2 Addition of Article Thirteen to Indenture. The Indenture is hereby amended by inserting Article Thirteen with the following language:

ARTICLE THIRTEEN

NOTES GUARANTEES

        SECTION 13.01 Notes Guarantees. Each Guarantor hereby jointly and severally unconditionally and irrevocably guarantees as a primary obligor and not merely as a surety, to each Holder and to the Trustee and its successors and assigns (a) the full and punctual payment of principal of, premium, if any, and interest, on the Securities when due, whether at maturity, by acceleration, by redemption or otherwise, subject to any applicable grace period, and all other monetary obligations of the Company under this Indenture (including obligations to the Trustee) and the Securities and (b) the full and punctual performance within applicable grace periods of all other Obligations of the Company whether for expenses, indemnification or otherwise under this Indenture and the Securities (all of the foregoing being hereinafter collectively called the "Guaranteed Obligations"). Each Guarantor further agrees that the Guaranteed Obligations may be extended or renewed, in whole or in part, without notice or further assent from each such Guarantor, and that each such Guarantor shall remain bound under this Article Thirteen notwithstanding any extension or renewal of any Guaranteed Obligation.

        Each Guarantor waives presentation to, demand of, payment from and protest to the Company of any of the Guaranteed Obligations and also waives notice of protest for nonpayment. Each Guarantor waives notice of any default under the Securities or the Guaranteed Obligations. The obligations of each Guarantor hereunder shall not be affected by (a) the failure of any Holder or the Trustee to assert any claim or demand or to enforce any right or remedy against the Company or any other Person under this Indenture, the Securities or any other agreement or otherwise; (b) any extension or renewal of any Guaranteed Obligations; (c) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Securities or any other agreement; (d) the release of any security held by any Holder or the Trustee for the Guaranteed Obligations or any of them; (e) the failure of any Holder or Trustee to exercise any right or remedy against any other guarantor of the Guaranteed Obligations; or (f) any change in the ownership of such Guarantor.

        Each Guarantor further agrees that its Note Guarantee herein constitutes a Guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any Holder or the Trustee to any security held for payment of the Guaranteed Obligations.

        The obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any Holder or the Trustee to assert any claim or demand or to enforce any remedy under this Indenture, the Securities or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Guaranteed Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of any Guarantor or would otherwise operate as a discharge of any Guarantor as a matter of law or equity.

        Each Guarantor further agrees that its Note Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Guaranteed Obligation is rescinded or must otherwise be restored by any Holder or the Trustee upon the bankruptcy or reorganization of the Company or otherwise.

2

        In furtherance of the foregoing and not in limitation of any other right which any Holder or the Trustee has at law or in equity against any Guarantor by virtue hereof, upon the failure of the Company to pay the principal of or interest or premium, if any, on any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Guaranteed Obligation, each Guarantor hereby promises to and shall, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal to the sum of (i) the unpaid principal amount of such Guaranteed Obligations, (ii) accrued and unpaid interest, premium, if any, on such Guaranteed Obligations (but only to the extent not prohibited by law) and (iii) all other monetary Guaranteed Obligations of the Company to the Holders and the Trustee.

        Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any Guaranteed Obligations guaranteed hereby until payment in full of all Guaranteed Obligations. Each Guarantor further agrees that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Guaranteed Obligations guaranteed hereby may be accelerated as provided in Article Five for the purposes of any Note Guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Guaranteed Obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such Guaranteed Obligations as provided in Article Five, such Guaranteed Obligations (whether or not due and payable) shall forthwith become due and payable by such Guarantor for the purposes of this Section.

        Each Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys' fees and expenses) incurred by the Trustee or any Holder in enforcing any rights under this Section.

        SECTION 13.02 Limitation on Liability; Release. Any term or provision of this Indenture to the contrary notwithstanding, the maximum, aggregate amount of the obligations guaranteed hereunder by any Guarantor shall not exceed the maximum amount that can be guaranteed without rendering this Indenture, as it relates to any Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally.

        SECTION 13.03 Successors and Assigns. This Article Thirteen shall be binding upon each Guarantor and its successors and assigns and shall ensure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges conferred upon that party in this Indenture and in the Securities shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture.

        SECTION 13.04 No Waiver. Neither a failure nor a delay on the part of either the Trustee or the Holders in exercising any right, power or privilege under this Article Thirteen shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article Thirteen at law, in equity, by statute or otherwise.

        SECTION 13.05. Modification. No modification, amendment or waiver of any provision of this Article Thirteen, nor the consent to any departure by any Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Guarantor in any case shall entitle such Guarantor to any other or further notice or demand in the same, similar or other circumstances.

        SECTION 13.06. Evidence of Guarantee. To evidence their guarantees to the Holders set forth in this Article Thirteen, each of the Guarantors hereby agrees to execute the notation of Note Guarantee

3

in substantially the form included in Exhibit A. Each such notation of Note Guarantee shall be signed on behalf of each Guarantor by an Officer.

        Each Guarantor hereby agrees that its Note Guarantee set forth in Section 13.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee.

        If an Officer whose signature is on this Indenture or on the Note Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Note Guarantee is endorsed, the Note Guarantee shall be valid nevertheless.

ARTICLE 2
MISCELLANEOUS

        Section 2.1 Definitions. Capitalized terms used and not otherwise defined in this Supplemental Indenture shall have the meaning ascribed thereto in the Indenture.

        Section 2.2 Indenture in Full Force and Effect. Except to the extent expressly modified or amended by this Supplemental Indenture, the Indenture and all of its covenants, agreements and other provisions remain in full force and effect, and are unchanged by this Supplemental Indenture.

        Section 2.3 Effect of Heading. The Article and Section headings herein are for convenience only and shall not affect the construction hereof.

        Section 2.4 Successors and Assigns. All covenants and agreements in this Supplemental Indenture by the Company, QSC and QCF shall bind their respective successors and assigns, whether so expressed or not.

        Section 2.5 Separability. In case any provision in this Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

        Section 2.6 Benefits of Supplemental Indenture. Nothing in this Supplemental Indenture, expressed or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Noteholders, any benefit or any legal or equitable right, remedy or claim under this Supplemental Indenture or the Indenture.

        Section 2.7 Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.

4

        IN WITNESS WHEREOF, we have set our hands on this Supplemental Indenture as of the 26^th day of December 2002.

QWEST COMMUNICATIONS INTERNATIONAL INC., as Issuer
By:	Name: Title:
QWEST SERVICES CORPORATION, as Guarantor
By:	Name: Title:
QWEST CAPITAL FUNDING, INC., as Guarantor
By:	Name: Title:
DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee
By:	Name: Title:

S-1

Exhibit A

Form of Note Guarantee

A-1

QuickLinks

FIRST SUPPLEMENTAL INDENTURE

EX-4.15

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 4.15

SECOND SUPPLEMENTAL INDENTURE

        SECOND SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of December 4, 2003, between QWEST COMMUNICATIONS INTERNATIONAL INC., a corporation organized and existing under the laws of the State of Delaware (the "Company"), QWEST SERVICES CORPORATION, a corporation organized and existing under the laws of the State of Colorado ("QSC"), QWEST CAPITAL FUNDING, INC., a corporation organized and existing under the laws of the State of Colorado ("QCF"), and BANK ONE TRUST COMPANY, N.A. (as successor in interest to Bankers Trust Company), as trustee under the indenture referred to below (the "Trustee").

W I T N E S S E T H

        WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture, dated as of November 4, 1998, as amended by the First Supplemental Indenture, dated as of December 26, 2002, among the Company, QSC, QCF and the Trustee (as so amended, the "Indenture"), providing for the issuance of $750,000,000 aggregate principal amount of 7.50% Senior Notes due 2008 (the "Securities");

        WHEREAS, the Holders of more than 50% in aggregate principal amount of the outstanding Securities have consented to the elimination of certain provisions of the Indenture and the Securities and the rights of Holders thereunder, pursuant to this Supplemental Indenture; and

        WHEREAS, pursuant to Article Nine of the Indenture, the Company, having been authorized by a resolution adopted by its Board of Directors, and the Trustee are authorized to execute and deliver this Supplemental Indenture.

        NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Company and the Trustee mutually covenant and agree as follows:

ARTICLE I—AMENDMENTS

        SECTION 1.01 Amendments to the Indenture. The Indenture and the Securities are hereby amended by deleting the following provisions and all defined terms used exclusively therein from the Indenture and by deleting any references to the foregoing from the Indenture and the Securities:

(a)	Section 501(6)
(b)	Section 501(7)
(c)	Section 801	Company May Consolidate, Etc., Only on Certain Terms
(d)	Section 802	Successor Substituted
(e)	Section 1004	Corporate Existence
(f)	Section 1007	Insurance
(g)	Section 1008	Provision of Financial Statements
(h)	Section 1009	Statement by Officers as to Default
(i)	Section 1010	Purchase of Securities upon Change of Control
(j)	Section 1011	Limitation on Consolidated Debt
(k)	Section 1012	Limitation on Debt and Preferred Stock of Restricted Subsidiaries
(l)	Section 1013	Limitation on Restricted Payments
(m)	Section 1014	Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
(n)	Section 1015	Limitation on Liens
(o)	Section 1016	Limitation on Issuances of Certain Guarantees by, and Debt Securities of, Restricted Subsidiaries

(p)	Section 1017	Limitation on Sale and Leaseback Transactions
(q)	Section 1018	Limitation on Asset Dispositions
(r)	Section 1019	Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries
(s)	Section 1020	Transactions with Affiliates and Related Persons
(t)	Section 1021	Limitation on Designations of Unrestricted Subsidiaries
(u)	Section 1022	No Repayment of Existing Parent Company Advances with the Proceeds of the Securities

ARTICLE II—MISCELLANEOUS

        SECTION 2.01 Governing Law. This Supplemental Indenture shall be governed by and construed in accordance with the law of the State of New York.

        SECTION 2.02 Definitions. Capitalized terms used in this Supplemental Indenture and not otherwise defined herein shall have the meanings assigned to such terms in the Indenture.

        SECTION 2.03 Conflict With Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with any provision of the Trust Indenture Act or another provision which is required or deemed to be included in this Supplemental Indenture by any of the provisions of the Trust Indenture Act, such provision or requirement of the Trust Indenture Act shall control.

        SECTION 2.04 Indenture. Except as amended hereby, the Indenture and the Securities are in all respects ratified and confirmed and all the terms thereof shall remain in full force and effect.

        SECTION 2.05 Effectiveness. This Supplemental Indenture shall become effective on the date on which all Securities validly tendered and not withdrawn in the offers being made pursuant to the Offer to Purchase and Consent Solicitation Statement dated November 19, 2003 are accepted for payment and purchased.

        SECTION 2.06 Counterparts. This Supplemental Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument.

2

        IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first above written.

QWEST COMMUNICATIONS INTERNATIONAL INC.
By:	Oren G. Shaffer Chief Financial Officer
QWEST SERVICES CORPORATION
By:	Oren G. Shaffer Chief Financial Officer
QWEST CAPITAL FUNDING, INC.
By:	Oren G. Shaffer Chief Financial Officer
J P MORGAN TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee successor in interest to Bank One Trust Company, N.A.
By:	Sharon K. McGrath Assistant Vice President

S-1

QuickLinks

SECOND SUPPLEMENTAL INDENTURE

EX-4.16

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 4.16

SECOND SUPPLEMENTAL INDENTURE

        SECOND SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of December 4, 2003, between QWEST COMMUNICATIONS INTERNATIONAL INC., a corporation organized and existing under the laws of the State of Delaware (the "Company"), QWEST SERVICES CORPORATION, a corporation organized and existing under the laws of the State of Colorado ("QSC"), QWEST CAPITAL FUNDING, INC., a corporation organized and existing under the laws of the State of Colorado ("QCF"), and BANK ONE TRUST COMPANY, N.A (as successor in interest to Bankers Trust Company), as trustee under the indenture referred to below (the "Trustee").

W I T N E S S E T H

        WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture dated as of November 27, 1998, as amended by the First Supplemental Indenture, dated as of December 26, 2002, among the Company, QSC, QCF and the Trustee (as so amended, the "Indenture"), providing for the issuance of $300,000,000 aggregate principal amount of 7.25% Senior Notes due 2008 (the "Securities");

        WHEREAS, the Holders of more than 50% in aggregate principal amount of the outstanding Securities have consented to the elimination of certain provisions of the Indenture and the Securities and the rights of Holders thereunder, pursuant to this Supplemental Indenture; and

        WHEREAS, pursuant to Article Nine of the Indenture, the Company, having been authorized by a resolution adopted by its Board of Directors, and the Trustee are authorized to execute and deliver this Supplemental Indenture.

        NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Company and the Trustee mutually covenant and agree as follows:

ARTICLE I—AMENDMENTS

        SECTION 1.01 Amendments to the Indenture. The Indenture and the Securities are hereby amended by deleting the following provisions and all defined terms used exclusively therein from the Indenture and by deleting any references to the foregoing from the Indenture and the Securities:

(a)	Section 501(6)
(b)	Section 501(7)
(c)	Section 801	Company May Consolidate, Etc., Only on Certain Terms
(d)	Section 802	Successor Substituted
(e)	Section 1004	Corporate Existence
(f)	Section 1007	Insurance
(g)	Section 1008	Provision of Financial Statements
(h)	Section 1009	Statement by Officers as to Default
(i)	Section 1010	Purchase of Securities upon Change of Control
(j)	Section 1011	Limitation on Consolidated Debt
(k)	Section 1012	Limitation on Debt and Preferred Stock of Restricted Subsidiaries
(l)	Section 1013	Limitation on Restricted Payments
(m)	Section 1014	Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
(n)	Section 1015	Limitation on Liens
(o)	Section 1016	Limitation on Issuances of Certain Guarantees by, and Debt Securities of, Restricted Subsidiaries

(p)	Section 1017	Limitation on Sale and Leaseback Transactions
(q)	Section 1018	Limitation on Asset Dispositions
(r)	Section 1019	Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries
(s)	Section 1020	Transactions with Affiliates and Related Persons
(t)	Section 1021	Limitation on Designations of Unrestricted Subsidiaries
(u)	Section 1022	No Repayment of Existing Parent Company Advances with the Proceeds of the Securities

ARTICLE II—MISCELLANEOUS

        SECTION 2.01 Governing Law. This Supplemental Indenture shall be governed by and construed in accordance with the law of the State of New York.

        SECTION 2.02 Definitions. Capitalized terms used in this Supplemental Indenture and not otherwise defined herein shall have the meanings assigned to such terms in the Indenture.

        SECTION 2.03 Conflict With Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with any provision of the Trust Indenture Act or another provision which is required or deemed to be included in this Supplemental Indenture by any of the provisions of the Trust Indenture Act, such provision or requirement of the Trust Indenture Act shall control.

        SECTION 2.04 Indenture. Except as amended hereby, the Indenture and the Securities are in all respects ratified and confirmed and all the terms thereof shall remain in full force and effect.

        SECTION 2.05 Effectiveness. This Supplemental Indenture shall become effective on the date on which all Securities validly tendered and not withdrawn in the offers being made pursuant to the Offer to Purchase and Consent Solicitation Statement dated November 19, 2003 are accepted for payment and purchased.

        SECTION 2.06 Counterparts. This Supplemental Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument.

2

        IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first above written.

QWEST COMMUNICATIONS INTERNATIONAL INC.
By:	Oren G. Shaffer Chief Financial Officer
QWEST SERVICES CORPORATION
By:	Oren G. Shaffer Chief Financial Officer
QWEST CAPITAL FUNDING, INC.
By:	Oren G. Shaffer Chief Financial Officer
J P MORGAN TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee successor in interest to Bank One Trust Company, N.A.
By:	Sharon K. McGrath Assistant Vice President

S-1

QuickLinks

SECOND SUPPLEMENTAL INDENTURE

EX-4.17

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 4.17

[Conformed Copy]

INDENTURE

Dated as February 5, 2004

Among

QWEST COMMUNICATIONS INTERNATIONAL INC.,

THE GUARANTORS NAMED HEREIN

and

J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION
as
Trustee

Providing for the Issuance of

7.25% Senior Notes due 2011
7.50% Senior Notesdue 2014
Floating Rate Senior Notes due 2009
and
Additional Notes (as defined herein)

CROSS-REFERENCE TABLE

TIA Section		Indenture Section
310	(a)(1)	7.10
	(a)(2)	7.10
	(a)(3)	N/A
	(a)(4)	N/A
	(b)	7.08; 7.10
	(c)	N/A
311	(a)	7.11
	(b)	7.11
	(c)	N/A
312	(a)	2.05
	(b)	13.03
	(c)	13.03
313	(a)	7.06
	(b)(1)	N/A
	(b)(2)	7.06
	(c)	13.02
	(d)	7.06
314	(a)	4.03
	(b)	11.02
	(c)(1)	13.04
	(c)(2)	13.04
	(c)(3)	13.04
	(d)	N/A
	(e)	13.05
	(f)	N/A
315	(a)	7.01
	(b)	7.05
	(c)	7.01
	(d)	7.01
	(e)	6.11
316	(a)(last sentence)	13.06
	(a)(1)(A)	6.05
	(a)(1)(B)	6.04
	(a)(2)	N/A
	(b)	6.07
317	(a)(1)	6.08
	(a)(2)	6.09
	(b)	2.04, 7.12
318	(a)	13.01

N/A means Not Applicable

TABLE OF CONTENTS

		Page
	ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01.	Definitions	1
SECTION 1.02.	Other Definitions	23
SECTION 1.03.	Incorporation by Reference of Trust Indenture Act	24
SECTION 1.04.	Rules of Construction	24
	ARTICLE II THE NOTES
SECTION 2.01.	Form and Dating	25
SECTION 2.02.	Execution and Authentication	26
SECTION 2.03.	Registrar, Paying Agent and Calculation Agent	26
SECTION 2.04.	Paying Agent To Hold Money in Trust	27
SECTION 2.05.	Noteholder Lists	28
SECTION 2.06.	Transfer and Exchange	28
SECTION 2.07.	Replacement Notes	28
SECTION 2.08.	Outstanding Notes	29
SECTION 2.09.	Temporary Notes	29
SECTION 2.10.	Cancellation	29
SECTION 2.11.	Defaulted Interest	30
SECTION 2.12.	CUSIP Numbers	30
SECTION 2.13.	Book-Entry Provisions for Global Notes	30
SECTION 2.14.	Special Transfer Provisions	31
SECTION 2.15.	Issuance of Additional Notes	32
	ARTICLE III REDEMPTION
SECTION 3.01.	Notices to Trustee	33
SECTION 3.02.	Selection	33
SECTION 3.03.	Notice	33
SECTION 3.04.	Effect of Notice of Redemption	34
SECTION 3.05.	Deposit of Redemption Price	34
SECTION 3.06.	Notes Redeemed in Part	34
SECTION 3.07.	No Sinking Fund	34
SECTION 3.08.	Asset Sale Offers	34

i

	ARTICLE IV COVENANTS
SECTION 4.01.	Payment of Notes	36
SECTION 4.02.	Maintenance of Office or Agency	36
SECTION 4.03.	Reports	36
SECTION 4.04.	Taxes	37
SECTION 4.05.	Stay, Extension and Usury Laws	37
SECTION 4.06.	Incurrence of Indebtedness	37
SECTION 4.07.	Restricted Payments	39
SECTION 4.08.	Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries	40
SECTION 4.09.	Asset Sales	41
SECTION 4.10.	Transactions with Affiliates	43
SECTION 4.11.	Change of Control	43
SECTION 4.12.	Compliance Certificate	45
SECTION 4.13.	Limitation on Designations of Unrestricted Subsidiaries	45
SECTION 4.14.	Liens	46
SECTION 4.15.	Business Activities	46
SECTION 4.16.	Suspension and Fallaway of Covenants	47
	ARTICLE V SUCCESSOR COMPANY
SECTION 5.01.	Merger, Consolidation, Etc.	47
	ARTICLE VI DEFAULTS AND REMEDIES
SECTION 6.01.	Events of Default and Remedies	49
SECTION 6.02.	Acceleration	51
SECTION 6.03.	Other Remedies	51
SECTION 6.04.	Waiver of Past Defaults	52
SECTION 6.05.	Control by Majority	52
SECTION 6.06.	Limitation on Suits	52
SECTION 6.07.	Rights of Holders To Receive Payment	52
SECTION 6.08.	Collection Suit by Trustee	52
SECTION 6.09.	Trustee May File Proofs of Claim	53
SECTION 6.10.	Priorities	53
SECTION 6.11.	Undertaking for Costs	53
SECTION 6.12.	Waiver of Stay or Extension Laws	53
	ARTICLE VII TRUSTEE
SECTION 7.01.	Duties of Trustee	53
SECTION 7.02.	Rights of Trustee	54
SECTION 7.03.	Individual Rights of Trustee	55
SECTION 7.04.	Trustee's Disclaimer	56
SECTION 7.05.	Notice of Defaults	56
SECTION 7.06.	Reports by Trustee to Holders	56
SECTION 7.07.	Compensation and Indemnity	56
SECTION 7.08.	Replacement of Trustee	57
SECTION 7.09.	Successor Trustee by Merger	58
SECTION 7.10.	Eligibility; Disqualification	58
SECTION 7.11.	Preferential Collection of Claims Against the Company	58

ii

	ARTICLE VIII SUBORDINATION OF QSC GUARANTEE
SECTION 8.01.	QSC Guarantee Subordinated to Senior Debt	58
SECTION 8.02.	No Payment on Notes in Certain Circumstances	58
SECTION 8.03.	Payment Over of Proceeds upon Dissolution, etc.	59
SECTION 8.04.	Subrogation	60
SECTION 8.05.	Obligations of QSC Unconditional	61
SECTION 8.06.	Notice to Trustee	61
SECTION 8.07.	Reliance on Judicial Order or Certificate of Liquidating Agent	62
SECTION 8.08.	Trustee's Relation to Senior Debt	62
SECTION 8.09.	Subordination Rights Not Impaired by Acts or Omissions of QSC or Holders of Senior Debt	62
SECTION 8.10.	Holders Authorize Trustee To Effectuate Subordination of Notes	62
SECTION 8.11.	This Article Not To Prevent Events of Default	62
SECTION 8.12.	Trustee's Compensation Not Prejudiced	63
SECTION 8.13.	No Waiver of Subordination Provisions	63
SECTION 8.14.	Subordination Provisions Not Applicable to Money Held in Trust for Holders; Payments May Be Paid Prior to Dissolution	63
SECTION 8.15.	Acceleration of Notes	63
SECTION 8.16.	Termination of Subordination of QSC Guarantee upon Occurrence of Termination Event	63
	ARTICLE IX DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 9.01.	Legal Defeasance and Covenant Defeasance	63
SECTION 9.02.	Conditions to Legal or Covenant Defeasance	64
SECTION 9.03.	Deposited Money and Government Securities To Be Held in Trust; Other Miscellaneous Provisions	65
SECTION 9.04.	Repayment to the Company	66
SECTION 9.05.	Reinstatement	66
SECTION 9.06.	Satisfaction and Discharge of Indenture	66
	ARTICLE X AMENDMENTS
SECTION 10.01.	Without Consent of Holders	67
SECTION 10.02.	With Consent of Holders	67
SECTION 10.03.	Compliance with Trust Indenture Act	69
SECTION 10.04.	Revocation and Effect of Consents and Waivers	69
SECTION 10.05.	Notation on or Exchange of Notes	69
SECTION 10.06.	Trustee To Sign Amendments	69

iii

	ARTICLE XI COLLATERAL DOCUMENTS
SECTION 11.01.	Security Documents	69
SECTION 11.02.	Recording and Opinions	70
SECTION 11.03.	Release of Collateral upon Asset Sale	70
SECTION 11.04.	Certificates of the Trustee	71
SECTION 11.05.	Authorization of Actions To Be Taken by the Trustee Under the Security Documents	71
SECTION 11.06.	Authorization of Receipt of Funds by the Trustee Under the Security Documents	71
SECTION 11.07.	Termination of Security Interest	71
SECTION 11.08.	Collateral Agent	72
SECTION 11.09.	Suits to Protect the Collateral	72
SECTION 11.10.	Powers Exercisable by Receiver or Trustee	72
	ARTICLE XII NOTES GUARANTEES
SECTION 12.01.	Notes Guarantees	72
SECTION 12.02.	Limitation on Liability; Release	74
SECTION 12.03.	Successors and Assigns	74
SECTION 12.04.	No Waiver	74
SECTION 12.05.	Modification	74
SECTION 12.06.	Evidence of Guarantee	74
	ARTICLE XIII MISCELLANEOUS
SECTION 13.01.	Trust Indenture Act Controls	75
SECTION 13.02.	Notices	75
SECTION 13.03.	Communication by Holders with Other Holders	75
SECTION 13.04.	Certificate and Opinion as to Conditions Precedent	75
SECTION 13.05.	Statements Required in Certificate or Opinion	76
SECTION 13.06.	When Notes Disregarded	76
SECTION 13.07.	Rules by Trustee, Paying Agent and Registrar	76
SECTION 13.08.	Legal Holidays	76
SECTION 13.09.	GOVERNING LAW	76
SECTION 13.10.	No Recourse Against Others	76
SECTION 13.11.	Successors	77
SECTION 13.12.	Multiple Originals	77
SECTION 13.13.	Table of Contents; Headings	77
SECTION 13.14.	Severability	77
SECTION 13.15.	No Adverse Interpretation of Other Agreements	77

iv

EXHIBIT A-1	—	FORM OF INITIAL FIXED RATE NOTE
EXHIBIT A-2	—	FORM OF INITIAL FLOATING RATE NOTE
EXHIBIT B-1	—	FORM OF EXCHANGE OR PERMANENT REGULATION S FIXED RATE NOTE
EXHIBIT B-2	—	FORM OF EXCHANGE OR PERMANENT REGULATION S FLOATING RATE NOTE
EXHIBIT C	—	FORM OF GUARANTEE
EXHIBIT D	—	FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFER TO INSTITUTIONAL ACCREDITED INVESTORS
EXHIBIT E	—	FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO RULE 144A
EXHIBIT F	—	FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S
EXHIBIT G	—	FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S
EXHIBIT H	—	FORM OF PLEDGE AGREEMENT

v

        INDENTURE dated as of February 5, 2004, among QWEST COMMUNICATIONS INTERNATIONAL INC., a Delaware corporation, the GUARANTORS (as defined) and J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION (the "Trustee").

        Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of (i) the Company's 7.25% Senior Notes due 2011, Series A (the "Initial 2011 Notes"), issued on the date hereof, (ii) the Company's 7.50% Senior Notes due 2014, Series A (the "Initial 2014 Notes"), issued on the date hereof, (iii) the Company's Floating Rate Senior Notes due 2009, Series A (the "Initial Floating Rate Notes"), issued on the date hereof (all such Notes in clauses (i) through (iii) being referred to collectively as the "Initial Notes"), (iv) any Additional Notes and (v) if and when issued as provided in the Registration Rights Agreement of the Company, 7.25% Senior Notes due 2011, Series B, 7.50% Senior Notes due 2014, Series B, and Floating Rate Senior Notes due 2009, Series B, in exchange for Initial Notes of the same maturity (collectively the "Exchange Notes" and, together with the Initial Notes and any Additional Notes, the "Notes").

ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE

        SECTION 1.01. Definitions.

        "Acquired Indebtedness" means (1) with respect to any Person that becomes a Restricted Subsidiary after the Issue Date, Indebtedness of such Person and its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary that was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary and (2) with respect to QSC or any of its Restricted Subsidiaries, any Indebtedness of a Person (other than QSC or its Restricted Subsidiary) existing at the time such Person is merged with or into QSC or any of its Restricted Subsidiaries, or Indebtedness expressly assumed by QSC or any of its Restricted Subsidiaries in connection with the acquisition of an asset or assets from another Person, which Indebtedness was not, in any case, incurred by such other Person in connection with, or in contemplation of, such merger or acquisition.

        "Additional Interest" shall have the meaning set forth in the Registration Rights Agreement.

        "Additional Notes" means Notes (other than the Initial Notes) issued pursuant to Article II hereof and otherwise in compliance with the provisions of this Indenture.

        "Additional QSC Notes" means senior subordinated secured notes of QSC issued under the Existing QSC Notes Indenture or an indenture with substantially equivalent (other than financial) terms; provided the aggregate principal amount of Existing QSC Notes and Additional QSC Notes does not exceed $4.0 billion (including any refinancings thereof, but exclusive of related premiums and expenses).

        "Affiliate" of any Person means any other Person which directly or indirectly controls or is controlled by, or is under direct or indirect common control with, the referent Person. For purposes of this definition, "control" of a Person shall mean the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

        "amend" means to amend, supplement, restate, amend and restate or otherwise modify; and "amendment" shall have a correlative meaning.

        "Asset Acquisition" means

(1)

an Investment by QSC or any of its Restricted Subsidiaries in any other Person if, as a result of such Investment, such Person shall become a Restricted Subsidiary of QSC, or shall be merged with or into QSC or any of its Restricted Subsidiaries, or



(2)

the acquisition by QSC or any of its Restricted Subsidiaries of all or substantially all of the assets of any other Person or any division or line of business of any other Person.

        "Asset Sale" means any sale, issuance, conveyance, transfer, lease, assignment or other disposition by QCII or any Restricted Subsidiary to any Person other than QCII or any Restricted Subsidiary (including by means of a Sale and Leaseback Transaction or a merger or consolidation) (collectively, for purposes of this definition, a "transfer"), in one transaction or a series of related transactions, of any assets of QCII or any of its Restricted Subsidiaries other than in the ordinary course of business. Notwithstanding the foregoing, the following will not be Asset Sales:

(1)

transfers of cash or Cash Equivalents or any repayment of permitted intercompany Indebtedness;



(2)

transfers of assets (including Equity Interests) that are governed by, and made in accordance with, Section 5.01;



(3)

the creation or realization of any Lien permitted hereunder;



(4)

transfers of damaged, worn-out or obsolete equipment or assets that, in QSC's reasonable judgment, are no longer used or useful in the business of QSC or its Restricted Subsidiaries;



(5)

Permitted Telecommunications Capital Asset Dispositions;



(6)

Restricted Payments made pursuant to and in compliance with Section 4.07; or



(7)

any transfer or series of related transfers that, but for this clause, would be Asset Sales, if after giving effect to such transfers, the aggregate Fair Market Value of the assets transferred in such transaction or any such series of related transactions does not exceed $25.0 million.

        "Attributable Indebtedness" when used with respect to any Sale and Leaseback Transaction means, as at the time of determination, the present value (discounted at a rate equivalent to QSC's then-current weighted average cost of funds for borrowed money as at the time of determination, compounded on a semiannual basis) of the total obligations of the lessee for rental payments during the remaining term of the lease included in any such Sale and Leaseback Transaction.

        "Bankruptcy Law" means Title 11 of the United States Code, as amended, or any similar federal or state law for the relief of debtors.

        "Board of Directors" means, with respect to any Person, the board of directors or comparable governing body of such Person.

        "Business Day" means a day other than a Saturday, Sunday or other day on which banking institutions in New York are authorized or required by law to close.

        "Calculation Agent" means the Person specified in Section 2.03 as the Calculation Agent, until a successor shall have been appointed and become such pursuant to the applicable provisions of this Indenture, and thereafter, "Calculation Agent" shall mean or include such successor.

        "Capitalized Lease" means a lease required to be capitalized for financial reporting purposes in accordance with GAAP.

        "Capitalized Lease Obligation" of any Person means the obligation of such Person to pay rent or other amounts under a Capitalized Lease, and the amount of such obligation shall be the capitalized amount thereof determined in accordance with GAAP.

        "Cash Equivalents" means:

(1)

marketable obligations with a maturity of 360 days or less issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof);

2

(2)

demand and time deposits and certificates of deposit or acceptances with a maturity of 365 days or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500 million and is assigned at least a "B" rating by Thomson Financial BankWatch;



(3)

commercial paper maturing no more than 365 days from the date of creation thereof issued by a corporation that is not QSC or an Affiliate of QSC, and is organized under the laws of any State of the United States of America or the District of Columbia and rated at least A-1 by S&P or at least P-1 by Moody's;



(4)

repurchase obligations with a term of not more than ten days for underlying securities of the types described in clause (1) above entered into with any commercial bank meeting the specifications of clause (2) above; and



(5)

investments in money market or other mutual funds substantially all of whose assets comprise securities of the types described in clauses (1) through (4) above.

        "Change of Control" means any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than Phillip F. Anschutz, Anschutz Company or any of their controlled affiliates, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of this clause such person or group shall be deemed to have "beneficial ownership" of all securities that any such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of Voting Stock representing more than 50% of the voting power of the total outstanding Voting Stock of QCII. Notwithstanding the foregoing, no "Change of Control" shall have occurred if the aforementioned ultimate beneficial owner is a corporation or other entity in which no one person or group (each, as defined above) beneficially owns (as determined above) more than 50% of the Voting Stock of such corporation or other entity.

        "Change of Control Triggering Event" means the occurrence of both a Change of Control and a Rating Decline.

        "Code" means the Internal Revenue Code of 1986, as amended.

        "Collateral" means initially, those assets of QSC pledged to secure the Existing QSC Notes on the Issue Date and such other assets as may be required to be pledged to secure the QSC Guarantee from time to time under this Indenture or the Security and Pledge Agreement. Any asset that has been released from the Liens securing the QSC Guarantee in accordance with Article XI shall not constitute Collateral for any purpose hereunder, including without limitation for any purpose for which the term "Collateral" is used, unless thereafter subjected to a Lien to secure the QSC Guarantee.

        "Collateral Agent" means the collateral agent under the Security and Pledge Agreement.

        "Company" or "QCII" means Qwest Communications International Inc., a Delaware corporation, and its permitted successors and assigns.

        "Comparable Treasury Issue" means the United States Treasury security selected by a Reference Treasury Dealer appointed by the Company as having a maturity comparable to the remaining term to maturity or the applicable redemption date of the Notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term to maturity or the applicable redemption date of such Notes.

        "Comparable Treasury Price" means with respect to any redemption date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third business day preceding such redemption date, as set forth in the daily

3

statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities," or (ii) if such release (or any successor release) is not published or does not contain such prices on such business day, (A) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (B) if QCII obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such Reference Treasury Dealer Quotations.

        "Consolidated Amortization Expense" means, with respect to any Person for any period, the amortization expense of the relevant Person and the Restricted Subsidiaries of the relevant Person for such period, determined on a consolidated basis in accordance with GAAP.

        "Consolidated Cash Flow" means, with respect to any Person for any period, without duplication, the sum of the amounts for such period of

(1)

Consolidated Net Income of such Person, plus

(2)

in each case only to the extent (and in the same proportion) deducted in determining Consolidated Net Income and with respect to the portion of Consolidated Net Income attributable to any Restricted Subsidiary of such Person,



(a)

Consolidated Income Tax Expense of such Person,



(b)

Consolidated Amortization Expense (but only to the extent not included in Consolidated Interest Expense of such Person),



(c)

Consolidated Depreciation Expense of such Person,



(d)

Consolidated Interest Expense of such Person and its Restricted Subsidiaries,



(e)

all other non-cash items reducing the Consolidated Net Income (excluding, for the period in which they are made (unless previously excluded for purposes of this calculation), any cash payments made with respect to any non-cash charge which is an accrual of a reserve for cash charges in any future period)) of such Person for such period, and



(f)

other than for purposes of calculating the Restricted Payments Basket, cash restructuring charges for actions taken prior to the Issue Date and cash charges arising from the settlement of the Outstanding UPOs,

in each case determined on a consolidated basis in accordance with GAAP, minus

(3)

the aggregate amount of all non-cash items (including the amortization of revenues for which cash was received in a period prior to the issuance of the Notes), determined on a consolidated basis, to the extent such items increased Consolidated Net Income of such Person for such period, minus

(4)

solely for purposes of calculating the Consolidated Leverage Ratio when incurring an item of Indebtedness pursuant to Section 4.06 (and not for any other purpose), an amount equal to the Consolidated Interest Expense of QCII and its Subsidiaries (other than in respect of Indebtedness (including by way of guarantees) of QSC and its Subsidiaries) to the extent paid, accrued or scheduled to be paid or accrued for the period and other cash expenses reducing Consolidated Net Income of QCII and its Subsidiaries (other than QSC and its Subsidiaries) paid or scheduled to be paid or accrued by QCII and its Subsidiaries (but no deduction from Consolidated Cash Flow shall be made under this clause to reflect interest expense actually paid by QCII or a Subsidiary of QCII from sources other than QCF or QSC and QSC's Restricted Subsidiaries).

4

        "Consolidated Depreciation Expense" means, with respect to any Person for any period, the depreciation expense of such Person and the Restricted Subsidiaries of such Person for such period, determined on a consolidated basis in accordance with GAAP.

        "Consolidated Income Tax Expense" means, with respect to any Person for any period, the provision for taxes of QSC and the Restricted Subsidiaries of such Person, determined on a consolidated basis in accordance with GAAP.

        "Consolidated Interest Expense" means, with respect to any Person for any period, the sum, without duplication, of the total interest expense of the relevant Person and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP and including without duplication,

(1)

imputed interest on Capitalized Lease Obligations and Attributable Indebtedness,



(2)

commissions, discounts and other fees and charges owed with respect to letters of credit securing financial obligations, bankers' acceptance financing and receivables financings,



(3)

the net costs associated with Hedging Obligations,



(4)

amortization of debt issuance costs, debt discount or premium and other financing fees and expenses,



(5)

the interest portion of any deferred payment obligations,



(6)

all other non-cash interest expense,



(7)

capitalized interest,



(8)

all interest payable with respect to discontinued operations, and



(9)

all interest on any Indebtedness of any other Person guaranteed by the relevant Person or any Restricted Subsidiary of the relevant Person.

        "Consolidated Leverage Ratio" means, as of the date of the transaction giving rise to the need to calculate the Consolidated Leverage Ratio (the "Transaction Date"), the ratio of (x) the total principal amount of Indebtedness (or in the case of Indebtedness issued at less than its principal amount at maturity, the accreted value thereof) of QSC and its Restricted Subsidiaries as of the Transaction Date on a pro forma basis after giving effect to all incurrences and repayments of Indebtedness to occur on or substantially concurrently with such Transaction Date (but excluding any Permitted Subordinated Indebtedness to the extent such Subordinated Indebtedness is also excluded from the definition of "Consolidated Leverage Ratio" contained in the Existing QSC Notes Indenture (as in effect on the Issue Date) while the Existing QSC Notes are outstanding) ("Total Indebtedness"), determined on a consolidated basis, less the amount of cash and Cash Equivalents held by QCII, QCF and QSC and its Restricted Subsidiaries on the Transaction Date, to (y) the Consolidated Cash Flow of QSC during the most recent four consecutive full fiscal quarters for which financial statements are available (the "Four-Quarter Period") ending on or prior to the Transaction Date. For purposes of this definition, Total Indebtedness and Consolidated Cash Flow shall be calculated after giving effect on a pro forma basis to:

(1)

the elimination from Total Indebtedness of any existing or future intercompany Indebtedness permitted under Section 4.06(b)(v);



(2)

any Asset Sale or other disposition or Asset Acquisition (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of QSC or any of its Restricted Subsidiaries (including any Person who becomes a Restricted Subsidiary as a result of such Asset Acquisition) incurring Indebtedness and also including any Consolidated Cash Flow (including any pro forma expense and cost reductions calculated on a basis consistent with Regulation S-X under the Exchange Act) associated with any such Asset

5

Acquisition) occurring during the Four-Quarter Period or at any time subsequent to the last day of the Four-Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or Asset Acquisition or other disposition (including the incurrence of, or assumption or liability for, any such Indebtedness or Acquired Indebtedness) occurred on the first day of the Four-Quarter Period; and

(3)

the Designation of an Unrestricted Subsidiary or Redesignation of a Restricted Subsidiary pursuant to Section 4.13 (as if such designation were an Asset Sale or Asset Acquisition under clause (2) above").

If QSC or any of its Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the preceding sentence shall give effect to the incurrence of such guaranteed Indebtedness as if QSC or such Restricted Subsidiary had directly incurred or otherwise assumed such guaranteed Indebtedness.

        "Consolidated Net Income" means, with respect to any Person for any period, the net income (or loss) of any Person and its Restricted Subsidiaries for such period, determined on a consolidated basis, in accordance with GAAP; provided that there shall be excluded from such net income (to the extent otherwise included therein) without duplication:

(1)

the net income (or loss) of any Person (other than a Restricted Subsidiary of the relevant Person) in which any Person other than the relevant Person and the Restricted Subsidiaries of the relevant Person has an ownership interest, except to the extent that cash in an amount equal to any such income has actually been received by the relevant Person or any of its Wholly Owned Restricted Subsidiaries during such period;



(2)

except to the extent included in the Consolidated Net Income of the relevant Person pursuant to the foregoing clause (1), the net income (or loss) of any Person that accrued prior to the date that (a) such Person becomes a Restricted Subsidiary of the relevant Person or is merged into or consolidated with the relevant Person or any Restricted Subsidiary of the relevant Person or (b) the assets of such Person are acquired by the relevant Person or any Restricted Subsidiary of the relevant Person;



(3)

except for purposes of calculating Consolidated Cash Flow, the net income of any Restricted Subsidiary of the relevant Person during such period to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of the relevant Person of that income is not permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary during such period, except that the relevant Person's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining Consolidated Net Income;



(4)

for the purposes of calculating the Restricted Payments Basket only, in the case of a successor to the relevant Person by consolidation, merger or transfer of its assets, any income (or loss) of the successor prior to such merger, consolidation or transfer of assets;



(5)

other than for purposes of calculating the Restricted Payments Basket, any gain (or loss), together with any related provision for taxes on any such gain (or the tax effect of any such loss), realized during such period by the relevant Person or any Restricted Subsidiary of the relevant Person upon (a) the acquisition of any securities, or the extinguishment of any Indebtedness, of the relevant Person or any Restricted Subsidiary of the relevant Person or (b) any Asset Sale by the relevant Person or any Restricted Subsidiary of the relevant Person;



(6)

other than for purposes of calculating the Restricted Payments Basket, any extraordinary gain (or extraordinary loss), together with any related provision for taxes on any such extraordinary

6

gain (or the tax effect of any such extraordinary loss), realized by the relevant Person or any Restricted Subsidiary of the relevant Person during such period;

(7)

any cost, charge or gain (including financing fees and related expenses) arising from the offering of Notes, the offering of the Existing QSC Notes and the issuance of Equity Interests or incurrence of Indebtedness; and



(8)

the effect of any non-cash gain (or loss) as a result of the impairment of goodwill as required by Statement of Financial Accounting Standards ("SFAS") No. 142 and the impairment of assets as required by SFAS 144.

        In addition, any return of capital with respect to an Investment that increased the Restricted Payments Basket pursuant to Section 4.07(a)(iii)(B) or decreased the amount of Investments outstanding pursuant to clause (13) of the definition of "Permitted Investments" shall be excluded from Consolidated Net Income for purposes of calculating the Restricted Payments Basket.

        "Consolidated Total Assets" of any Person means the total amount of assets (less applicable reserves and other properly deductible items) which under GAAP would be included on a consolidated balance sheet of such Person and its Subsidiaries.

        "Credit Agreement" means the Credit Agreement dated as of February 2004 among QCII, QSC, Bank of America, N.A., as administrative agent, and the other lenders named therein, including any notes, guarantees, collateral and security documents, instruments and agreements executed in connection therewith (including Hedging Obligations related to the Indebtedness incurred thereunder), and in each case as amended or refinanced from time to time, including any agreement extending the maturity of, refinancing, replacing or otherwise restructuring (including increasing the amount of borrowings or other Indebtedness outstanding or available to be borrowed thereunder) all or any portion of the Indebtedness under such agreement, and any successor or replacement agreement or agreements with the same or any other agents, creditor, lender or group of creditors or lenders.

        "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.

        "Debt Securities" means any debt securities, as such term is commonly understood, issued in any public offering or private placement and in an outstanding principal amount of more than $100.0 million.

        "Default" means (1) any Event of Default or (2) any event, act or condition that after notice or the passage of time or both would be an Event of Default.

        "Definitive Notes" means Notes that are in the form of Exhibit A-1, Exhibit A-2, Exhibit B-1 or Exhibit B-2 attached hereto that do not include the Global Notes Legend therein.

        "Depository" means, with respect to the Notes issuable or issued in whole or in part in global form, the person specified in Section 2.03 as the Depository with respect to the Notes, until a successor shall have been appointed and become such pursuant to the applicable provisions of this Indenture, and thereafter, "Depository" shall mean or include such successor.

        "Designated Senior Debt" means (1) Senior Debt under or in respect of the Credit Agreement or (2) in the event no amounts are outstanding or available under the Credit Agreement, any other Indebtedness constituting Senior Debt in an aggregate amount of $100.0 million or more which, at the time of determination, is specifically designated in the instrument evidencing such Senior Debt as "Designated Senior Debt" by QSC.

        "Disqualified Equity Interest" of any Person means any Equity Interest of such Person that, by its terms, or by the terms of any related agreement or of any security into which it is convertible, puttable or exchangeable, is, or upon the happening of any event or the passage of time would be, required to

7

be redeemed by such Person, whether or not at the option of the holder thereof, or matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, in whole or in part, on or prior to the date which is 91 days after the final maturity date of the applicable series of Notes; provided, however, that any class of Equity Interests of such Person that, by its terms, authorizes such Person to satisfy in full its obligations with respect to the payment of dividends or upon maturity, redemption (pursuant to a sinking fund or otherwise) or repurchase thereof or otherwise by the delivery of Equity Interests that are not Disqualified Equity Interests, and that are not convertible, puttable or exchangeable for Disqualified Equity Interests or Indebtedness, will not be deemed to be Disqualified Equity Interests so long as such Person satisfies its obligations with respect thereto solely by the delivery of Equity Interests that are not Disqualified Equity Interests; provided, further, however, that any Equity Interests that would not constitute Disqualified Equity Interests but for provisions thereof giving holders thereof (or the holders of any security into or for which such Equity Interests are convertible, exchangeable or exercisable) the right to require such Person to redeem such Equity Interests upon the occurrence of a change in control occurring prior to the final maturity date of the Notes shall not constitute Disqualified Equity Interests if the change in control provisions applicable to such Equity Interests are no more favorable to such holders than the provisions described under Section 4.11 and such Equity Interests specifically provides that such Person will not redeem any such Equity Interests pursuant to such provisions prior to the Company's or QSC's purchase of the Notes as required pursuant to Section 4.11.

        "Equity Interests" of any Person means (1) any and all shares or other equity interests (including common stock, preferred stock, limited liability company interests and partnership interests) in such Person and (2) all rights to purchase, warrants or options (whether or not currently exercisable), participations or other equivalents of or interests in (however designated) such shares or other interests in such Person.

        "Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended.

        "Exchange Notes" has the meaning stated in the first recital of this Indenture.

        "Exchange Offer" has the meaning set forth in the Registration Rights Agreement.

        "Existing QSC Notes" means the 13% Senior Subordinated Notes due 2007 of QSC, the 13¹/2% Senior Subordinated Secured Notes due 2010 of QSC and the 14% Senior Subordinated Secured Notes due 2014 of QSC, as the same may be amended and in effect from time to time, unless otherwise specified as in effect on a certain date.

        "Existing QSC Notes Indenture" means the Indenture dated as of December 26, 2002, among QSC, the Guarantors named therein and J.P. Morgan Trust Company, National Association, as successor-in-interest to Bank One Trust Company, N.A., relating to the Existing Senior Sub Notes, as the same may be amended and in effect from time to time.

        "Existing 2008 Note Indentures" means the Indentures dated as of November 4, 1998 and November 27, 1998, respectively, between QCII and Bankers Trust Company relating to the Existing 2008 Notes, as the same has been amended and in effect from time to time, unless otherwise specified as in effect on a certain date.

        "Existing 2008 Notes" means the 7.50% Senior Notes due 2008 of QCII and the 7.25% Senior Notes due 2008 of QCII issued under the Existing 2008 Note Indentures.

        "Fair Market Value" means, with respect to any asset, the price (after taking into account any liabilities relating to such assets) that would be negotiated in an arm's-length transaction for cash between a willing seller and a willing and able buyer, neither of which is under any compulsion to complete the transaction, as such price is determined in good faith by the applicable Board of

8

Directors or a duly authorized committee thereof, as evidenced by a resolution of such Board or committee.

        "Fixed Rate Notes" means the 2011 Notes and the 2014 Notes issued under this Indenture.

        "Floating Rate Notes" means the Floating Rate Senior Notes due 2009, Series A, and the Floating Rate Senior Notes due 2009, Series B.

        "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession of the United States as in effect from time to time.

        "Global Note" means a Note that is in the form of Exhibit A-1, Exhibit A-2, Exhibit B-1 or Exhibit B-2 hereto that includes the Global Notes Legend therein.

        "Global Notes Legend" means the legend set forth in the first paragraph of Exhibit A-1 and Exhibit A-2 hereto.

        "guarantee" means a direct or indirect guarantee by any Person of any Indebtedness of any other Person and includes any obligation, direct or indirect, contingent or otherwise, of such Person: (1) to purchase or pay (or advance or supply funds for the purchase or payment of) Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services (unless such purchase arrangements are on arm's-length terms and are entered into in the ordinary course of business), to take-or-pay, or to maintain financial statement conditions or otherwise); or (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part). "guarantee," when used as a verb, and "guaranteed" have correlative meanings.

        "Guarantors" means QSC, QCF and each other Person that is required to become a Guarantor by the terms hereof after the Issue Date, in each case until such Person is released from its Note Guarantee.

        "Hedging Obligations" of any Person means the obligations of such Person pursuant to (1) any interest rate swap agreement, interest rate collar agreement or other similar agreement or arrangement designed to protect such Person against fluctuations in interest rates, (2) agreements or arrangements designed to protect such Person against fluctuations in foreign currency exchange rates in the conduct of its operations, or (3) any forward contract, commodity swap agreement, commodity option agreement or other similar agreement or arrangement designed to protect such Person against fluctuations in commodity prices, in each case entered into in the ordinary course of business for bona fide hedging purposes and not for the purpose of speculation.

        "Holder" or "Noteholder" means the Person in whose name a Note is registered on the Registrar's books.

        "Indebtedness" of any Person at any date means, without duplication:

(1)

all liabilities, contingent or otherwise, of such Person for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof);



(2)

all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;

9

(3)

all obligations of such Person in respect of letters of credit or other similar instruments (or reimbursement obligations with respect thereto);



(4)

all obligations of such Person to pay the deferred and unpaid purchase price of property or services, except trade payables and accrued expenses incurred by such Person in the ordinary course of business in connection with obtaining goods, materials or services;



(5)

the maximum fixed redemption or repurchase price of all Disqualified Equity Interests of such Person or liquidation preference of any Preferred Stock of any Restricted Subsidiary of such Person;



(6)

all Capitalized Lease Obligations of such Person;



(7)

all Indebtedness of others secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person;



(8)

all Indebtedness of others guaranteed by such Person to the extent of such guarantee; provided that Indebtedness of such Person or its Subsidiaries that is guaranteed by such Person or its Subsidiaries shall only be counted once in the calculation of the amount of Indebtedness of such Person and its Subsidiaries on a consolidated basis;



(9)

all Attributable Indebtedness;



(10)

to the extent not otherwise included in this definition, Hedging Obligations of such Person; and



(11)

all obligations of such Person under conditional sale or other title retention agreements relating to assets purchased by such Person.

        The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above, the maximum liability of such Person for any such contingent obligations at such date and, in the case of clause (7), the lesser of (a) the Fair Market Value of any asset subject to a Lien securing the Indebtedness of others and (b) the amount of the Indebtedness secured. For purposes of clause (5), the principal amount of any "Indebtedness" which is in the form of Preferred Stock or Disqualified Equity Interests shall be the greater of the maximum fixed redemption or repurchase price or liquidation preference thereof. "Indebtedness" shall not include any obligation that did not constitute Indebtedness at the time of its incurrence but is subsequently treated as Indebtedness by reason of a change in GAAP or in the application of GAAP and shall not include the Outstanding UPOs at any time.

        "Indenture" means this Indenture as amended or supplemented from time to time.

        "Independent Director" means a director of QCII who

(1)

is independent with respect to the transaction at issue;



(2)

does not have any material financial interest in QCII or any of its Affiliates (other than as a result of holding securities of QCII and its Subsidiaries); and



(3)

has not and whose Affiliates or affiliated firm has not, at any time during the twelve months prior to the taking of any action hereunder, directly or indirectly, received, or entered into any understanding or agreement to receive, any material compensation, payment or other benefit, of any type or form, from QCII or any of its Affiliates, other than customary directors' fees for serving on the Board of Directors of QCII or any committee thereof or any Affiliate and reimbursement of out-of-pocket expenses for attendance at QCII's or an Affiliate's board and board committee meetings.

10

        "Independent Financial Advisor" means an accounting, appraisal or investment banking firm of nationally recognized standing that is, in the reasonable judgment of the Company's Board of Directors, qualified to perform the task for which it has been engaged and disinterested and independent with respect to the Company and its Affiliates.

        "Initial Notes" has the meaning stated in the first recital of this Indenture.

        "Insolvency Event" means an event of the type set forth in Section 6.01(g) or (h).

        "interest" means with respect to the Notes, interest and Additional Interest, if any, on the Notes.

        "Investment Grade Rating" means (i) with respect to Moody's (or any successor to the rating agency business thereof), a rating equal to or higher than Baa3 (or the equivalent), and (ii) with respect to S&P (or any successor to the rating agency business thereof), a rating equal to or higher than BBB- (or the equivalent).

        "Investments" of any Person means:

(1)

all direct or indirect investments by such Person in any other Person in the form of loans, advances or capital contributions or other credit extensions constituting Indebtedness of such other Person, and any guarantee of Indebtedness of any other Person;



(2)

all purchases (or other acquisitions for consideration) by such Person of Indebtedness, Equity Interests or other securities of any other Person;



(3)

all other items that would be classified as investments (including purchases of assets outside the ordinary course of business) on a balance sheet of such Person prepared in accordance with GAAP; and



(4)

the Designation of any Subsidiary as an Unrestricted Subsidiary.

Except as otherwise expressly specified in this definition, the amount of any Investment (other than an Investment made in cash) shall be the Fair Market Value thereof on the date such Investment is made. The amount of Investment pursuant to clause (4) shall be the Designation Amount determined in accordance with Section 4.13. If the relevant Person or any Subsidiary of the relevant Person sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary, the relevant Person shall be deemed to have made an Investment on the date of any such sale or other disposition equal to the Fair Market Value of the Equity Interests of and all other Investments in such Subsidiary not sold or disposed of, which amount shall be determined by the Board of Directors of QCII. The acquisition by the relevant Person or any Restricted Subsidiary of the relevant Person of a Person that holds an Investment in a third Person shall be deemed to be an Investment by the relevant Person or such Restricted Subsidiary in the third Person in an amount equal to the Fair Market Value of the Investment held by the acquired Person in the third Person. Notwithstanding the foregoing, purchases or redemptions of Equity Interests of the relevant Person shall be deemed not to be Investments.

        "Issue Date" means the date on which the Initial Notes are issued under this Indenture.

        "Lien" means, with respect to any asset, any mortgage, deed of trust, lien (statutory or other), pledge, lease, easement, restriction, covenant, charge, security interest or other encumbrance of any kind or nature in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, and any lease in the nature thereof, any option or other agreement to sell, and any filing of, or agreement to give, any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction (other than cautionary filings in respect of operating leases).

        "Moody's" means Moody's Investors Service, Inc. and its successors.

11

        "Net Available Proceeds" means, with respect to any Asset Sale, the proceeds thereof in the form of cash or Cash Equivalents, net of

(1)

brokerage commissions and other fees and expenses (including fees and expenses of legal counsel, accountants and investment banks) of such Asset Sale;



(2)

provisions for taxes payable as a result of such Asset Sale (after taking into account any available tax credits or deductions and any tax sharing arrangements);



(3)

except in the case of Collateral, amounts required to be paid to any Person (other than QCII or any Restricted Subsidiary of QCII) owning a beneficial interest in the assets subject to the Asset Sale or having a Lien thereon;



(4)

payments of unassumed liabilities (not constituting Indebtedness) relating to the assets sold at the time of, or within 30 days after the date of, such Asset Sale; and



(5)

appropriate amounts to be provided by QCII or any Restricted Subsidiary of QCII, as the case may be, as a reserve required in accordance with GAAP against any liabilities associated with such Asset Sale and retained by QCII or any Restricted Subsidiary of QCII, as the case may be, after such Asset Sale, including pensions and other post employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as reflected in an Officers' Certificate delivered to the Trustee; provided, however, that any amounts remaining after adjustments, revaluations or liquidations of such reserves shall constitute Net Available Proceeds.

        "Non-Recourse Debt" means, with respect to any Person, Indebtedness of such Person:

(1)

in the case of an Unrestricted Subsidiary, as to which neither QCII nor any Restricted Subsidiary of QCII (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise, or (c) constitutes the lender;



(2)

in the case of an Unrestricted Subsidiary only, no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness of QCII or any Restricted Subsidiary of QCII to declare a default on the other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and



(3)

in the case of an Unrestricted Subsidiary only, as to which the lenders have been notified in writing that they will not have any recourse to the Equity Interests or assets of QCII or any Restricted Subsidiary of QCII (other than the Equity Interests in the Unrestricted Subsidiary).

        "Note Guarantee" means, in respect of any Guarantor, the unconditional guarantee by such Guarantor of the Company's Obligations under the Notes.

        "Notes" has the meaning stated in the first recital of this Indenture and more particularly means any Notes authenticated and delivered under this Indenture. For all purposes of this Indenture, the term "Notes" shall include any Additional Notes and Exchange Notes to be issued and exchanged for any Initial Notes pursuant to the Registration Rights Agreement and this Indenture. All Notes including any such Additional Notes shall vote together as one series of Notes under this Indenture.

        "Notes Custodian" means the custodian with respect to any Global Note (as appointed by the Depository), or any successor entity thereto covered in Section 2.03.

        "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, costs, expenses, damages and other liabilities payable under the documentation governing any Indebtedness.

12

        "Officers" means for any Person: the Chairman of the Board of Directors, the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, the Treasurer or the Secretary.

        "Officers' Certificate" means a certificate signed by two Officers.

        "Opinion of Counsel" means a written opinion from legal counsel who is reasonably acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. As to matters of fact, an Opinion of Counsel may conclusively rely on an Officers' Certificate, without any independent investigation.

        "Pari Passu Indebtedness" means, with respect to QCII or any Guarantor, any Indebtedness of such obligor that ranks pari passu as to payment (whether with respect to security or Liens on Collateral) with the Notes or the Guarantees, as applicable.

        "Permitted Collateral Liens" means, with respect to the Collateral:

(1)

Liens on the Collateral to secure Senior Debt, including Obligations under the Credit Agreement; provided that the aggregate principal amount of Indebtedness secured under this clause (1) and under clause (10) of Permitted Liens does not exceed the amount provided for under clauses (x) and (y) of such clause (10);



(2)

Liens on the Collateral to secure the QSC Guarantee;



(3)

Liens on the Collateral to secure Indebtedness (other than Subordinated Indebtedness) of QSC and related Obligations initially incurred after the Issue Date; provided that such Liens are junior to Liens to secure Senior Debt and equal and ratable with the Liens to secure the QSC Guarantee in the same manner and at least to the same extent (including with respect to control rights in favor of senior lien holders) as the Liens securing the QSC Guarantee are to Senior Debt; and



(4)

Liens on the Collateral to secure Permitted Subordinated Indebtedness, the QSC guaranty of the Existing 2008 Notes, the Existing QSC Notes and any Additional QSC Notes (provided that the aggregate principal amount of Existing QSC Notes and Additional QSC Notes does not exceed $4.0 billion), and Obligations related to the foregoing, to the extent that such Liens on the Collateral are junior and subordinate in priority to the Liens securing the Obligations in respect of the QSC Guarantee referred to in the preceding clause (3) and Senior Debt in the same manner and at least to the same extent (including with respect to control rights in favor of senior lien holders) as the Liens securing the QSC Guarantee and this Indenture are to the Liens securing Senior Debt.

        "Permitted Investments" means:

(1)

Investments by QCII or any Restricted Subsidiary of QCII in (a) any Restricted Subsidiary or (b) any Person that is or will become immediately after such Investment a Restricted Subsidiary of QSC or that will merge or consolidate into QSC or a Restricted Subsidiary of QSC;



(2)

Investments in QCII by any Restricted Subsidiary of QCII and Investments by QCII in an Unrestricted Subsidiary as permitted by Section 4.15;



(3)

Investments by QCII in, or Investments in the Company by, a newly formed Wholly Owned Restricted Subsidiary of QCII formed in accordance with the penultimate paragraph of Section 5.01;



(4)

loans and advances to directors, employees and officers of QCII and the Restricted Subsidiaries of QCII for bona fide business purposes and to purchase Equity Interests of the Company not in excess of $10.0 million at any one time outstanding;

13

(5)

Hedging Obligations incurred pursuant to Section 4.06(b)(5);



(6)

Cash Equivalents;



(7)

receivables owing to QCII or any Restricted Subsidiary of QCII if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as QCII or any such Restricted Subsidiary of QCII deems reasonable under the circumstances;



(8)

Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers;



(9)

Investments made by QCII or any Restricted Subsidiary of QCII as a result of consideration received in connection with an Asset Sale made in compliance with Section 4.09 (except to the extent allocated to clause (13) below by the terms thereof);



(10)

lease, utility and other similar deposits in the ordinary course of business;



(11)

Investments made by QCII or a Restricted Subsidiary of QCII for consideration consisting only of Qualified Equity Interests of QCII;



(12)

stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to QCII or any Restricted Subsidiary of QCII or in satisfaction of judgments; and



(13)

other Investments in Persons other than QCII or any of its Restricted Subsidiaries in an aggregate amount not to exceed 5% of QCII's Consolidated Total Assets at any one time outstanding (with each Investment being valued as of the date made and without regard to subsequent changes in value).

        The amount of Investments outstanding at any time pursuant to clause (13) above shall be deemed to be reduced upon the disposition or repayment of or return on any Investment made pursuant to clause (13) above, by an amount equal to the return of capital with respect to such Investment to QCII or any Restricted Subsidiary of QCII (to the extent not included in the computation of Consolidated Net Income), less the cost of the disposition of such Investment and net of taxes. Upon a Redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, there shall be deemed a return of the Investment by an amount equal to the lesser of (x) the Fair Market Value of QCII's direct or indirect Investment in such Subsidiary immediately following such Redesignation, and (y) the aggregate amount of Investments in such Subsidiary that either increased (and did not previously decrease) the amount of Investments outstanding pursuant to clause (13) above or reduced the Restricted Payments Basket.

        "Permitted Junior Securities" means

(1)

Equity Interests in QSC; or



(2)

debt securities provided for in a plan of reorganization under any Bankruptcy Law that are subordinated to (a) all Senior Debt and (b) any debt securities issued in exchange for the QSC Guarantee to substantially the same extent as, or to a greater extent than, the QSC Guarantee is subordinated to Senior Debt under this Indenture.

        "Permitted Liens" means (A) with respect to assets constituting Collateral, Permitted Collateral Liens and (B) with respect to assets not constituting Collateral (including any assets that once constituted but no longer constitute Collateral for the QSC Guarantee), the following types of Liens:

(1)

Liens for taxes, assessments, governmental charges, levies or claims which are not yet delinquent or which are being contested in good faith by appropriate proceedings, if a reserve

14

or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor;

(2)

other Liens incidental to the conduct of the Company's or its Restricted Subsidiaries' business or the ownership of its property and assets not securing any Indebtedness, and which do not in the aggregate materially detract from the value of the Company's or its Restricted Subsidiaries' property or assets, or materially impair the use thereof in the operation of its business;



(3)

Liens, pledges and deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of statutory obligations;



(4)

Liens, pledges or deposits made to secure the performance of tenders, bids, leases, public or statutory obligations, sureties, stays, appeals, indemnities, performance or other similar bonds and other obligations of like nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money);



(5)

zoning restrictions, servitudes, easements, rights-of-way, restrictions and other similar charges or encumbrances incurred in the ordinary course of business which, in the aggregate, do not materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Company or its Restricted Subsidiaries;



(6)

Liens arising out of judgments or awards against or other court proceedings concerning the Company or its Subsidiaries with respect to which the Company or its Subsidiaries is prosecuting an appeal or proceeding for review and the Company or any of its Subsidiaries is maintaining adequate reserves in accordance with GAAP;



(7)

any interest or title of a lessor in the property subject to any lease other than a Capitalized Lease;



(8)

Liens existing on the Issue Date securing Indebtedness permitted under Section 4.06(b)(iv), and Liens securing any Refinancing Indebtedness of such Indebtedness; provided that such Liens do not extend to any additional assets (other than improvements thereon or replacements thereof);



(9)

Liens securing treasury management arrangements or other cash management services as described under Section 4.06(b)(iii);



(10)

Liens on assets of QSC securing an aggregate principal amount of Indebtedness (other than Subordinated Indebtedness) and related Obligations outstanding at any time, including under the Credit Agreement, not to exceed the greater of (x) $2.50 billion and (y) the maximum amount of Indebtedness, determined at the time of incurrence of the relevant Lien under this clause (10) after giving effect thereto and to the use of proceeds of the Indebtedness to be secured, that may be incurred without exceeding a Senior Leverage Ratio of QSC of 2.90:1.0 (it being understood that monetary obligations not constituting Indebtedness shall not be included in this calculation but shall nonetheless be permitted to be secured); provided that the aggregate principal amount of Indebtedness secured under this clause (10) and under clause (1) of Permitted Collateral Liens does not exceed the amount provided for in the preceding clauses (x) and (y);



(11)

Liens in favor of the Company or a Guarantor;



(12)

Liens on the assets of a Restricted Subsidiary of QSC other than assets constituting or required to be pledged as Collateral and Liens on assets of Subsidiaries of QCII other than QCF and QSC and its Restricted Subsidiaries;

15

(13)

Liens on Equity Interests in QCF and QSC previously pledged to secure the Existing 2008 Notes and the Existing QSC Notes and related Obligations and any Additional QSC Notes issued after the Issue Date such that the aggregate principal amount of Existing QSC Notes and Additional QSC Notes would not exceed $4.0 billion; and



(14)

Liens on Equity Interests of any Restricted Subsidiary held by QSC securing Indebtedness of QSC incurred in compliance with this Indenture that is incurred to finance the acquisition of the relevant Restricted Subsidiary; provided that no material assets of any other Restricted Subsidiary are at the time held by the relevant Restricted Subsidiary.

        "Permitted Subordinated Indebtedness" means Subordinated Indebtedness of QSC (other than the Existing QSC Notes and any Additional QSC Notes); provided that such new Subordinated Indebtedness (1) is subordinated to Senior Debt, the Notes and any Pari Passu Indebtedness in the same manner and at least to the same extent as set forth herein and (2) matures no earlier than the seventh anniversary of the Issue Date.

        "Permitted Telecommunications Capital Asset Disposition" means the transfer, conveyance, sale, lease or other disposition of a capital asset that is a Telecommunications Asset (including fiber, conduit and related equipment) (i) the proceeds of which are treated as revenues by QCII in accordance with GAAP and (ii) that, in the case of the sale of fiber, would not result in QCII and its Restricted Subsidiaries retaining less than 24 fibers per route mile on any segment of QCII's and its Restricted Subsidiaries' network.

        "Person" means any individual, corporation, partnership, limited liability company, joint venture, incorporated or unincorporated association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof or any other entity of any kind.

        "Pledge Agreement" means the Security and Pledge Agreement, between QSC and the Collateral Agent dated as of the Issue Date, as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof.

        "Preferred Stock" means with respect to any Person, any and all preferred or preference stock or other equity interests (however designated) of such Person whether now outstanding or issued after the Issue Date.

        "Primary Treasury Dealer" means a primary U.S. Government Obligations dealer in The City of New York.

        "principal" means, with respect to the Notes, the principal of and premium, if any, on the Notes.

        "Purchase Money Indebtedness" means Indebtedness, including Capitalized Lease Obligations, of QSC or any of its Restricted Subsidiaries incurred after the Issue Date for the purpose of financing all or any part of the cost of the construction, installation, acquisition or improvement by QSC or any of its Restricted Subsidiaries of any new Telecommunications Assets constructed, installed, acquired or improved after the 270th day prior to the Issue Date; provided, however, that (1) the amount of such Indebtedness shall not exceed such purchase price or cost, and (2) such Indebtedness shall be incurred within 270 days of such acquisition of such asset by QSC or such Restricted Subsidiary or such construction, installation, acquisition or improvement and the proceeds of such Indebtedness shall be expended for such purposes within such 270-day period.

        "QCC" means Qwest Communications Corporation, a Delaware corporation, and its permitted successors and assigns.

        "QCF" means Qwest Capital Funding, Inc., a Colorado corporation, and its permitted successors and assigns.

        "QCF Guarantee" means the guarantee by QCF of the Notes.

16

        "QCII" means Qwest Communications International Inc., a Delaware corporation, and its permitted successors and assigns.

        "QCII Ratio" means (a) the ratio of (A) the aggregate consolidated principal amount of Indebtedness of QCII outstanding as of the most recent available quarterly or annual balance sheet date, after giving pro forma effect to the incurrence of such Indebtedness and the incurrence of any other Indebtedness incurred or repaid since the balance sheet date and the receipt and application of the proceeds thereof, to (B) Consolidated Cash Flow (but determined by reference to QCII and its Restricted Subsidiaries, rather than QSC and its Restricted Subsidiaries) for the four fiscal quarters preceding the incurrence of such Indebtedness for which consolidated financial statements are available, and (b) QCII's Consolidated Capital Ratio (as defined in the Existing 2008 Note Indentures, as in effect at the original issuance date of the Existing QSC Notes) as of the most recent available quarterly or annual balance sheet date, after giving pro forma effect to the incurrence of such Indebtedness and the incurrence of any other Indebtedness incurred or repaid since the balance sheet date and the receipt and application of the proceeds thereof. The QCII Ratio will be satisfied and QCII will be considered as permitted to incur $1.00 of Indebtedness if either (1) the ratio in the preceding clause (a) is less than 5.0:1.0 or (2) the ratio in the preceding clause (b) is less than 2.0:1.0.

        "QSC Guarantee" means the guarantee by QSC of the Notes.

        "Qualified Equity Interests" means Equity Interests of QCII other than Disqualified Equity Interests; provided that such Equity Interests shall not be deemed Qualified Equity Interests to the extent sold or owed to a Subsidiary of QCII or financed, directly or indirectly, using funds (1) borrowed from QCII or any Subsidiary of QCII until and to the extent such borrowing is repaid or (2) contributed, extended, guaranteed or advanced by QCII or any Subsidiary of QCII (including, without limitation, in respect of any employee stock ownership or benefit plan).

        "Qualified Senior Debt" means Senior Debt other than Senior Debt incurred to finance the acquisition of the relevant Restricted Subsidiary whose Equity Interests are to be pledged; provided that no material assets of any other Restricted Subsidiary are at any time held by the relevant Restricted Subsidiary.

        "Qwest Corporation" means Qwest Corporation, a Colorado corporation, and its successors.

        "Rating Agencies" means Moody's and S&P.

        "Rating Category" means (i) with respect to S&P, any of the following categories: BB, B, CCC, CC, C and D (or equivalent successor categories); (ii) with respect to Moody's, any of the following categories: Ba, B, Caa, Ca, C and D (or equivalent successor categories); and (iii) the equivalent of any such category of S&P or Moody's used by another Rating Agency. In determining whether the rating of the Notes has decreased by one or more gradations, gradations within Rating Categories (+ and - for S&P; 1, 2 and 3 for Moody's; or the equivalent gradations for another Rating Agency) shall be taken into account (e.g., with respect to S&P, a decline in a rating from BB+ to BB, as well as from BB to B+, will constitute a decrease of one gradation).

        "Rating Date" means the date which is 90 days prior to the earlier of (x) a Change of Control and (y) public notice of the occurrence of a Change of Control or of the intention by QCII to effect a Change of Control.

        "Rating Decline" means the decrease (as compared with the Rating Date) by one or more gradations (including gradations within Rating Categories as well as between Rating Categories) of the rating of the Notes by both Rating Agencies on or within six months after the date of public notice of the occurrence of a Change of Control or of the intention by QCII to effect a Change of Control (which period shall be extended for so long as the rating of the Notes is under publicly announced consideration for possible downgrade by any of the Rating Agencies).

17

        "redeem" means to redeem, repurchase, purchase, defease, retire, discharge or otherwise acquire or retire for value; and "redemption" shall have a correlative meaning; provided that this definition shall not apply for purposes of Section 3.07.

        "Redesignation" has the meaning given to such term in Section 4.13.

        "Reference Treasury Dealer" means each of Banc of America Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and UBS Warburg LLC and their respective successors or any of their affiliates; provided, however, that if any of the foregoing shall cease to be a Primary Treasury Dealer, the Company shall substitute therefor another Primary Treasury Dealer.

        "Reference Treasury Dealer Quotation" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Company, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Company by such Reference Treasury Dealer at 5:00 p.m. on the third business day preceding such redemption date.

        "refinance" means to refinance, repay, prepay, replace, renew or refund.

        "Refinancing Indebtedness" means, without duplication for any other incurrence of Indebtedness (of any type), Indebtedness (of any type) of QSC or any of its Restricted Subsidiaries issued in exchange for, or the proceeds of which are in an amount which is to be used within the next 365 days to redeem or refinance in whole or in part, any Indebtedness (of any type) of QSC or any of its Restricted Subsidiaries (the "Refinanced Indebtedness") in a principal amount not in excess of the principal amount of the Refinanced Indebtedness so repaid or amended (or, if such Refinancing Indebtedness refinances Indebtedness under a revolving credit facility or other agreement providing a commitment for subsequent borrowings, with a maximum commitment not to exceed the maximum commitment under such revolving credit facility or other agreement); provided that:

(1)

if the Refinanced Indebtedness was Subordinated Indebtedness, then such Refinancing Indebtedness, by its terms, is Subordinated Indebtedness (other than if the Refinanced Indebtedness is Existing QSC Notes and any Additional QSC Notes) and such Refinancing Indebtedness is the obligation of the same Person as that of the Refinanced Indebtedness or is otherwise Subordinated Indebtedness;



(2)

the Refinancing Indebtedness is scheduled to mature either (a) no earlier than the Refinanced Indebtedness being repaid or amended or (b) after the maturity date of the Notes; and



(3)

the portion, if any, of the Refinancing Indebtedness that is scheduled to mature on or prior to the maturity date of the Notes has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is incurred that is equal to or greater than the Weighted Average Life to Maturity of the portion of the Refinanced Indebtedness being repaid that is scheduled to mature on or prior to the maturity date of the Notes.

        "Registration Rights Agreement" means (i) with respect to the Initial Notes issued on the date hereof, the Registration Rights Agreement dated February 2004, among the Company, the Guarantors and the other parties named on the signature pages thereof, as such agreement may be amended, modified, or supplemented from time to time in accordance with the terms thereof and (ii) with respect to any Additional Notes, one or more registration rights agreements among the Company, the Guarantors and the other parties thereto, as such agreements may be amended, modified or supplemented from time to time, relating to the rights given by the Company to the purchasers of Additional Notes to register such Additional Notes under the Securities Act.

        "Representative" means any agent or representative in respect of any Designated Senior Debt; provided that if, and for so long as, any Designated Senior Debt lacks such representative, then the

18

Representative for such Designated Senior Debt shall at all times constitute the holders of a majority in outstanding principal amount of such Designated Senior Debt.

        "Restricted Notes Legend" means the legend set forth in the second paragraph of Exhibit A-1 and Exhibit A-2 hereto.

        "Restricted Payment" means any of the following:

(1)

the declaration or payment of any dividend or any other distribution on Equity Interests of QCII or any Restricted Subsidiary of QCII or any payment made to the direct or indirect holders (in their capacities as such) of Equity Interests of QCII or any Restricted Subsidiary of QCII, excluding (a) dividends or distributions payable solely in Qualified Equity Interests and (b) in the case of Restricted Subsidiaries of QCII, dividends or distributions payable to QCII or to a Restricted Subsidiary and pro rata dividends or distributions payable to minority stockholders of any Restricted Subsidiary;



(2)

the purchase, retirement, redemption or other acquisition for value of any Equity Interests of QCII or any Restricted Subsidiary of QCII, but excluding any such Equity Interests held by QCII or any Restricted Subsidiary;



(3)

any Investment other than a Permitted Investment; or



(4)

any purchase, retirement, redemption or other acquisition for value prior to the date which is 365 days prior to any scheduled maturity, scheduled repayment of principal or sinking fund payment, as the case may be, in respect of Subordinated Indebtedness.

        "Restricted Subsidiary" means any Subsidiary of QSC or the Company, as the case may be, other than an Unrestricted Subsidiary.

        "Sale and Leaseback Transaction" means any arrangement with any Person providing for the leasing to the Company or any Restricted Subsidiary of any real or tangible personal property (except for leases between or among the Company and any of the Restricted Subsidiaries), which property has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person in contemplation of such leasing.

        "S&P" means Standard & Poor's Ratings Services, a division of the McGraw-Hill Companies, Inc., and its successors.

        "SEC" means the U.S. Securities and Exchange Commission.

        "Secretary's Certificate" means a certificate signed by the Secretary of the Company.

        "Securities Act" means the U.S. Securities Act of 1933, as amended.

        "Security Documents" means, collectively,

(1)

the Pledge Agreement relating to the Collateral; and



(2)

all security agreements, mortgages, deeds of trust, pledges, collateral assignments and other agreements or instruments evidencing or creating any security in favor of the Trustee or the Collateral Agent in any or all of the Collateral, in each case as amended from time to time in accordance with their terms.

        "Senior Debt" means the principal of, premium, if any, interest (including any interest accruing subsequent to (or that would accrue but for) the filing of a petition of bankruptcy at the rate provided

19

for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of:

(1)

all monetary obligations of QSC of every nature under, or with respect to, the Credit Agreement, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities (and guarantees thereof);



(2)

all monetary obligations of QSC of every nature under, or with respect to, any other Indebtedness (other than obligations in respect of Subordinated Indebtedness), including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities (and guarantees thereof); and



(3)

all monetary obligations of QSC in respect of treasury management arrangements or other cash management services performed by lenders (or their affiliates) under the Credit Agreement or any other credit facility in an aggregate amount at any time outstanding not to exceed $350.0 million;

in each case whether outstanding on the Issue Date or thereafter incurred; provided, that the aggregate principal amount of Senior Debt outstanding at any time under clause (2), after taking account of clause (1), shall not result in the principal amount of Senior Debt under clause (1) and (2) exceeding the greater of (x) $2.5 billion or (y) the maximum amount, determined at the time of incurrence of the relevant Indebtedness sought to be designated as Senior Debt and after giving effect thereto and the use of proceeds therefrom, that may be incurred without exceeding a Senior Leverage Ratio of 2.90:1.00 (it being understood that monetary obligations not constituting Indebtedness shall not be included in the calculation of this amount but shall nonetheless constitute "Senior Debt"). The foregoing amounts shall be determined only at the time of incurrence of the relevant Indebtedness.

        In addition, without limiting the foregoing, "Senior Debt" shall include all Hedging Obligations in respect of the Credit Agreement and any other Senior Debt.

        Notwithstanding the foregoing, "Senior Debt" shall not include:

(1)

any Indebtedness of QSC to QCII or any of its Subsidiaries;



(2)

Indebtedness to, or guaranteed on behalf of, any director, officer or employee of QCII or any of its Subsidiaries (including, without limitation, amounts owed for compensation);



(3)

obligations to trade creditors;



(4)

Indebtedness represented by Disqualified Equity Interests or Preferred Stock of any Person;



(5)

any liability for taxes owed or owing by QSC;



(6)

that portion of any Indebtedness incurred in violation of Section 4.06 or the Senior Leverage Ratio (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (6) if the holder(s) of such obligation or their representative shall have received an Officers' Certificate of the Company to the effect that the incurrence of such Indebtedness does not (or, in the case of revolving credit indebtedness, that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate such provisions of the Indenture);



(7)

Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to QSC;



(8)

any Indebtedness represented by the Existing QSC Notes or any other Senior Subordinated Notes issued under the Existing QSC Notes Indenture and QSC's guarantee of the Existing 2008 Notes;

20

(9)

any Indebtedness that is secured by a Lien on Collateral that does not rank prior to the Lien on the Collateral securing the Notes; and



(10)

any Indebtedness (other than Indebtedness secured by any of the Collateral and possessing a priority senior to the QSC Notes) of QSC which is, by its express terms, subordinated in right of payment to any other Indebtedness of QSC (but excluding in any event Indebtedness described in clause (1) of the definition of "Senior Debt"; it being understood that the mere subordination of liens on Collateral to secure Indebtedness which would otherwise constitute Senior Debt is not disqualifying under this clause (10)).

        "Senior Leverage Ratio" means shall mean the Consolidated Leverage Ratio with the following adjustments: clause (x) of the definition of Consolidated Leverage Ratio shall only include, without duplication, Senior Debt (prior to a Termination Event), Indebtedness of QSC that has a Lien on any of the Collateral that ranks prior to the Lien on the Collateral securing the QSC Guarantee, Indebtedness of a Restricted Subsidiary of QSC and Indebtedness secured by any asset of QSC (other than Collateral); provided that cash and Cash Equivalents shall not be offset against any Indebtedness.

        "Significant Subsidiary" means (1) any Restricted Subsidiary that would be a "significant subsidiary" as defined in Regulation S-X promulgated pursuant to the Securities Act as such Regulation is in effect on the Issue Date and (2) any Restricted Subsidiary that, when aggregated with all other Restricted Subsidiaries that are not otherwise Significant Subsidiaries and as to which any event described in clause (g) or (h) under Section 6.01 has occurred and is continuing, would constitute a Significant Subsidiary under clause (1) of this definition.

        "Start Date" means March 31, 1997.

        "Subordinated Indebtedness" means (1) Indebtedness of the Company, the Guarantors or any Restricted Subsidiary that is subordinated in right of payment to the Notes or the Note Guarantees, as applicable, and (2) any other Indebtedness of QCII and its Subsidiaries (other than the Company and its Restricted Subsidiaries) that is an Obligation solely of a Person or Persons other than the Company and its Restricted Subsidiaries.

        "Subsidiary" means, with respect to any Person, (i) any corporation, limited liability company, association or other business entity of which more than 50% of the total voting power of the Equity Interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Board of Directors thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). Unless otherwise specified, "Subsidiary" refers to a Subsidiary of QCII or QSC, as the context requires.

        "tax" shall mean any tax, duty, levy, impost, assessment or other governmental charge (including penalties, interest and any other liabilities related thereto).

        "Telecommunications Assets" means all assets, rights (contractual or otherwise) and properties, whether tangible or intangible, used or intended for use in connection with a Telecommunications Business.

        "Telecommunications Business" means the business of (i) transmitting, or providing services relating to the transmission of, voice, data or video through owned or leased transmission facilities, (ii) constructing, creating, developing or marketing communications related network equipment, software and other devices for use in a telecommunications business or (iii) any other activity or opportunity that is in any manner related to those identified in (i) or (ii) above as determined in good faith by the Board of Directors of QCII (which determination shall be conclusive).

21

        "Termination Event" means the delivery by QSC, at its option, of a written notice to the Trustee certifying that (i) no Default or Event of Default has occurred and is continuing and (ii) all Liens on the Collateral securing the Existing QSC Notes have been released and discharged pursuant to the Existing QSC Notes Indenture and all Liens on the Collateral securing any other Pari Passu Indebtedness (other than Indebtedness secured by a Lien that would be permitted by, and incurred under, clause (10) of the definition of "Permitted Liens") or Subordinated Indebtedness have also been so released and discharged or are being released and discharged simultaneously.

        "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the date of this Indenture, unless as stated in Section 10.03 hereof.

        "Transfer" means to sell, assign, transfer, lease (other than pursuant to an operating lease entered into in the ordinary course of business), convey or otherwise dispose of, including by sale and leaseback transaction, consolidation, merger, liquidation, dissolution or otherwise, in one transaction or a series of related transactions.

        "Transfer Restricted Notes" means Notes that bear or are required to bear the Restricted Notes Legend.

        "Treasury Rate" means with respect to any redemption date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

        "Trust Officer" means, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.

        "Trustee" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor.

        "2011 Notes" means the 7.25% Senior Notes due 2011, Series A, and the 7.25% Senior Notes due 2011, Series B.

        "2014 Notes" means the 7.50% Senior Notes due 2014, Series A, and the 7.50% Senior Notes due 2014, Series B.

        "Uniform Commercial Code" means the New York Uniform Commercial Code as in effect from time to time.

        "Unrestricted Subsidiary" means (1) any Subsidiary that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors of QCII in the manner provided in Section 4.13 and (2) any Subsidiary of an Unrestricted Subsidiary.

        "U.S. Government Obligation" means direct non-callable obligations of, or obligations guaranteed by, the United States of America for the payment of which guarantee or obligations the full faith and credit of the United States is pledged.

        "Voting Stock" with respect to any Person, means securities of any class of Equity Interests of such Person entitling the holders thereof (whether at all times or only so long as no senior class of stock or other relevant equity interest has voting power by reason of any contingency) to vote in the election of members of the Board of Directors of such Person.

22

        "Weighted Average Life to Maturity", when applied to any Indebtedness at any date, means the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness.

        "Wholly Owned Restricted Subsidiary" means a Restricted Subsidiary of which 100% of the Equity Interests (except for directors' qualifying shares or certain minority interests owned by other Persons solely due to local law requirements that there be more than one stockholder, but which interest is not in excess of what is required for such purpose) are owned directly by QCII or through one or more Wholly Owned Restricted Subsidiaries.

        SECTION 1.02. Other Definitions.

Term	Defined in Section
"Accredited Investors"	2.01(b)
"Affected Covenants"	4.16(a)
"Affiliate Transaction"	4.10
"Agent Members"	2.13(a)
"Asset Sale Offer"	4.09
"Change of Control Offer"	4.11
"Change of Control Payment"	4.11
"Covenant Defeasance"	9.01(c)
"CUSIP"	2.12
"Debt Instrument"	6.01(a)(5)
"Defeasance Trust Payment"	8.02
"Designation"	4.13
"Designation Amount	4.13
"DTC"	2.03
"Event of Default"	6.01
"Excess Proceeds"	4.09
"Guaranteed Obligations"	12.01
"IAI Global Note"	2.01(b)
"IAIs"	2.01(b)
"incur"	4.06(a)
"Indemnified Party"	7.07
"Legal Defeasance"	9.01(b)
"Legal Holiday"	13.08
"Leverage Ratio Exception"	4.06(a)
"Offer Amount"	3.08
"Offer Period"	3.08
"outstanding"	8.01(b)
"Outstanding UPOs"	4.06(b)(ix)
"Paying Agent"	2.03
"Payment Blockage Notice"	8.02
"Permanent Regulation S Global Note"	2.01
"Permitted Indebtedness"	4.06(b)
"Physical Notes"	2.01(c)
"protected purchaser"	2.07
"Purchase Date"	3.08
"QIBs"	2.01(b)

23

"QIB Global Note"	2.01(b)
"qualified institutional buyers"	2.01(b)
"Redesignation	4.13
"Registrar"	2.03
"Regulation S"	2.01(b)
"Regulation S Global Note"	2.01(b)
"Released Interests"	11.03
"Restricted Payments"	4.07(a)
"Restricted Payments Basket"	4.047a)(3)
"Revocation"	4.13
"Rule 144A"	2.01(b)
"SEC Reports"	4.03
"Successor"	5.01
"Suspension Period"	4.16
"Temporary Regulation S Global Note"	2.01(b)
"Trustee"	9.03
"U.S. Global Notes"	2.01(b)

        SECTION 1.03. Incorporation by Reference of Trust Indenture Act. This Indenture is subject to the mandatory provisions of the TIA, which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings:

        "Commission" means the SEC.

        "indenture securities" means the Notes.

        "indenture security holder" means a Noteholder.

        "indenture to be qualified" means this Indenture.

        "indenture trustee" or "institutional trustee" means the Trustee.

        "obligor" on the Notes means the Company and any other obligor on the Notes.

        All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions.

        SECTION 1.04. Rules of Construction. Unless the context otherwise requires:

(1)

a term has the meaning assigned to it;



(2)

an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;



(3)

"or" is not exclusive;



(4)

"including" means including without limitation;



(5)

words in the singular include the plural and words in the plural include the singular;



(6)

unsecured Indebtedness shall not be deemed to be subordinate or junior to Secured Indebtedness merely by virtue of its nature as unsecured Indebtedness;



(7)

the principal amount of any non-interest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the Company dated such date prepared in accordance with GAAP and accretion of principal on such security shall not be deemed to be the incurrence of Indebtedness;

24

(8)

the principal amount of any Preferred Stock shall be (i) the maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock, whichever is greater; and



(9)

references to sections of or rules under the Securities Act will be deemed to include substitute, replacement or successor sections or rules adopted by the Commission from time to time.

ARTICLE II
THE NOTES

        SECTION 2.01. Form and Dating. (a) The Initial Notes issued on the date hereof and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A-1 or Exhibit A-2, as applicable, which is hereby incorporated in and expressly made a part of this Indenture, and as otherwise provided in this Article II. The Exchange Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit B-1 or Exhibit B-2, as applicable, each of which is hereby incorporated in and expressly made a part of this Indenture, and as otherwise provided in this Article II. Any Additional Notes shall be issued in the form of either (i) Exhibit A-1 or Exhibit A-2, as applicable, if such Note is a Transfer Restricted Note, or (ii) Exhibit B-1 or Exhibit B-2, as applicable, if such Note is not a Transfer Restricted Note. The Notes (including the Note Guarantee) may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company or any Guarantor is subject, if any, or usage. Each Note shall be dated the date of its authentication. The terms of the Notes set forth in Exhibit A-1, Exhibit A-2, Exhibit B-1 and Exhibit B-2 are part of the terms of this Indenture. The Notes shall be issuable only in registered form without coupons and only in denominations of $1,000 and integral multiples thereof.

        (b)   The Initial Notes are being issued by the Company only (i) to "qualified institutional buyers" (as defined in Rule 144A under the Securities Act ("Rule 144A")) ("QIBs") and (ii) in reliance on Regulation S under the Securities Act ("Regulation S"). After such initial offers, Initial Notes that are Transfer Restricted Notes may be transferred to, among others, QIBS, in reliance on Rule 144A or Regulation D, and to institutional "Accredited Investors" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act ("IAI"s), in accordance with certain transfer restrictions. Initial Notes that are offered in reliance on Rule 144A shall be issued initially in the form of one or more permanent Global Notes substantially in the form set forth in Exhibit A-1 or Exhibit A-2, as applicable (collectively, the "QIB Global Note") deposited with the Trustee, as Notes Custodian, duly executed by the Company and authenticated by the Trustee as hereinafter provided. In connection with any transfer following the Issue Date pursuant to Section 2.14(a), upon receipt of a Company order, the Trustee shall authenticate in accordance with Section 2.02, one or more permanent Global Notes substantially in the form set forth in Exhibit A-1 or Exhibit A-2, as applicable (collectively, the "IAI Global Note" and, together with the QIB Global Note, the "U.S. Global Notes"). Initial Notes that are offered in offshore transactions in reliance on Regulation S shall be issued initially in the form of one or more temporary Global Notes substantially in the form set forth in Exhibit A (collectively, the "Temporary Regulation S Global Note") deposited with the Trustee, as Notes Custodian, duly executed by the Company and authenticated by the Trustee as hereinafter provided. At any time on or after March 17, 2004, upon receipt by the Trustee and the Company of a certificate substantially in the form of Exhibit G hereto, one or more permanent Global Notes substantially in the form set forth in Exhibit B-1 or Exhibit B-2, as applicable (collectively, the "Permanent Regulation S Global Note"; and together with the Temporary Regulation S Global Note, the "Regulation S Global Note") duly executed by the Company and authenticated by the Trustee as hereinafter provided shall be deposited with the Trustee, as Notes Custodian. The QIB Global Note, the IAI Global Note, the Regulation S Global Note and, if applicable, the IAI Global Note, shall each be issued with separate CUSIP numbers. The aggregate principal amount of each Global Note may from time to time be increased or decreased by adjustments

25

made on the records of the Trustee, as Notes Custodian. Transfers of Initial Notes between QIBs and IAIs and to or by purchasers pursuant to Regulation S shall be represented by appropriate increases and decreases to the respective amounts of the appropriate Global Notes, as more fully provided in Section 2.14.

        (c)   Initial Notes offered other than as described in the preceding two paragraphs, if any, shall be issued in the form of permanent certificated Notes in registered form in substantially the form set forth in Exhibit A-1or Exhibit A-2, as applicable, attached hereto without the Global Notes Legend (the "Physical Notes").

        SECTION 2.02. Execution and Authentication. One or more Officers of the Company shall sign the Notes by manual or facsimile signature.

        If an Officer whose signature is on a Note no longer holds that office at the time the Trustee authenticates the Note, the Note shall be valid nevertheless.

        A Note shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Note. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture.

        The Trustee shall authenticate and make available for delivery upon a written order of the Company signed by two of its Officers (1) Initial 2011 Notes for original issue on the date hereof in an aggregate principal amount of $525,000,000; (2) Initial 2014 Notes for original issue on the date hereof in an aggregate principal amount of $500,000,000; (3) Initial Floating Rate Notes for original issue on the date hereof in an aggregate principal amount of $750,000,000; (4) Additional Notes in an unlimited aggregate principal amount subject to compliance with Section 4.06; and (5) Exchange Notes for issue only in a registered Exchange Offer pursuant to the Registration Rights Agreement and for a like principal amount of Initial Notes of the same maturity exchanged pursuant thereto. Such order shall specify the amount of Notes of each maturity to be authenticated, the date on which the original issue of Notes of each maturity is to be authenticated and whether the Notes of each maturity are to be Initial Notes, Additional Notes or Exchange Notes and whether such Notes are to be Fixed Rate Notes or Floating Rate Notes.

        The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Notes. Any such appointment shall be evidenced by an instrument signed by a Trust Officer of the Trustee, a copy of which shall be furnished to the Company. Unless limited by the terms of such appointment, an authenticating agent may authenticate Notes whenever the Trustee may do so. After any such appointment, each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands.

        SECTION 2.03. Registrar, Paying Agent and Calculation Agent. The Company shall maintain an office or agency in the Borough of Manhattan, The City of New York, where Notes may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Notes may be presented for payment (the "Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. In addition, the Company shall appoint a Calculation Agent to determine the interest rate on the Floating Rate Notes as provided in paragraph 1 of Exhibit A-2. Neither the Company nor any of its Affiliates may serve as Calculation Agent.

        The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such

26

presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 13.02.

        The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations. The Company will give prompt notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

        The Company initially designates the Corporate Trust Office of the Trustee specified in Section 13.02 as such office of the Company in accordance with this Section 2.03.

        The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent, Calculation Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar, Paying Agent or Calculation Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Company may act as Paying Agent, Registrar, co-registrar or transfer agent.

        The Company initially appoints the Trustee as Registrar, Paying Agent and Calculation Agent in connection with the Notes.

        The Company initially appoints The Depository Trust Company ("DTC") to act as Depository with respect to the Global Notes, and the Trustee shall initially be the Notes Custodian with respect to the Global Notes.

        The Company may remove any Registrar, Paying Agent or Calculation Agent upon written notice to such Registrar, Paying Agent or Calculation Agent and to the Trustee, provided that no such removal shall become effective until (1) acceptance of an appointment by a successor as evidenced by an appropriate agreement entered into by the Company and such successor Registrar, Paying Agent or Calculation Agent, as the case may be, and delivered to the Trustee or (2) notification to the Trustee that the Trustee shall serve as Registrar, Paying Agent or Calculation Agent until the appointment of a successor in accordance with clause (1) above. The Registrar, Paying Agent or Calculation Agent may resign at any time upon not less than three Business Days' prior written notice to the Company; provided, however, that the Trustee may resign as Paying Agent, Registrar or Calculation Agent only if the Trustee also resigns as Trustee in accordance with Section 7.08.

        SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to 10:00 a.m. on each due date of the principal and interest on any Note, the Company shall deposit with the Paying Agent (or if the Company is acting as Paying Agent, segregate and hold in trust for the benefit of the Persons entitled thereto) a sum sufficient to pay such principal and interest when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Noteholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Notes and shall notify the Trustee in writing of any default by the Company in making any such payment within one Business Day thereof. If the Company acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee.

        Any money deposited with any Paying Agent or then held by the Company in trust for the payment of principal or interest on any Note and remaining unclaimed for two years after such principal and interest has become due and payable shall be paid to the Company at its request, or, if then held by the Company, shall be discharged from such trust; and the Noteholders shall thereafter, as general unsecured creditors, look only to the Company for payment thereof, and all liability of the

27

Paying Agent with respect to such money, and all liability of the Company as trustee thereof, shall thereupon cease.

        SECTION 2.05. Noteholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Noteholders and shall otherwise comply with TIA § 312(a). If the Trustee is not the Registrar, the Company shall furnish, or cause the Registrar to furnish, to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Noteholders and the Company shall otherwise comply with TIA § 312(a).

        SECTION 2.06. Transfer and Exchange. The Notes shall be issued in registered form and shall be transferable only upon the surrender of a Note for registration of transfer. When a Note is presented to the Registrar or a co-registrar with a request to register a transfer, the Registrar shall register the transfer as requested if the requirements of Section 8-401 of the Uniform Commercial Code or any successor provisions thereto are met. When a Note is presented to the Registrar or a co-registrar with a request to exchange them for an equal principal amount of Notes of other denominations, the Registrar shall make the exchange as requested if the same requirements are met. To permit registration of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Notes at the Registrar's or co-registrar's request. The Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges in connection with any transfer or exchange pursuant to this Section. The Company shall not be required to make, and the Registrar need not register, transfers or exchanges of Notes selected for redemption (except, in the case of Notes to be redeemed in part, the portion thereof not to be redeemed) or transfers or exchanges of any Notes for a period of 15 days before a selection of Notes to be redeemed.

        Prior to the due presentation for registration of transfer of any Note, the Company, the Guarantors, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the Person in whose name a Note is registered as the absolute owner of such Note for the purpose of receiving payment of, principal of and accrued and unpaid interest and Additional Interest, if any, on such Note and for all other purposes whatsoever, whether or not such Note is overdue, and none of the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary.

        Any Holder of a Global Note shall, by acceptance of such Global Note, agree that transfers of beneficial interests in such Global Note may be effected only through a book-entry system maintained by (i) the Holder of such Global Note (or its agent) or (ii) any holder of such beneficial interest, and that ownership of a beneficial interest in such Global Note shall be required to be reflected in a book entry.

        All Notes issued upon any transfer or exchange pursuant to this Section 2.06 will evidence the same debt and will be entitled to the same benefits under this Indenture as the Notes surrendered upon such transfer or exchange.

        The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Persons who have accounts with the Depository or beneficial owners of interests in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

        SECTION 2.07. Replacement Notes. If a mutilated Note is surrendered to the Registrar or if the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken, the Company shall

28

issue and the Trustee shall authenticate a replacement Note if the requirements of Section 8-405 of the Uniform Commercial Code (or any successor provision thereto) are met, such that the Holder (i) satisfies the Company or the Trustee within a reasonable time after he has notice of such loss, destruction or wrongful taking and the Registrar does not register a transfer prior to receiving such notification, (ii) makes such request to the Company or the Trustee prior to the Note being acquired by a protected purchaser as defined in Section 8-303 of the Uniform Commercial Code (or any successor provision thereto) (a "protected purchaser") and (iii) satisfies any other reasonable requirements of the Trustee and the Company including evidence of the destruction, loss or theft of the Note. Such Holder shall furnish an indemnity bond sufficient in the judgment of the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss that any of them may suffer if a Note is replaced. The Company and the Trustee may charge the Holder for their expenses in replacing a Note including the payment of a sum sufficient to cover any tax or other governmental charge that may be required. In the event any such mutilated, lost, destroyed or wrongfully taken Note has become or is about to become due and payable, the Company in its discretion may pay such Note instead of issuing a new Note in replacement thereof.

        Every replacement Note is an additional obligation of the Company and will be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder.

        The provisions of this Section 2.07 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, lost, destroyed or wrongfully taken Notes.

        SECTION 2.08. Outstanding Notes. Notes outstanding at any time are all Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation and those described in this Section 2.08 as not outstanding. A Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note.

        If a Note is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Note is held by a protected purchaser.

        If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal and interest payable on that date with respect to the Notes (or portions thereof) to be redeemed or maturing, as the case may be, and the Paying Agent is not prohibited from paying such money to the Noteholders on that date pursuant to the terms of this Indenture, then on and after that date such Notes (or portions thereof) cease to be outstanding and interest on them ceases to accrue.

        SECTION 2.09. Temporary Notes. Until Definitive Notes and Global Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of Definitive Notes but may have variations that the Company considers appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Definitive Notes and deliver them in exchange for temporary Notes upon surrender of such temporary Notes at the office or agency of the Company, without charge to the Holder.

        SECTION 2.10. Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment or cancellation and deliver canceled Notes to the Company in accordance with the Trustee's customary procedures. The Company may not issue new Notes to replace Notes it has redeemed, paid or delivered to the Trustee for cancellation.

29

The Trustee shall not authenticate Notes in place of canceled Notes other than pursuant to the terms of this Indenture.

        SECTION 2.11. Defaulted Interest. If the Company defaults in a payment of interest on the Notes, the Company shall pay the defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful manner. The Company may pay the defaulted interest to the persons who are Noteholders on a subsequent special record date. The Company shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail or cause to be mailed to each Noteholder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid.

        The Company may make payment of any defaulted interest in any other lawful manner not inconsistent with the requirements (if applicable) of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this paragraph, such manner of payment shall be deemed practicable by the Trustee.

        SECTION 2.12. CUSIP Numbers. The Company in issuing the Notes may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in "CUSIP" numbers.

        SECTION 2.13. Book-Entry Provisions for Global Notes. (a) Each Global Note initially shall (i) be registered in the name of the Depository for such Global Note or the nominee of such Depository and (ii) be delivered to the Trustee as the initial Notes Custodian for such Depository. Beneficial interests in Global Notes may be held indirectly through members of or participants in ("Agent Members") the Depository.

        Agent Members shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depository, or the Trustee as Notes Custodian, or under such Global Note, and the Depository may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or shall impair, as between the Depository and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Note.

        (b)   Transfers of a Global Note shall be limited to transfers of such Global Note in whole, but not in part, to the Depository, its successors or their respective nominees. Interests of beneficial owners in a Global Note may be transferred in accordance with the rules and procedures of the Depository (and Agent Member, if applicable) and the provisions of Section 2.14. The Trustee shall register the transfer of Physical Notes to all beneficial owners in exchange for their beneficial interests in a Global Note if (i) the Depository notifies the Company that it is unwilling or unable to continue as Depository for such Global Note or the Depository ceases to be a clearing agency registered under the Exchange Act, at a time when the Depository is required to be so registered in order to act as Depository, and in each case a successor Depository is not appointed by the Company within 90 days of such notice, (ii) the Company executes and delivers to the Trustee and Registrar an Officers' Certificate stating that such Global Note shall be so exchangeable or (iii) an Event of Default has occurred and is continuing and the Registrar has received a request from the Depository to permit such transfers. Except in procedures under Section 2.14, Restricted Global Notes shall only be exchanged for Physical Notes bearing the Restricted Notes Legend, and, in connection with any exchange of Global Notes for Physical Notes, the Trustee may request certificates or other evidence from the Holder thereof prior to exchange necessary to evidence compliance with this Article II.

30

        Notwithstanding the previous sentence, in no event shall Physical Notes be delivered to investors who purchased Notes in reliance on Regulation S prior to (i) the day that is forty days after the Issue Date with respect to such Notes and (ii) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Securities Act.

        (c)   The registered holder of a Global Note may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action that a Holder is entitled to take under this Indenture or the Notes.

        SECTION 2.14. Special Transfer Provisions. Unless and until a Transfer Restricted Note is transferred or exchanged under an effective registration statement under the Securities Act, the following provisions shall apply:

        (a)   Transfers to Non-QIB IAIs. The following provisions shall apply with respect to the registration of any proposed transfer of a Transfer Restricted Note to any IAI that is not a QIB (other than pursuant to Regulation S):

        (i)    The Registrar shall register the transfer of any Transfer Restricted Note by a Holder if (x) the requested transfer is (1) at least two years after the later of (A) the Issue Date with respect to such Transfer Restricted Note and (B) the date such Transfer Restricted Note was acquired from an affiliate of the Company and (2) at least three months after the last date such Holder was an affiliate of the Company or (y) the proposed transferor has delivered to the Registrar a letter substantially in the form set forth in Exhibit D hereto.

        (ii)   If the proposed transferee is an Agent Member and the Transfer Restricted Note to be transferred consists of a beneficial interest in the QIB Global Note or the Regulation S Global Note, upon receipt by the Registrar of (x) the letter, if any, required by paragraph (i) above and (y) instructions given in accordance with the Depository's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the IAI Global Note in an amount equal to the principal amount of the beneficial interest in the QIB Global Note or the Regulation S Global Note to be so transferred and the Registrar shall reflect on its books and records the date and an appropriate decrease in the principal amount of such QIB Global Note or Regulation S Global Note.

        (b)   Transfers to QIBs. The following provisions shall apply with respect to the registration of any proposed transfer of a Transfer Restricted Note to a QIB (other than pursuant to Regulation S):

        (i)    The Registrar shall register the transfer of a Transfer Restricted Note by a Holder if (x) the requested transfer is (1) at least two years after the later of (A) the Issue Date with respect to such Transfer Restricted Note and (B) the date such Transfer Restricted Note was acquired from an affiliate of the Company and (2) at least three months after the last date such Holder was an affiliate of the Company or (y) such transfer is being made by a proposed transferor who has provided the Registrar with a letter substantially in the form set forth in Exhibit E hereto.

        (ii)   If the proposed transferee is an Agent Member and the Transfer Restricted Note to be transferred consists of an interest in the IAI Global Note or the Regulation S Global Note, upon receipt by the Registrar of (x) the letter, if any, required by paragraph (i) above and (y) instructions given in accordance with the Depository's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the QIB Global Note in an amount equal to the principal amount of the beneficial interest in the IAI Global Note or the Regulation S Global Note to be so transferred, and the Registrar shall reflect on its books and records the date and an

31

appropriate decrease in the principal amount of such IAI Global Note or Regulation S Global Note.

        (c)   Transfers Pursuant to Regulation S. The Registrar shall register the transfer of any Permanent Regulation S Global Note without requiring any additional certification. The following provisions shall apply with respect to registration of any proposed transfer of a Transfer Restricted Note pursuant to Regulation S:

        (i)    The Registrar shall register any proposed transfer of a Transfer Restricted Note by a Holder if (x) the requested transfer is at least two years after the Issue Date with respect to such Transfer Restricted Note and at least three months after the last date such Holder was an affiliate of the Company or (y) upon receipt of a letter substantially in the form set forth in Exhibit F hereto from the proposed transferor.

        (ii)   If the proposed transferee is an Agent Member holding a beneficial interest in a U.S. Global Note, upon receipt by the Registrar of (x) the letter, if any, required by paragraph (i) above and (y) instructions in accordance with the Depository's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Regulation S Global Note in an amount equal to the principal amount of the beneficial interest in such U.S. Global Note to be transferred, and the Registrar shall reflect on its books and records the date and an appropriate decrease in the principal amount of the applicable U.S. Global Note.

        (d)   Restricted Notes Legend. Upon the transfer, exchange or replacement of Notes not bearing the Restricted Notes Legend, the Registrar shall deliver Notes that do not bear the Restricted Notes Legend. Upon the transfer, exchange or replacement of Notes bearing the Restricted Notes Legend, the Registrar shall deliver only Notes that bear the Restricted Notes Legend unless either (i) the circumstances contemplated by paragraph (a)(i)(x), (b)(i)(x) or (c)(i)(x) of this Section exist or (ii) there is delivered to the Registrar an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act.

        (e)   General. By its acceptance of any Note bearing the Restricted Notes Legend, each Holder of such a Note acknowledges the restrictions on transfer of such Note set forth in this Indenture and in the Restricted Notes Legend and agrees that it shall transfer such Note only as provided in this Indenture.

        The Registrar shall retain copies of all letters, notices and other written communications received pursuant to this Section 2.14. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar.

        SECTION 2.15. Issuance of Additional Notes. The Company shall be entitled to issue Additional Notes under this Indenture that shall have identical terms as the Initial Notes, other than with respect to the date of issuance, issue price, interest rate, amount of interest payable on the first interest payment date applicable thereto, maturity date and dates and premiums for optional redemption (and, if such Additional Notes shall be issued in the form of Transfer Restricted Notes, other than with respect to transfer restrictions; a Registration Rights Agreement and Additional Interest with respect thereto); provided that such issuance is not prohibited by Section 4.06. The Initial Notes and any Additional Notes and all Exchange Notes shall be treated as a single class for all purposes under this Indenture.

32

        With respect to any Additional Notes, the Company shall set forth in a resolution of its Board of Directors and in an Officers' Certificate, a copy of each of which shall be delivered to the Trustee, the following information:

        (1)   the aggregate principal amount of such Additional Notes to be authenticated and delivered pursuant to this Indenture;

        (2)   the issue price, the issue date, the CUSIP number of such Additional Notes, the first interest payment date and the amount of interest payable on such first interest payment date applicable thereto and the date from which interest shall accrue; and

        (3)   whether such Additional Notes shall be Transfer Restricted Notes.

ARTICLE III
REDEMPTION

        SECTION 3.01. Notices to Trustee. If the Company elects to redeem any of the Notes pursuant to paragraph 5 of the Notes, it shall notify the Trustee in writing of the redemption date, the principal amount of Notes to be redeemed and the paragraph of the Notes pursuant to which the redemption will occur.

        The Company shall give each notice to the Trustee provided for in this Section at least 60 days before the redemption date unless the Trustee consents to a shorter period. Such notice shall be accompanied by an Officers' Certificate to the effect that such redemption will comply with the conditions herein. If fewer than all of the Notes of a particular maturity are to be redeemed, the record date relating to such redemption shall be selected by the Company and given to the Trustee, which record date shall be not fewer than 15 days after the date of notice to the Trustee. Any such notice may be canceled at any time prior to notice of such redemption being mailed to any Holder and shall thereby be void and of no effect.

        SECTION 3.02. Selection. If less than all of the Notes of a particular maturity are to be redeemed at any time, selection of such Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which such Notes are listed, or, if such Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided that no Notes of $1,000 or less shall be redeemed in part and any redemption related to equity proceeds of such Notes shall be pro rata. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount of such Note to be redeemed. On and after the redemption date, interest shall cease to accrue on Notes or portions thereof called for redemption so long as the Company has deposited with the Paying Agent funds in satisfaction of the redemption price (including accrued and unpaid interest on the Notes to be redeemed) pursuant to the terms of this Indenture.

        SECTION 3.03. Notice. Notices of redemption shall be mailed by first-class mail at least 30 but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address. Notices of redemption may not be conditional. The Trustee shall notify the Company promptly of the Notes or portions of Notes to be redeemed.

        The notice shall identify the Notes to be redeemed and shall state:

        (1)   the redemption date;

        (2)   the redemption price;

        (3)   the name and address of the Paying Agent;

        (4)   that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price;

33

        (5)   if fewer than all the outstanding Notes of a particular maturity are to be redeemed, the certificate numbers and principal amounts of the particular Notes to be redeemed;

        (6)   that, unless the Company defaults in making such redemption payment or the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture, interest on Notes (or portion thereof) called for redemption ceases to accrue on and after the redemption date;

        (7)   the paragraph of the Notes and/or section of this Indenture pursuant to which the Notes called for redemption are being redeemed;

        (8)   the CUSIP number, if any, printed on the Notes being redeemed; and

        (9)   that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes.

        At the Company's request (which may be revoked at any time in writing prior to the time at which the Trustee shall have given such notice to the Holders), the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. In such event, the Company shall provide the Trustee with the information required by this Section.

        SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed, Notes called for redemption become due and payable on the redemption date and at the redemption price stated in the notice. Upon surrender to the Paying Agent, such Notes shall be paid at the redemption price stated in the notice, plus accrued interest and Additional Interest, if any, to the redemption date; provided that if the redemption date is after a regular record date and on or prior to the interest payment date, the accrued interest shall be payable to the Noteholder of the redeemed Notes registered on the relevant record date. If mailed in the manner required herein, the notice shall be conclusively presumed to have been given whether or not the Holder receives such notice. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder.

        SECTION 3.05. Deposit of Redemption Price. Prior to 10:00 a.m. on the redemption date, the Company shall deposit with the Paying Agent (or, if the Company is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest and Additional Interest, if any, on all Notes to be redeemed on the redemption date other than Notes or portions of Notes called for redemption that have been delivered by the Company to the Trustee for cancellation. The Trustee or the Paying Agent will promptly return to the Company any money deposited with the Trustee or Paying Agent by the Company in excess of the amounts necessary to pay the redemption or purchase price of and accrued interest and Additional Interest, if any, on all Notes to be redeemed or purchased.

        SECTION 3.06. Notes Redeemed in Part. Upon surrender of a Note of a particular maturity that is redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder (at the Company's expense) a new Note of the same maturity equal in principal amount to the unredeemed portion of the Note surrendered.

        SECTION 3.07. No Sinking Fund. There shall be no sinking fund for the payment of principal on the Notes to the Noteholders.

        SECTION 3.08. Asset Sale Offers. In the event that the Company or QSC shall be required to commence an offer to all Holders to purchase Notes pursuant to an Asset Sale Offer under Section 4.09 hereof, the Company or QSC shall follow the procedures specified in this Section 3.08:

        The Asset Sale Offer shall be made to all Holders and all holders of other Indebtedness specified in Section 4.09. The Asset Sale Offer will remain open for a period of at least 20 Business Days

34

following its commencement and not more than 30 Business Days, except to the extent that a longer period is required by applicable law (the "Offer Period"). No later than five Business Days after the termination of the Offer Period (the "Purchase Date"), the Company will apply all Excess Proceeds (the "Offer Amount") to purchase the principal amount of Notes of each maturity required to be purchased as contemplated by clause (h) below and such other Indebtedness (on a pro rata basis, if applicable) or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Asset Sale Offer. Payment for any Notes so purchased will be made in the same manner as interest payments are made.

        If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest, and Additional Interest, if any, will be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest will be payable to Holders who tender Notes pursuant to the Asset Sale Offer.

        Upon the commencement of an Asset Sale Offer, the Company will send, by first class mail, a notice to the Trustee and each of the Holders, with a copy to the Trustee. The notice will contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The notice, which will govern the terms of the Asset Sale Offer, will state:

        (a)   that the Asset Sale Offer is being made pursuant to this Section 3.08 and Section 4.09 hereof and the length of time the Asset Sale Offer will remain open;

        (b)   the Offer Amount, the purchase price and the Purchase Date;

        (c)   that any Note not tendered or accepted for payment will continue to accrue interest;

        (d)   that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer will cease to accrue interest after the Purchase Date;

        (e)   that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may elect to have Notes purchased in integral multiples of $1,000 only;

        (f)    that Holders electing to have a Note purchased pursuant to any Asset Sale Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a Depository, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date;

        (g)   that Holders will be entitled to withdraw their election if the Company, the Depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased;

        (h)   that subject to Section 4.09, if the aggregate principal amount of Notes of a particular maturity and other Pari Passu Indebtedness surrendered by Holders exceeds the Offer Amount, the Company will select the Notes of a particular maturity and other Pari Passu Indebtedness to be purchased on a pro rata basis based on the principal amount of Notes of each maturity and such other Pari Passu Indebtedness surrendered (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, will be purchased); and

        (i)    that subject to Section 4.09, Holders whose Notes were purchased only in part will be issued new Notes of the same maturity equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer).

35

        On or before the Purchase Date, the Company will, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and will deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.08. The Company, the Depositary or the Paying Agent, as the case may be, will promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company will promptly issue a new Note, and the Trustee, upon written request from the Company will authenticate and mail or deliver such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company will publicly announce the results of the Asset Sale Offer on the Purchase Date.

        Other than as specifically provided in this Section 3.08, any purchase pursuant to this Section 3.08 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof.

ARTICLE IV
COVENANTS

        SECTION 4.01. Payment of Notes. The Company shall promptly pay the principal of and interest on the Notes on the dates and in the manner provided in the Notes and in this Indenture. Principal and interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent (but only if other than the Company) holds by 11:00 a.m., New York City time, in accordance with this Indenture available funds sufficient to pay all principal and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the Noteholders on that date pursuant to the terms of this Indenture.

        The Company shall pay interest on overdue principal at the rate specified therefor in the Notes, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful.

        SECTION 4.02. Maintenance of Office or Agency. The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company fails to maintain any such required office or agency or fails to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.

        The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission will in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

        The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03 hereof.

        SECTION 4.03. Reports. (a) To the extent permitted by the Exchange Act, QCII shall file with the SEC, and simultaneously provide to the Trustee and the Holders, annual, quarterly and current reports and all other information, documents and reports that QCII is required to file with the SEC pursuant

36

to Sections 13 and 15(d) of the Exchange Act ("SEC Reports"). In the event QCII is not permitted or able to file such reports, documents and information with the SEC, QCII will provide substantially similar information to the Trustee and the Holders, as if QCII were subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act. QCII also shall comply with the other provisions of TIA § 314(a).

        (b)   In addition to the delivery of reports, documents and information required by subsection (a) above, QCII will publish information in the SEC Reports relating to the Consolidated Leverage Ratio and/or the Senior Leverage Ratio for any quarterly period in which Consolidated Cash Flow of QSC would be materially different from that of QCII and the Leverage Ratio Exception or Senior Leverage Ratio, as applicable, was relied upon for any action during such period. At the time QCII is required to file the SEC Reports with the Trustee, QCII will furnish copies of such SEC Reports to Holders of the Notes who request such SEC Reports in writing.

        (c)   For so long as any Notes remain outstanding, unless QCII is subject to Section 13 or 15(d) of the Exchange Act, QCII will furnish to the Holders and to securities analysts and prospective investors, upon their request, any information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

        SECTION 4.04. Taxes. The Company shall pay, and shall cause each of its Restricted Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes.

        SECTION 4.05. Stay, Extension and Usury Laws. The Company and each of its Restricted Subsidiaries covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company and each of its Restricted Subsidiaries (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law has been enacted.

        SECTION 4.06. Incurrence of Indebtedness. (a) QSC shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness; provided that QSC or any of its Restricted Subsidiaries may incur additional Indebtedness if, after giving effect thereto, the Consolidated Leverage Ratio would be a positive number that is less than 3.50 to 1.00 (the "Leverage Ratio Exception"). In addition, QCII shall not, and shall not permit any of its Restricted Subsidiaries (other than QSC and its Restricted Subsidiaries) to, incur any Indebtedness, unless the QCII Ratio is satisfied; provided that QCII and its Restricted Subsidiaries (other than QSC and its Restricted Subsidiaries) shall be permitted to refinance any Indebtedness of QCII or any of its Restricted Subsidiaries to incur Indebtedness that would otherwise constitute Permitted Indebtedness.

        (b)   The provisions of Section 4.06(a) will not apply to the incurrence by QSC or any of its Restricted Subsidiaries of any of the following items of Indebtedness (collectively, "Permitted Indebtedness"):

        (i)    Indebtedness under the Credit Agreement or otherwise; providedthat the aggregate principal amount at any time outstanding pursuant to this clause (i) shall not exceed $2.0 billion;

        (ii)   Indebtedness under any credit facility or other Indebtedness in an aggregate principal amount at any time outstanding not to exceed $750.0 million;

37

        (iii)  Indebtedness in respect of treasury management arrangements or other cash management services provided by lenders (or their affiliates) under the Credit Agreement or any other credit facility in an aggregate principal amount at any time outstanding not to exceed $350.0 million;

        (iv)  (a) Indebtedness of QSC and its Restricted Subsidiaries to the extent outstanding on the Issue Date (other than Indebtedness referred to in clauses (i), (ii) and (iii) above, clause (v) below and the Existing QSC Notes) and (b) up to $4.0 billion in aggregate principal amount of Existing QSC Notes and Additional QSC Notes (including any refinancings thereof under clause (xi) below) and (c) the 2011 Notes, the 2014 Notes and the Floating Rate Notes in an aggregate principal amount not to exceed $1.775 billion and the Note Guarantees;

        (v)   Indebtedness of QSC owed to a Restricted Subsidiary of QSC and Indebtedness of any Restricted Subsidiary of QSC owed to QSC or any other Restricted Subsidiary of QSC; provided that upon any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or such Indebtedness being owed to any Person other than QSC or any of its Restricted Subsidiaries, QSC or such Restricted Subsidiary, as applicable, shall be deemed to have incurred Indebtedness not permitted by this clause (v); and Indebtedness of QSC or any of its Restricted Subsidiaries owed to QCII or QCF as of the Issue Date and any other such Indebtedness owed to QCII or QCF incurred in the ordinary course of business and consistent with past practice; provided that upon any disposition of QCF by QCII or such Indebtedness being owed to any Person other than QCII, QCF or QSC or any Restricted Subsidiary of QSC, the relevant obligor shall be deemed to have incurred Indebtedness not permitted by this clause (v);

        (vi)  Indebtedness under Hedging Obligations; provided that (a) such Hedging Obligations relate to payment obligations on Indebtedness otherwise permitted to be incurred by this Section 4.06, and (b) the notional principal amount of such Hedging Obligations at the time incurred does not exceed the principal amount of the Indebtedness to which such Hedging Obligations relate;

        (vii) Indebtedness in respect of bid, performance or surety bonds or letters of credit issued for the account of QSC or any of its Restricted Subsidiaries in the ordinary course of business, including guarantees or obligations of QSC or any of its Restricted Subsidiaries with respect to letters of credit supporting such bid, performance or surety obligations (in each case other than for an obligation for money borrowed);

        (viii)   Purchase Money Indebtedness incurred by QSC or any of its Restricted Subsidiaries;

        (ix)  Indebtedness of QSC or any Restricted Subsidiary in an aggregate principal amount not to exceed $750.0 million so long as the net proceeds thereof do not exceed the cash consideration paid to retire unconditional purchase obligations of QCC and QCII outstanding on the Issue Date ("Outstanding UPOs"); provided that such Indebtedness has no scheduled payments of principal greater than the scheduled payments with respect to the replaced Outstanding UPOs as in effect on the Issue Date;

        (x)   Permitted Subordinated Indebtedness;

        (xi)  Refinancing Indebtedness of QSC or any of its Restricted Subsidiaries with respect to Indebtedness incurred (a) pursuant to the Leverage Ratio Exception, (b) under clauses (iv), (viii), (ix) and (x) above or (c) during any Suspension Period; and

        (xii) Indebtedness of QSC or any Restricted Subsidiary of QSC in an aggregate amount not to exceed $1.625 billion at any time outstanding.

        For purposes of determining compliance with this Section 4.06, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (i) through (xii) above (but excluding Indebtedness incurred pursuant to the Leverage Ratio

38

Exception), the Company shall, in its sole discretion, classify or later reclassify such item of Indebtedness and may divide and classify such Indebtedness in more than one of the types of Indebtedness described, except that (1) Indebtedness of the type referred to in clause (iii) above outstanding as of the Issue Date shall be deemed to have been incurred under clause (iii) above, and (2) Indebtedness to the extent outstanding on the Issue Date (other than Indebtedness referred to in clause (1) above) or otherwise referred to in clause (iv) shall be deemed to have been incurred under clause (iv) above.

        SECTION 4.07. Restricted Payments. (a) The Company shall not, and shall not permit any Restricted Subsidiary of QCII to, directly or indirectly, make any Restricted Payment if at the time of such Restricted Payment:

        (i)    a Default shall have occurred and be continuing or shall occur as a consequence thereof;

        (ii)   QSC cannot incur $1.00 of additional Indebtedness pursuant to the Leverage Ratio Exception; or

        (iii)  the amount of such Restricted Payment, when added to the aggregate amount of all other Restricted Payments made after the Issue Date (other than Restricted Payments made pursuant to clauses (iii), (iv), (v) and (vi) of clause (b) below), exceeds the sum (the "Restricted Payments Basket") of (without duplication):

        (A)  the difference between (i) 100% of cumulative Consolidated Cash Flow of QCII for the period (taken as one accounting period) commencing on January 1, 2004 to and including the last day of the fiscal quarter ended immediately prior to the date of such calculation for which consolidated financial statements are available (the "Measurement Period") (or, if such cumulative Consolidated Cash Flow shall be negative, minus 100% of such negative amount), and (ii) 140% of cumulative Consolidated Interest Expense of QCII for the Measurement Period, plus

        (B)  in the case of the disposition or repayment of or return on any Investment that was treated as a Restricted Payment made after the Issue Date, an amount (to the extent not included in the computation of Consolidated Cash Flow of QCII) equal to the lesser of (i) the return of capital with respect to such Investment and (ii) the amount of such Investment that was treated as a Restricted Payment, in either case, less the cost of the disposition of such Investment and net of taxes, plus

        (C)  upon a Redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the lesser of (i) the Fair Market Value of QSC's direct or indirect interest in such Subsidiary immediately following such Redesignation, and (ii) the aggregate amount of QSC's Investments in such Subsidiary to the extent such Investments reduced the Restricted Payments Basket and were not previously repaid or otherwise reduced.

        (b)   The provisions of Section 4.07(a) shall not prohibit any of the following:

        (i)    the payment of any dividend within 60 days after the date of declaration thereof, if on the date of declaration the payment would have complied with the provisions of this Indenture;

        (ii)   the payment of dividends on Disqualified Equity Interests permitted to be incurred under Section 4.06 and the other terms of this Indenture;

        (iii)  to the extent constituting a Restricted Payment, the redemption or repayment of Subordinated Indebtedness in exchange for, or out of the proceeds of, the incurrence of other Subordinated Indebtedness otherwise permitted to be incurred under the other terms of this Indenture within 365 days prior to such redemption or repayment;

39

        (iv)  payments made pursuant to and in accordance with stock or other benefit plans for management employed by QCII and its Subsidiaries so long as such plans are for the benefit of a broad range of management and other employees generally;

        (v)   so long as QCII could incur $1.00 of Indebtedness pursuant to the second sentence of Section 4.06(a), QCII or a Restricted Subsidiary of QCII may make Restricted Payments under this clause (v) that, when taken together with all Restricted Payments made after January 1, 2003 (other than Restricted Payments made after the Issue Date under another provision of this Section 4.07), do not exceed the sum of (i) 100% of the aggregate net cash proceeds received as capital contributions by QCII or from the issuance of Qualified Equity Interests of QCII on or after the Start Date and (ii) the aggregate amount by which Indebtedness of QCII has been converted into Qualified Equity Interests (other than by a Subsidiary of QCII) after the Start Date (in each case to the extent such cash proceeds received after the Issue Date are not used to fund an Investment in an Unrestricted Subsidiary contemplated by the proviso to the first sentence of Section 4.15); and

        (vi)  to the extent constituting a Restricted Payment, the refinancing of the Existing QSC Notes and any Additional QSC Notes (including any associated expenses or premiums) otherwise permitted to be incurred under the terms of this Indenture;

provided that, in the case of any Restricted Payment pursuant to clause (ii), (iii), (v) or (vi) above, no Default shall have occurred and be continuing or occur as a consequence thereof.

        SECTION 4.08. Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries. QSC shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or permit to exist or become effective any consensual encumbrance or consensual restriction on its ability or the ability of any of its Restricted Subsidiaries to: (a) pay dividends or make any other distributions on or in respect of its Equity Interests, (b) make loans or advances or pay any Indebtedness or other obligation owed to the Company or any Restricted Subsidiary or (c) transfer any of its assets to the Company or any Restricted Subsidiary, except for such encumbrances or restrictions existing under or by reason of:

        (i)    applicable law;

        (ii)   this Indenture, the Notes and the Note Guarantees;

        (iii)  non-assignment provisions of any contract or any lease entered into in the ordinary course of business;

        (iv)  agreements existing on the Issue Date (including, without limitation, the Credit Agreement and the Existing QSC Notes) as in effect on that date or any encumbrances or restrictions not more materially restrictive than the Credit Agreement as in effect on the Issue Date;

        (v)   restrictions on the transfer of assets subject to any Lien permitted under this Indenture imposed by the holder of such Lien;

        (vi)  restrictions on the transfer of assets imposed under any agreement to sell such assets permitted under this Indenture to any Person pending the closing of such sale;

        (vii) any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired;

        (viii)   any customary encumbrance or restriction applicable to QSC or a Restricted Subsidiary that is contained in an agreement or instrument governing Indebtedness incurred under Section 4.06;

40

        (ix)  customary provisions in partnership agreements, limited liability company organizational governance documents, joint venture agreements and other similar agreements entered into in the ordinary course of business that restrict the transfer of ownership interests in such partnership, limited liability company, joint venture or similar Person;

        (x)   Purchase Money Indebtedness incurred in compliance with Section 4.06 that impose restrictions of the nature described in clause (c) above on the assets acquired; and

        (xi)  any encumbrances or restrictions imposed by any amendments or refinancings of the contracts, instruments or obligations referred to in clauses (i) through (x) above; provided that such amendments or refinancings are, in the good faith judgment of QCII's Board of Directors, no more materially restrictive with respect to such encumbrances and restrictions than those prior to such amendment or refinancing.

        SECTION 4.09. Asset Sales. (a) QCII shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, consummate any Asset Sale unless:

        (i)    QCII or such Restricted Subsidiary receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets included in such Asset Sale;

        (ii)   at least 75% of the total consideration received in such Asset Sale consists of cash or Cash Equivalents; and

        (iii)  if such Asset Sale involves Collateral, it complies with all applicable provisions of this Indenture, and all consideration in any form representing proceeds that would constitute Collateral shall be expressly made subject to a Lien securing the Notes, subject to Permitted Collateral Liens.

        (b)   The provisions of clause (a)(ii) above shall not apply to assets (other than Collateral) of QCII and its Restricted Subsidiaries (other than QSC and its Subsidiaries) owned as of the Issue Date and Investments made by such Persons after the Issue Date in exchange for, or out of the proceeds of, Qualified Equity Interests of QCII issued after the Issue Date. In addition, for purposes of clause (a)(ii) above, the following shall be deemed to be cash:

        (i)    the amount (without duplication) of any Indebtedness (other than Pari Passu Indebtedness and Subordinated Indebtedness) of QCII or such Restricted Subsidiary of QCII that is expressly assumed by the transferee in such Asset Sale and with respect to which QCII or such Restricted Subsidiary of QCII, as the case may be, is unconditionally released by the holder of such Indebtedness;

        (ii)   the amount of any obligations received from such transferee that are within 90 days converted by QCII or such Restricted Subsidiary of QCII to cash (to the extent of the cash actually so received);

        (iii)  the Fair Market Value of any Telecommunications Assets received by QSC or any Restricted Subsidiary of QCII; and

        (iv)  the amount of any Permitted Investment received pursuant to and in compliance with clause (13) of the definition of "Permitted Investments" or pursuant to and in compliance with the Restricted Payments Basket or clause (b)(v) or (b)(vi) of Section 4.07.

        (c)   If at any time any non-cash consideration or other consideration referred to in clause (b)(ii), (b)(iii) or (b)(iv) above received by QCII or any Restricted Subsidiary of QCII, as the case may be, in connection with any Asset Sale is repaid or converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration), then the date of such repayment, conversion or disposition shall be deemed to constitute the date of an Asset Sale hereunder and the Net Available Proceeds thereof shall be applied in accordance with this Section 4.09.

41

        (d)   Within 365 days after the receipt of any Net Available Proceeds from an Asset Sale, QCII or such Restricted Subsidiary may, subject to the following paragraph, cause the Net Available Proceeds to be applied as follows:

        (i)    to the extent the Asset Sale involves Collateral, to any Indebtedness secured by Liens on the assets sold in such Asset Sale which are senior in priority to the Liens securing the Notes, in accordance with the applicable Security Documents or governing debt instruments; and

        (ii)   to the extent the Asset Sale does not involve Collateral:

        (A)  to invest or use all or any part of the Net Available Proceeds thereof in the Telecommunications Business of QSC and its Restricted Subsidiaries; and/or

        (B)  to redeem any outstanding Indebtedness of QSC and its Restricted Subsidiaries (other than Subordinated Indebtedness or Pari Passu Indebtedness).

        (e)   Any Net Available Proceeds from Asset Sales that are not applied or invested as provided in clause (d) above will be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $50.0 million, the Company or QSC will:

        (i)    make an offer to all Holders of the Notes (an "Asset Sale Offer"); and

        (ii)   at the same time, purchase, retire, redeem or otherwise acquire (or make an offer to do so):

        (A)  to the extent the Asset Sale involves Collateral, any other Indebtedness secured equally and ratably with the Notes by a Lien on the Collateral, and

        (B)  to the extent the Asset Sale does not involve Collateral, any other Pari Passu Indebtedness,

in each case in accordance with the provisions governing such other Indebtedness to the extent it requires QCII or QSC, as applicable, to purchase, retire, redeem or otherwise acquire such Indebtedness with the proceeds from the applicable Asset Sale (or offer to do so), pro rata in proportion to the respective principal amounts of the Notes and such other Indebtedness required to be purchased, retired, redeemed or otherwise acquired for and, in the case of the Notes to be purchased pursuant to the Asset Sale Offer, to purchase the maximum principal amount of the Notes that may be purchased out of such pro rata portion of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of their principal amount plus accrued and unpaid interest to the date of purchase, in accordance with the procedures set forth in Article III; provided that, to the extent the holders of such Pari Passu Indebtedness do not require the entire pro rata portion allocated thereto to be applied to any purchase, retirement, redemption or other acquisition as contemplated hereunder, such unused proceeds shall be made available as additional Excess Proceeds to the Holders of the Notes in the Asset Sale Offer.

        (f)    To the extent that the aggregate principal amount of the Notes and such other Indebtedness tendered pursuant to an Asset Sale Offer or other offer is less than the Excess Proceeds, the Company or QSC may use any remaining Excess Proceeds for any purpose not otherwise prohibited by this Indenture; provided that, notwithstanding anything to the contrary in the foregoing, to the extent that all or any portion of any remaining Excess Proceeds comprises proceeds of Asset Sales of Collateral, such Excess Proceeds shall be subject to the Lien of the applicable Security Documents in favor of the Holders of the Notes and any other permitted secured parties (but subject to the subordinate rights of holders of Permitted Liens on the Collateral to receive an offer with Excess Proceeds). If the aggregate principal amount of the Notes surrendered by Holders thereof exceeds the pro rata portion of such Excess Proceeds to be used to purchase the Notes and other Indebtedness, the Trustee shall select the

42

Notes and the other Indebtedness to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero.

        (g)   The Company or QSC will comply with applicable tender offer rules, including the requirements of Rule 14e-1 under the Exchange Act and any other applicable laws and regulations in connection with the purchase of the Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with this Section 4.09, the Company or QSC shall comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 4.09 by virtue of this compliance.

        SECTION 4.10. Transactions with Affiliates. (a) QCII shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, in one transaction or a series of related transactions, sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any assets from, or enter into any contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (an "Affiliate Transaction"), unless:

        (i)    such Affiliate Transaction is on terms that are no less favorable to QCII or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction at such time on an arm's-length basis by QCII or that Restricted Subsidiary from a Person that is not an Affiliate of QCII or that Restricted Subsidiary; and

        (ii)   the Company delivers to the Trustee, with respect to any Affiliate Transaction involving aggregate value in excess of $100.0 million, an Officers' Certificate certifying that such Affiliate Transaction complies with this Section 4.10 and a Secretary's Certificate certifying that such Affiliate Transaction has been approved by either a majority of the Independent Directors of QCII or by a majority of the members of the Audit Committee of the Board of Directors of QCII.

        (b)   Notwithstanding the foregoing, none of the following shall be prohibited by this Section 4.10 (or be deemed to be Affiliate Transactions):

        (i)    transactions exclusively between or among (A) QCII and one or more Restricted Subsidiaries or (B) Restricted Subsidiaries; provided, in each case, that no Affiliate of QCII (other than another Restricted Subsidiary) owns Equity Interests of any such Restricted Subsidiary;

        (ii)   director, officer and employee compensation (including bonuses) and other benefits (including retirement, health, stock option and other benefit plans) and indemnification arrangements, in each case approved by a majority of the Independent Directors of QCII;

        (iii)  any agreement in effect on the Issue Date or any amendment thereto (so long as such amendment is not disadvantageous to the Holders in any material respect) or any transaction contemplated thereby; provided the terms of any such agreement in effect on the Issue Date have been previously disclosed in QCII's periodic and current reports filed under the Exchange Act in accordance with Rule 404 of Regulation S-K (or its successor);

        (iv)  Restricted Payments which are made in accordance with Section 4.07; or

        (v)   any transaction with an Affiliate where the only consideration paid by QCII or any Restricted Subsidiary is Qualified Equity Interests.

        SECTION 4.11. Change of Control. (a) Upon the occurrence of any Change of Control Triggering Event, unless all Notes have been called for redemption pursuant to paragraph 5 of the Notes, each Holder of Notes shall have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes (a "Change of Control Offer") made pursuant to this Section 4.11 at an offer price in cash (the "Change of Control Payment") equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Additional Interest thereon, if any, to the date of purchase.

43

        Within 45 days following any Change of Control Triggering Event, the Company shall mail, or cause to be mailed, a notice to each Holder describing the transaction or transactions that constitute the Change of Control Triggering Event and stating:

        (i)    that the Change of Control Offer is being made pursuant to this Section 4.11 and that all Notes tendered will be accepted for payment;

        (ii)   the purchase price and the purchase date, which shall be a Business Day no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date");

        (iii)  that any Note not tendered will continue to accrue interest;

        (iv)  that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest after the Change of Control Payment Date;

        (v)   that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date;

        (vi)  that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have the Notes purchased; and

        (vii) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof.

        The Company shall cause the Change of Control Offer to remain open for at least 20 Business Days or such longer period as is required by applicable law. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change in Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.11, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 4.11 by virtue of such conflict.

        (b)   On the Change of Control Payment Date, the Company will, to the extent lawful:

        (i)    accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer;

        (ii)   deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and

        (iii)  deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company.

        The Paying Agent will promptly mail to each Holder of Notes properly tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased

44

portion of the Notes surrendered, if any; provided that each new Note will be in a principal amount of $1,000 or an integral multiple thereof. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

        (c)   The Company shall not be required to make a Change of Control Offer upon a Change of Control Triggering Event if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.11 applicable to a Change of Control Offer made by the Company and purchases all Notes properly tendered and not withdrawn under such Change of Control Offer.

        (d)   The Company may make a Change of Control Offer in advance of, but conditioned on, the occurrence of a Change of Control Triggering Event but otherwise in accordance with the provisions of this Section 4.11.

        SECTION 4.12. Compliance Certificate. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company an Officers' Certificate stating that in the course of the performance by the signers of their duties as Officers of the Company they would normally have knowledge of any Default and whether or not the signers know of any Default that occurred during such period. If they do have such knowledge, the certificate shall describe the Default, its status and what action the Company is taking or proposes to take with respect thereto. The Company also shall comply with Section 314(a)(4) of the TIA.

        The Company shall deliver to the Trustee, as soon as possible and in any event within five days after the Company becomes aware of the occurrence of any Event of Default or an event which, with notice or the lapse of time or both, would constitute an Event of Default, an Officers' Certificate setting forth the details of such Event of Default or Default and the action which the Company proposes to take with respect thereto.

        SECTION 4.13. Limitation on Designations of Unrestricted Subsidiaries. (a) The Board of Directors of the Company may designate any Subsidiary of the Company (other than QSC) (including any newly acquired or newly formed Subsidiary of the Company) as an Unrestricted Subsidiary (a "Designation") only if (i) no Default shall have occurred and is continuing at the time of or after giving effect to such Designation and (ii) (A) QCII would be permitted to make at the time of such Designation (1) a Permitted Investment or (2) an Investment pursuant to Section 4.07(a), in either case, in an amount (the "Designation Amount") equal to the Fair Market Value of QSC's direct or indirect Investment in such Subsidiary on such date, and (B) QCII would be permitted to incur $1.00 of additional Indebtedness under the second sentence of Section 4.06(a) on a pro forma basis after giving effect to such Designation.

        (b)   Notwithstanding the foregoing, no Subsidiary shall be Designated as an Unrestricted Subsidiary unless such Subsidiary:

        (i)    has no Indebtedness other than Non-Recourse Debt;

        (ii)   is not party to any agreement, contract, arrangement or understanding with QCII or any of its Restricted Subsidiaries unless the terms of the agreement, contract, arrangement or understanding comply with Section 4.10;

        (iii)  is a Person with respect to which neither QCII nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve the Person's financial condition or to cause the Person to achieve any specified levels of operating results except if limited to that which would be permitted by its terms as Permitted Investment under Section 4.07; and

        (iv)  has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of QCII or any of its Restricted Subsidiaries, except for any guarantee given solely to

45

support the pledge by QCII or any of its Restricted Subsidiaries of the Equity Interests of such Unrestricted Subsidiary, which guarantee is not recourse to QCII or any of its Restricted Subsidiaries, and except to the extent the amount thereof constitutes a Restricted Payment permitted pursuant to Section 4.07.

        If, at any time, any Unrestricted Subsidiary fails to meet the preceding requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of the Subsidiary and any Liens on assets of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary as of the date and, if the Indebtedness is not permitted to be incurred under Section 4.06 or the Lien is not permitted under Section 4.14, the Company shall be in Default of the applicable Section.

        (c)   The Board of Directors of QCII may redesignate an Unrestricted Subsidiary as a Restricted Subsidiary (a "Redesignation"), only if:

        (i)    no Default shall have occurred and be continuing at the time of or after giving effect to such Redesignation; and

        (ii)   all Liens, Indebtedness and Investments of such Unrestricted Subsidiary outstanding immediately following such Redesignation would, if incurred at such time, have been permitted to be incurred or made for all purposes of this Indenture.

        Any such Designations or Redesignations by the Board of Directors of the Company after the Issue Date shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors giving effect to such Designation or Redesignation and an Officers' Certificate certifying that such Designation or Redesignation complied with the foregoing provisions. Nothing in this Section 4.13 shall prevent a Designation of an Unrestricted Subsidiary contemplated by the proviso to the first sentence of Section 4.15 and shall not affect any other calculation in this Section 4.13.

        SECTION 4.14. Liens. QCII shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien of any kind upon any of their assets, whether now owned or hereafter acquired, to secure Indebtedness other than Permitted Liens; unless all payments due under this Indenture, the Notes and the Note Guarantees are secured on an equal and ratable basis with the Indebtedness so secured until such time as the Indebtedness is no longer secured by a Lien;

provided that, if the obligations so secured are subordinated by their terms to the Notes or a Note Guarantee, the Lien securing such obligations will also be so subordinated by its terms at least to the same extent.

        SECTION 4.15. Business Activities. QCII (and any intermediate company directly or indirectly owning Equity Interests of QSC) shall conduct its business as a holding company that shall not be permitted to engage in any business or activity other than those incidental to its ownership of the Equity Interests of QSC, QCF and the other direct Subsidiaries of QCII in existence on the Issue Date, functioning as a public company and financing activities relating to the foregoing; provided that QCII shall be permitted to make Investments in any Person engaged in any business to the extent funded with the net cash proceeds from, or in exchange for, the issuance of Qualified Equity Interests of QCII (to any person other than a Subsidiary of QCII) so long as such Person is Designated as an Unrestricted Subsidiary of QCII and remains as such. In addition, in no event shall QCII hold, directly or indirectly, less than 100% of the Equity Interests of QSC. QCF's operations and the operations of any Restricted Subsidiaries of QCII (other than QSC and its Restricted Subsidiaries) shall be limited to those conducted by it as of and on the Issue Date and activities reasonably related thereto (as well as to Investments referred to in the proviso of the preceding sentence).

46

        SECTION 4.16. Suspension and Fallaway of Covenants. (a) During any period of time (a "Suspension Period") that (i) the ratings assigned to the Notes by one (but not both) of the Rating Agencies are Investment Grade Ratings and (ii) no Default or Event of Default has occurred and is continuing under this Indenture, QCII and its Restricted Subsidiaries shall not be subject to the terms of Sections 4.06, 4.07, 4.08, 4.09 (to the extent not relating to Collateral), 4.10, 4.13, 4.15, any provisions of this Indenture limiting the ability of QSC to grant pari passu or subordinate Liens on the Collateral) and Section 5.01(a)(iii) (collectively, the "Affected Covenants"). Subject to clause (b) below, in the event that QCII and its Restricted Subsidiaries are not subject to the Affected Covenants with respect to the Notes for any period of time as a result of the preceding sentence and, subsequently, the applicable Rating Agency has in effect, withdrawn or downgraded the ratings assigned to such Notes below the required Investment Grade Ratings, then QCII and its Restricted Subsidiaries will thereafter again be subject to the Affected Covenants and compliance with respect to Restricted Payments made after the time of such withdrawal or downgrade will be calculated in accordance with the provisions of Section 4.07 as if such covenant had been in effect since the date of the execution of this Indenture. Notwithstanding the foregoing, neither (a) the continued existence, after the date of such withdrawal or downgrade, of facts and circumstances or obligations that were incurred or otherwise came into existence during a Suspension Period nor (b) the performance of any such obligations shall constitute a breach of any covenant set forth in this Indenture or cause a Default or Event of Default hereunder; provided that (1) QCII and its Restricted Subsidiaries did not incur or otherwise cause such facts and circumstances or obligations to exist in anticipation of a withdrawal or downgrade by the applicable Rating Agency below an Investment Grade Rating and (2) QCII and QSC reasonably believed that such incurrence or actions would not result in such a withdrawal or downgrade. For purposes of clauses (1) and (2) in the preceding sentence, anticipation and reasonable belief may be determined by QCII and QSC and shall be conclusively evidenced by a board resolution to such effect adopted in good faith by the Board of Directors of QCII. In reaching their determination, the Board of Directors of QCII may, but need not, consult with the Rating Agencies.

        (b)   Notwithstanding anything in the preceding paragraph to the contrary, in the event that (i) the ratings assigned to the Notes by both of the Rating Agencies are Investment Grade Ratings at any time and (ii) no Default or Event of Default has occurred and is continuing hereunder at such time, QCII and the Restricted Subsidiaries shall immediately cease to be subject to the Affected Covenants, and the Affected Covenants shall not be subject to reinstatement for any reason.

ARTICLE V
SUCCESSOR COMPANY

        SECTION 5.01. Merger, Consolidation, Etc. (a) Neither QCII nor QSC shall, directly or indirectly, in a single transaction or a series of related transactions, consolidate or merge with or into any Person (other than a merger with a Wholly Owned Restricted Subsidiary solely for the purpose of changing QCII's or QSC's, as the case may be, jurisdiction of incorporation to another State of the United States), or sell, lease, transfer, convey or otherwise dispose of or assign all or substantially all of the assets of QCII or QCII and its Restricted Subsidiaries (taken as a whole), or QSC or QSC and its Restricted Subsidiaries (taken as a whole), as the case may be, to any Person unless, in either case:

        (i)    either:

        (A)  QCII or QSC, as the case may be, will be the surviving or continuing Person; or

        (B)  the Person formed by or surviving such consolidation or merger or to which such sale, lease, conveyance or other disposition shall be made (the "Successor") is a corporation organized and existing under the laws of any State of the United States of America or the District of Columbia, and the Successor expressly assumes, by supplemental indenture in form and substance satisfactory to the Trustee, all of the obligations of QCII or QSC, as the case

47

may be, under the Notes, the Note Guarantees (as applicable), this Indenture, the Registration Rights Agreement and the Security Documents to which it is a party;

        (ii)   immediately after and giving effect to such transaction and the assumption of the obligations as set forth in clause (i)(B) above and the incurrence of any Indebtedness to be incurred in connection therewith, no Default shall have occurred and be continuing; and

        (iii)  immediately after and giving effect to such transaction and the assumption of the obligations set forth in clause (i)(B) above and the incurrence of any Indebtedness to be incurred in connection therewith, and the use of any net proceeds therefrom on a pro forma basis, QSC (or, in the case of a transaction involving QSC in which QSC is not the surviving entity, QSC's Successor) could incur $1.00 of additional Indebtedness pursuant to the Leverage Ratio Exception, in the case of a transaction involving QSC, or the QCII Ratio, in the case of a transaction involving QCII.

        For purposes of this Section 5.01, any Indebtedness of the Successor which was not Indebtedness of the Company or QSC, as the case may be, immediately prior to the transaction shall be deemed to have been incurred in connection with such transaction.

        (b)   The following additional conditions shall apply to each transaction described in paragraph (a) above:

        (1)   QSC or the relevant surviving entity, as applicable, shall cause such amendments or other instruments to be filed and recorded in such jurisdictions as may be required by applicable law to preserve and protect the Lien of the Security Documents on the Collateral owned by or Transferred to such Person;

        (2)   the Collateral owned by or Transferred to QSC or the relevant surviving entity, as applicable, shall

        (A)  continue to constitute Collateral under this Indenture and the Security Documents;

        (B)  be subject to the Lien in favor of the applicable Collateral Agent for the benefit of the Holders; and

        (C)  not be subject to any Lien other than Liens permitted by this Indenture;

        (3)   the assets of the Person which is merged or consolidated with or into the relevant surviving entity, to the extent that they are assets of the types which would constitute Collateral under the Security Documents, shall be treated as after acquired property and such surviving entity shall take such action as may be reasonably necessary to cause such assets to be made subject to the Lien of the Security Documents in the manner and to the extent required in this Indenture; and

        (4)   the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such transaction and, if a supplemental indenture or supplemental Security Documents are required in connection with such transaction, such supplemental indenture and Security Documents comply with the applicable provisions of this Indenture, that all conditions precedent in this Indenture relating to such transaction have been satisfied and that such supplemental indenture and Security Documents are enforceable.

        (c)   For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries of a Person, the Equity Interests of which constitute all or substantially all of the properties and assets of such Person, will be deemed to be the transfer of all or substantially all of the properties and assets of such Person.

48

        Upon any consolidation, combination or merger of the Company or QSC, or any transfer of all or substantially all of the assets of the Company or QSC in accordance with the foregoing, in which the Company or QSC is not the continuing obligor under the Notes or its Note Guarantee, the surviving entity formed by such consolidation or into which the Company or QSC is merged or to which the conveyance, lease or transfer is made will succeed to, and be substituted for, and may exercise every right and power of, the Company or QSC under this Indenture, the Notes and the Note Guarantees with the same effect as if such surviving entity had been named therein as the Company or QSC and, except in the case of a conveyance, transfer or lease, the Company or QSC, as the case may be, will be released from the obligation to pay the principal of and interest on the Notes or in respect of its Note Guarantee, as the case may be, and all of the Company's or QSC's other obligations and covenants under the Notes, this Indenture and its Note Guarantee, if applicable.

        The foregoing will not prevent (i) the contribution by QCII of all of the outstanding Equity Interests of QSC to a Wholly Owned Restricted Subsidiary of QCII; provided such Wholly Owned Subsidiary becomes a Guarantor of the Notes to the same extent that QSC guarantees the Notes (but without granting a Lien or otherwise being required to provide collateral for such guarantee) by execution of a supplemental indenture to this Indenture, or (ii) the merger of any Restricted Subsidiary of QSC into QSC or another Restricted Subsidiary of QSC.

ARTICLE VI
DEFAULTS AND REMEDIES

        SECTION 6.01. Events of Default and Remedies. Each of the following constitutes an "Event of Default" with respect to any series of Notes:

        (a)   failure to pay interest on such series of Notes when it becomes due and payable and the continuance of any such failure for 30 days (whether or not such payment is prohibited by the subordination provisions of this Indenture);

        (b)   failure to pay the principal of such series of Notes when it becomes due and payable, whether at stated maturity, upon redemption, upon purchase, upon acceleration or otherwise (whether or not such payment is prohibited by the subordination provisions of this Indenture);

        (c)   failure to comply with any of the agreements or covenants of Section 5.01 or in respect of any obligation to make a Change of Control Offer pursuant to Section 4.11 (whether or not such payment is prohibited by the subordination provisions of this Indenture);

        (d)   failure to comply with any other agreement or covenant in this Indenture and continuance of this failure for 45 days after notice of the failure has been given to QSC by the Trustee or by the Holders of at least 25% of the aggregate principal amount of the series of the Notes to which such failure relates then outstanding;

        (e)   default under any mortgage, indenture or other instrument or agreement ("Debt Instrument") under which there may be issued or by which there may be secured or evidenced Indebtedness of QCII, QSC or any Restricted Subsidiary of QCII (other than QCC to the extent that none of QCII, QSC or QCF have outstanding a Debt Instrument governing Debt Securities under which there is a similar default as this clause (e) with respect to QCC that applies to such default) whether such Indebtedness now exists or is incurred after the Issue Date, which default:

        (i)    is caused by a failure to pay when due principal on such Indebtedness at the final maturity thereof,

        (ii)   results in the acceleration of such Indebtedness prior to its express final maturity or

        (iii)  results in the commencement of judicial proceedings to foreclose upon, or to exercise remedies under applicable law or applicable security documents to take ownership of or to

49

cause the sale of, the assets securing such Indebtedness (other than the consensual provision of assets securing non-recourse Indebtedness),

and in each case, the principal amount of such Indebtedness, together with any other Indebtedness with respect to which an event described in clause (i), (ii) or (iii) has occurred and is continuing, aggregates more than $100.0 million;

        (f)    one or more final and non-appealable judgments or orders that exceed $100.0 million in the aggregate (net of amounts covered by insurance or bonded) for the payment of money have been entered by a court or courts of competent jurisdiction against QCII, QSC or any Restricted Subsidiary of QCII and such judgment or judgments have not been satisfied, stayed, annulled or rescinded within 60 days of being entered;

        (g)   QCII, QSC or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law:

        (i)    commences a voluntary case,

        (ii)   consents to the entry of an order for relief against it in an involuntary case,

        (iii)  consents to the appointment of a Custodian of it or for all or substantially all of its assets, or

        (iv)  makes a general assignment for the benefit of its creditors;

        (h)   a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

        (i)    is for relief against QCII, QSC or any Significant Subsidiary as debtor in an involuntary case,

        (ii)   appoints a Custodian of QCII, QSC or any Significant Subsidiary or a Custodian for all or substantially all of the assets of QSC or any Significant Subsidiary, or

        (iii)  orders the liquidation of QCII, QSC or any Significant Subsidiary,

        and the order or decree remains unstayed and in effect for 60 days;

        (i)    (i) any Note Guarantee shall be held in a judicial proceeding before a court of competent jurisdiction not to be in full force and effect (other than in accordance with the terms of such Note Guarantee and this Indenture) or is declared in such a proceeding null and void and unenforceable or found to be invalid or (ii) any Guarantor denies its liability under its Note Guarantee (other than by reason of release of a Guarantor from its Note Guarantee in accordance with the terms of this Indenture and the Note Guarantee); or

        (j)    default by QSC in the performance of the Security Documents which adversely affects the enforceability or the validity of the Collateral Agent's Lien on the Collateral or which adversely affects the condition or value of the Collateral, taken as a whole, in any material respect, repudiation or disaffirmation by QSC of its obligations under the Security Documents or the determination in a judicial proceeding before a court of competent jurisdiction that the Security Documents are unenforceable or invalid against QSC for any reason.

50

        SECTION 6.02. Acceleration. (a) If an Event of Default (other than an Event of Default specified in Section 6.01(g) or (h) with respect to the Company or QSC) occurs and is continuing with respect to the Notes of a particular maturity, the Trustee by written notice to the Company, or the Holders of at least 25% in aggregate principal amount of any series of Notes then outstanding by written notice to the Company and the Trustee, may declare the principal of, premium, if any, and accrued but unpaid interest in respect of such series of Notes to be due and payable; provided, however, that prior to any Termination Event if there are any amounts outstanding under the Credit Agreement, such amounts shall become immediately due and payable upon the first to occur of (i) an acceleration under the Credit Agreement; (ii) exercise of any remedies against Collateral therefor; or (iii) five Business Days after the giving of written notice to the Company and the Representative under the Credit Agreement (provided that the name and address of such Representative has been delivered to the Trustee in writing) of such acceleration, but only if such Event of Default is then continuing. Upon the effectiveness of such a declaration, the aggregate principal of, premium, if any, and accrued and unpaid interest, if any, on the outstanding Notes of such series shall be due and payable immediately. Notwithstanding the foregoing, if an Event of Default specified in Section 6.01(g) or (h) with respect to the Company or QSC occurs, the principal of and accrued and unpaid interest and premium, if any, on all outstanding Notes shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Noteholders.

        (b)   Notwithstanding the foregoing, if an Event of Default specified in Section 6.01(e) occurs resulting in a declaration of acceleration of the Notes, such declaration of acceleration shall be automatically annulled if such Event of Default triggering such declaration of acceleration pursuant to Section 6.01(e) shall have been remedied or cured by QCII or any of its Subsidiaries or waived by the holders of the relevant Indebtedness within 60 days of the declaration of acceleration with respect thereto and if (i) the annulment of the acceleration of the Notes would not conflict with any judgment or decree of a court of competent jurisdiction and (ii) all existing Events of Default, except nonpayment of principal, premium or interest on the Notes that became due and payable solely because of the acceleration of the Notes, have been cured or waived.

        (c)   At any time after a declaration of acceleration with respect to the Notes of a particular maturity as described in Section 6.02(a), the Holders of a majority in aggregate principal amount of the outstanding Notes of such maturity may rescind and cancel such declaration and its consequences: (i) if the rescission would not conflict with any judgment or decree of a court of competent jurisdiction; (ii) if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration; (iii) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid; and (iv) if the Company has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances. No such rescission shall affect any subsequent Default or impair any right consequent thereto.

        SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing with respect to the Notes of a particular maturity, the Trustee may pursue any available remedy to collect the payment of principal of or interest on such Notes or to enforce the performance of any provision of such Notes or this Indenture.

        The Trustee may maintain a proceeding even if it does not possess any of such Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Noteholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law.

51

        SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in aggregate principal amount of the Notes of a single maturity then outstanding by written notice to the Trustee may on behalf of the Holders of all of such Notes waive any existing Default or Event of Default and its consequences under this Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of or premium on, any such Note. When a Default is waived, it is deemed cured and ceases to exist and any Event of Default arising therefrom shall be deemed to have been cured and waived for every purpose under this Indenture, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any consequent right.

        SECTION 6.05. Control by Majority. The Holders of a majority in aggregate principal amount of the then outstanding Notes of a single maturity may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee by this Indenture. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of another Holder of such Notes or would involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action.

        SECTION 6.06. Limitation on Suits. Except to enforce the right to receive payment of principal, premium, if any, interest or Additional Interest when due, no Noteholder may pursue any remedy with respect to this Indenture or the Notes unless:

        (1)   such Holder has previously given the Trustee notice that an Event of Default with respect to the Notes of a particular maturity owned by such Holder is continuing;

        (2)   Holders of at least 25% in aggregate principal amount of the outstanding Notes of that maturity have made a written request to the Trustee to pursue the remedy;

        (3)   such Holder or Holders offer to the Trustee security or indemnity reasonably satisfactory to it against any loss, liability or expense;

        (4)   the Trustee has not complied with such request within 60 days after the receipt of the request and the offer of security or indemnity; and

        (5)   the Holders of a majority in aggregate principal amount of the outstanding Notes of that maturity have not given the Trustee a direction inconsistent with such request within such 60-day period.

        A Noteholder may not use this Indenture or the Security Documents to prejudice the rights of another Holder of Notes of the same maturity or to obtain a preference or priority over another Holder of Notes of the same maturity.

        SECTION 6.07. Rights of Holders To Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and Additional Interest and interest on the Notes held by such Holder, on or after the respective due dates expressed in the Notes, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder; provided that a Holder shall not have the right to institute any such suit for the enforcement of payment if and to the extent that the institution or prosecution thereof or the entry of judgment therein would, under applicable law, result in the surrender, impairment, waiver or loss of the Lien of this Indenture and the Security Documents upon any Collateral.

        SECTION 6.08. Collection Suit by Trustee. If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an

52

express trust against the Company for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.07.

        SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Noteholders allowed in any judicial proceedings relative to the Company, any Subsidiary or any Guarantor, their creditors or their property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07.

        SECTION 6.10. Priorities. If the Trustee collects any money or property pursuant to this Article VI or pursuant to the Pledge Agreement or otherwise, it shall pay out the money or property in the following order:

        FIRST: to the Trustee for amounts due under Section 7.07;

        SECOND: to Holders of Notes for amounts due and unpaid on the Notes for principal and interest, ratably, and any Additional Interest without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, any Additional Interest and interest, respectively; and

        THIRD: subject to the Pledge Agreement and any other security agreements pertaining to the disposition of Collateral proceeds as required by the Pledge Agreement, to the Company.

        The Trustee may fix a record date and payment date for any payment to Noteholders pursuant to this Section. At least 15 days before such record date, the Trustee shall mail to each Noteholder and the Company a notice that states the record date, the payment date and amount to be paid.

        SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in principal amount of the Notes of a particular maturity then outstanding.

        SECTION 6.12. Waiver of Stay or Extension Laws. Neither the Company nor any Guarantor (to the extent they may lawfully do so) shall at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company and each Guarantor (to the extent that they may lawfully do so) hereby expressly waive all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted.

ARTICLE VII
TRUSTEE

        SECTION 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of

53

care and skill in its exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs.

        (b)   Except during the continuance of an Event of Default:

        (1)   the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and the Security Documents, and no implied covenants or obligations shall be read into this Indenture or the Security Documents against the Trustee; and

        (2)   in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture and the Security Documents. However, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture or the Security Documents.

        (c)   The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:

        (1)   this paragraph does not limit the effect of Section 7.01(b);

        (2)   the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and

        (3)   the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05.

        (d)   Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section.

        (e)   The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company.

        (f)    Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

        (g)   No provision of this Indenture or the Security Documents shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or thereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

        (h)   Upon request from the Company, the Trustee is hereby authorized to and shall enter into the Pledge Agreement or any amendment, restatement, supplement, renewal, replacement or other modification thereof or any other agreement required by the Pledge Agreement and permitted by the terms hereof, entered into in accordance with the terms of this Indenture, including Section 4.06 hereof.

        (i)    Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the TIA.

        SECTION 7.02. Rights of Trustee. Subject to Section 7.01:

        (a)   The Trustee may conclusively rely, and shall be protected in acting or refraining from acting, upon any document believed by it to be genuine and to have been signed or presented by

54

the proper person. The Trustee need not investigate any fact or matter stated in any such document.

        (b)   Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel.

        (c)   The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care.

        (d)   The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Trustee's conduct does not constitute willful misconduct or negligence.

        (e)   The Trustee may consult with counsel of its selection, and the advice or opinion of such counsel with respect to legal matters relating to this Indenture and the Notes shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel.

        (f)    The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, note or other paper or document unless requested in writing to do so by the Holders of not less than a majority in principal amount of the Notes of a particular maturity at the time outstanding, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation.

        (g)   The Trustee shall not be required to give any note, bond or surety in respect of the execution of the trusts and powers under this Indenture.

        (h)   The permissive rights of the Trustee to take any action enumerated in this Indenture shall not be construed as a duty to take such action.

        (i)    The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Trust Officer has actual knowledge thereof or unless a Trust Officer receives written notice thereof at its Corporate Trust Office specified in Section 13.02, from the Company or a Holder that such Default or Event of Default has occurred, and such notice references the Notes and this Indenture.

        (j)    The rights, privileges, protections, immunities and benefits given to the Trustee, including its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder.

        (k)   The Trustee may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any person authorized to sign an Officers' Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded.

        SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or

55

co-paying agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11.

        SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes, and it shall not be responsible for any statement of the Company in this Indenture or in any document issued in connection with the sale of the Notes or in the Notes other than the Trustee's certificate of authentication.

        SECTION 7.05. Notice of Defaults. If a Default with respect to any maturity of Notes occurs and is continuing and is known to the Trustee, the Trustee shall mail to each Holder thereof notice of the Default within 30 days after it is known to a Trust Officer or written notice of it is received by the Trustee. Except in the case of a Default in the payment of principal of, premium, if any, interest or Additional Interest on any Note or a Default in complying with Section 5.01, the Trustee may withhold notice if and so long as a committee of its trust officers in good faith determines that withholding notice is in the interests of Noteholders. If a Default occurs and is continuing and a Senior Officer of the Company has actual knowledge of such Default, the Company shall deliver to the Trustee written notice of such Default, which notice shall include the status of such Default and any action being taken or proposed to be taken by the Company with respect thereto. Notwithstanding anything to the contrary expressed in this Indenture, the Trustee shall not be deemed to have knowledge of any Default or Event of Default hereunder, except in the case of an Event of Default under Section 6.01(a) or (b) hereof (provided that the Trustee is Paying Agent), unless and until a Trust Officer receives written notice thereof at its Corporate Trust Office specified in Section 13.02, from the Company or a Holder that such Default or Event of Default has occurred.

        SECTION 7.06. Reports by Trustee to Holders. The Trustee shall transmit to the Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the TIA at the times and in the manner provided pursuant thereto. To the extent that any such report is required by the TIA with respect to any 12-month period, such report shall cover the 12-month period ending May 15 and shall be transmitted by the next succeeding July 15.

        A copy of each report at the time of its mailing to Noteholders shall be filed with the SEC and each stock exchange (if any) on which the Notes are listed. The Company agrees to notify promptly the Trustee whenever the Notes become listed on any stock exchange and of any delisting thereof.

        SECTION 7.07. Compensation and Indemnity. The Company shall pay to the Trustee from time to time such compensation as is agreed to in writing by the Trustee and the Company for the Trustee's services hereunder and under the Security Documents. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket disbursements, advances and expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. The Company shall indemnify the Trustee and its officers, directors, shareholders, agents and employees (each, an "Indemnified Party") for and hold each Indemnified Party harmless against any and all loss, damage, claims, liability or expense (including reasonable attorneys' fees and expenses) including taxes (other than taxes based upon, measured by or determined by the income of the Trustee) incurred by it without negligence or bad faith on their part arising out of or in connection with the acceptance or administration of this Indenture, the Notes or any Security Document and the performance of its duties hereunder or under the Security Documents, including the cost and expense of enforcing this Indenture against the Company (including this Section 7.07), and defending itself against any claim (whether asserted by a Holder or any other Person). The Trustee and its officers, directors, shareholders, agents and employees in its capacity as Paying Agent, Registrar, Notes Custodian, Calculation Agent and agent for service of notice and demands shall have the full

56

benefit of the foregoing indemnity as well as all other benefits, rights and privileges accorded to the Trustee in this Indenture when acting in such other capacity. The Trustee shall notify the Company of any claim for which it may seek indemnity promptly upon obtaining actual knowledge thereof; provided that any failure so to notify the Company shall not relieve the Company or any Guarantor of its indemnity obligations hereunder. The Company shall defend the claim and the Indemnified Party shall provide reasonable cooperation at the Company's expense in the defense. Such Indemnified Parties may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by an Indemnified Party through such party's own willful misconduct, negligence or bad faith. The Company need not pay any settlement made without its consent (which consent shall not be unreasonably withheld).

        To secure the Company's payment obligations in this Section and all other obligations to the Trustee pursuant to this Indenture and the Security Documents, including all fees, expenses, and rights to indemnification, the Trustee shall have a lien on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest and any Additional Interest on particular Notes. Such lien shall survive the satisfaction and discharge of this Indenture and the termination of any Security Document and the resignation or removal of the Trustee. The Trustee's right to receive payment of any amounts due under this Indenture and the termination of any Security Document shall not be subordinated to any other Indebtedness of the Company and the Notes shall be subordinate to the Trustee's rights to receive such payment.

        The Company's payment obligations pursuant to this Section shall survive the satisfaction or discharge of this Indenture, any rejection or termination of this Indenture under any Bankruptcy Law or the resignation or removal of the Trustee. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.01(i) or (j) with respect to the Company, the expenses are intended to constitute expenses of administration under the Bankruptcy Law.

        SECTION 7.08. Replacement of Trustee. The Trustee may resign at any time by so notifying the Company in writing. The Holders of a majority in principal amount of the then outstanding Notes of a particular maturity may remove the Trustee by so notifying the Trustee and the Company in writing and may appoint a successor Trustee. The Company shall remove the Trustee if:

        (1)   the Trustee fails to comply with Section 7.10;

        (2)   the Trustee is adjudged bankrupt or insolvent;

        (3)   a receiver or other public officer takes charge of the Trustee or its property; or

        (4)   the Trustee otherwise becomes incapable of acting.

        If the Trustee resigns, is removed by the Company or by the Holders of a majority in principal amount of the then outstanding Notes of a particular maturity, the Company will promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company.

        A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Noteholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07.

        If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of at least 10% in aggregate principal amount of the then

57

outstanding Notes of a particular maturity may petition any court of competent jurisdiction for the appointment of a successor Trustee at the expense of the Company.

        If the Trustee fails to comply with Section 7.10, any Noteholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

        Notwithstanding the replacement of the Trustee pursuant to this Section, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee.

        SECTION 7.09. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee, provided that such Person shall be qualified and eligible under this Article VII.

        In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor to the Trustee.

        SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA § 310(a). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA § 310(b); provided, however, that there shall be excluded from the operation of TIA § 310(b)(1) any indenture or indentures under which other Securities or certificates of interest or participation in other Securities of the Company are outstanding if the requirements for such exclusion set forth in TIA § 310(b)(1) are met.

        SECTION 7.11. Preferential Collection of Claims Against the Company. The Trustee shall comply with TIA § 311(a), excluding any creditor relationship listed in TIA § 311(b). A Trustee who has resigned or been removed shall be subject to TIA § 311(a) to the extent indicated therein.

ARTICLE VIII
SUBORDINATION OF QSC GUARANTEE

        SECTION 8.01. QSC Guarantee Subordinated to Senior Debt. QSC covenants and agrees, and the Trustee and each Holder of the Notes by his acceptance thereof likewise covenant and agree, that all Notes shall be issued subject to the provisions of this Article VIII, and each person holding any Note, whether upon original issue or upon transfer, assignment or exchange thereof, accepts and agrees that payments of all Obligations on or relating to the QSC Guarantee by QSC shall, to the extent and in the manner set forth in this Article VIII and subject to Section 8.16, be subordinated and junior in right of payment to the prior payment in full in cash or Cash Equivalents of all Obligations due in respect of Senior Debt of QSC whether outstanding on the Issue Date or incurred thereafter.

        SECTION 8.02. No Payment on Notes in Certain Circumstances. (a) No direct or indirect payment or distribution (excluding any payment or distribution of Permitted Junior Securities and excluding any payment from funds held in trust for the benefit of the Holders pursuant to Article IX (a "Defeasance Trust Payment")) by or on behalf of QSC with respect to any Obligations on or relating to the Notes or to acquire any Notes for cash, assets or otherwise, whether pursuant to the terms of the Notes, upon acceleration or otherwise, will be made if, at the time of such payment or distribution, (i) there exists a default in payment of all or any portion of the Obligations due in respect of Senior Debt or (ii) there exists a default with respect to any Designated Senior Debt pursuant to which the maturity thereof may be immediately accelerated, and upon receipt by the Trustee of written notice of such default (a

58

"Payment Blockage Notice") from the Representative of such Designated Senior Debt. In addition, subject to Section 8.16, no direct or indirect payment or distribution (other than Permitted Junior Securities) will be made by or on behalf of QSC with respect to any Obligation on or relating to the Notes to such Holders or to acquire any Notes for cash, assets or otherwise, (a) during the continuance of any payment default referred to in clause (i) above, unless and until such default has been cured or waived or has ceased to exist or the benefits of these provisions have been waived by the holders of such Senior Debt, or (b) during the continuance of any nonpayment default referred to in clause (ii) above (a "Payment Blockage Period"), unless and until the earlier of (1) the date on which any nonpayment defaults referred to in clause (ii) above shall have been cured or waived or the benefits of these provisions have been waived by the holders of such Designated Senior Debt, (2) 179 days after the date on which the applicable Payment Blockage Notice is received or (3) the Trustee receives notice from the Representative for such Designated Senior Debt rescinding the Payment Blockage Notice, provided that in the case of clause (3) above the maturity of any Designated Senior Debt has not been accelerated.

        Notwithstanding anything in the subordination provisions of this Indenture or the Notes to the contrary, (1) in no event will a Payment Blockage Period extend beyond 179 days from the date the Payment Blockage Notice in respect thereof was given and (2) no subsequent Payment Blockage Period may be commenced with respect to the QSC Guarantee as it relates to the Notes of a particular maturity unless and until 360 consecutive days have elapsed since the delivery of the immediately prior Payment Blockage Notice. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice with respect to any Designated Senior Debt initiating such Payment Blockage Period may be, or be made, the basis for the commencement of any other Payment Blockage Period by the holder or holders of such Designated Senior Debt or the trustee or agent acting on behalf of such Designated Senior Debt, whether or not within a period of 360 consecutive days, unless such event of default has been cured or waived for a period of not less than 90 consecutive days. Any subsequent action or breach of any financial covenants for a period ending after the date of delivery of the initial Payment Blockage Notice that in either case would give rise to a default pursuant to any provisions under which a default in respect of Designated Senior Indebtedness previously existed or was continuing shall constitute a new default for the purposes of this paragraph.

        (b)   In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or any Holder from or on behalf of QSC when such payment is prohibited by Section 8.02(a), such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Designated Senior Debt or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Designated Senior Debt may have been issued, as their respective interests may appear, but only to the extent that, upon notice from the Trustee to the holders of Designated Senior Debt that such prohibited payment has been made, the holders of the Designated Senior Debt (or their representative or representatives or a trustee or trustees) notify the Trustee in writing of the amounts then due and owing on the Designated Senior Debt, if any, and only the amounts specified in such notice to the Trustee shall be paid to the holders of Designated Senior Debt.

        SECTION 8.03. Payment Over of Proceeds upon Dissolution, etc. (a) Upon any payment or distribution of assets or securities of QSC of any kind or character, whether in cash, property or securities (excluding any payment or distribution of Permitted Junior Securities and excluding Defeasance Trust Payment), upon any dissolution or winding-up or total liquidation or reorganization of QSC, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all Obligations due in respect of Senior Debt (including interest after the commencement of any bankruptcy proceeding) shall first be paid in full in cash or Cash Equivalents before the Holders of the Notes or the Trustee on behalf of such Holders shall be entitled to receive any payment by QSC with respect to any Obligations on or relating to the Notes, or any payment by QSC to acquire any of

59

the Notes for cash, property or securities, or any distribution by QSC with respect to the Notes of any cash, property or securities (excluding any payment or distribution of Permitted Junior Securities and excluding any Defeasance Trust Payment). Before any payment may be made by, or on behalf of, QSC with respect to any Obligations on or relating to the Notes upon any such dissolution or winding-up or total liquidation or reorganization, any payment or distribution of assets or securities of QSC of any kind or character, whether in cash, property or securities (excluding any payment or distribution of Permitted Junior Securities and excluding any Defeasance Trust Payment), to which the Holders of the Notes or the Trustee on their behalf would be entitled, but for the subordination provisions of this Indenture, shall be made by QSC or by any receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, directly to the holders of the Senior Debt (pro rata to such holders on the basis of the respective amounts of Senior Debt held by such holders) or their representatives or to the trustee or trustees or agent or agents under any agreement or indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, to the extent necessary to pay all such Senior Debt in full in cash after giving effect to any prior or concurrent payment, distribution or provision therefor to or for the holders of such Senior Debt.

        (b)   In the event that, notwithstanding the foregoing provision prohibiting such payment or distribution, any payment or distribution of assets or securities of QSC of any kind or character, whether in cash, property or securities (excluding any payment or distribution of Permitted Junior Securities and excluding any Defeasance Trust Payment), shall be received by the Trustee or any Holder of Notes at a time when such payment or distribution is prohibited by Section 8.03(a) and before all obligations in respect of Senior Debt are paid in full in cash, such payment or distribution shall be received and held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Debt (pro rata to such holders on the basis of the respective amounts of Senior Debt held by such holders) or their respective representatives, or to the trustee or trustees or agent or agents under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been paid in full in cash after giving effect to any prior or concurrent payment, distribution or provision therefor to or for the holders of such Senior Debt.

        The consolidation of QSC with, or the merger of QSC with or into, another corporation or the liquidation or dissolution of QSC following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided in Article V shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 8.03 if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article V.

        SECTION 8.04. Subrogation. Upon the payment in full in cash or Cash Equivalents of all Senior Debt, or provision for payment, the Holders of the Notes shall be subrogated to the rights of the holders of Senior Debt to receive payments or distributions of cash, property or securities of QSC made on such Senior Debt until all Obligations due in respect of the Notes shall be paid in full in cash; and, for the purposes of such subrogation, no payments or distributions to the holders of the Senior Debt of any cash, property or securities to which the Holders of the Notes or the Trustee on their behalf would be entitled except for the provisions of this Article VIII, and no payment over pursuant to the provisions of this Article VIII to the holders of Senior Debt by Holders of the Notes or the Trustee on their behalf shall, as between QSC, its creditors other than holders of Senior Debt, and the Holders of the Notes, be deemed to be a payment by QSC to or on account of the Senior Debt. It is understood that the provisions of this Article VIII are and are intended solely for the purpose of defining the relative rights of the Holders of the Notes with respect to the QSC Guarantee, on the one hand, and the holders of the Senior Debt, on the other hand.

60

        If any payment or distribution to which the Holders of the Notes would otherwise have been entitled but for the provisions of this Article VIII shall have been applied, pursuant to the provisions of this Article VIII, to the payment of all amounts payable under Senior Debt, then and in such case, the Holders of the Notes shall be entitled to receive from the holders of such Senior Debt any payments or distributions received by such holders of Senior Debt in excess of the amount required to make payment in full in cash of such Senior Debt.

        SECTION 8.05. Obligations of QSC Unconditional. Nothing contained in this Article VIII or elsewhere in this Indenture or in the Notes is intended to or shall impair, as among QSC and the Holders of the Notes, the obligation of QSC, which is absolute and unconditional, to pay to the Holders of the Notes, all Obligations due in respect of the QSC Guarantee as and when the same shall become due and payable in accordance with the terms of the QSC Guarantee, or is intended to or shall affect the relative rights of the Holders of the Notes and creditors of QSC other than the holders of the Senior Debt, nor shall anything herein or therein prevent the Holder of any Note or the Trustee on their behalf from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article VIII of the holders of the Senior Debt in respect of cash, property or securities of QSC received upon the exercise of any such remedy.

        Without limiting the generality of the foregoing, nothing contained in this Article VIII shall restrict the right of the Trustee or the Holders of Notes to take any action to declare the Notes to be due and payable prior to their stated maturity pursuant to Section 6.01 or to pursue any rights or remedies hereunder; provided, however, that all Senior Debt then due and payable shall first be paid in full in cash or Cash Equivalents before the Holders of the Notes or the Trustee are entitled to receive any direct or indirect payment from QSC of all Obligations due in respect of the QSC Guarantee.

        SECTION 8.06. Notice to Trustee. QSC shall give prompt written notice to the Trustee of any fact known to QSC which would prohibit the making of any payment to or by the Trustee in respect of the QSC Guarantee pursuant to the provisions of this Article VIII. The Trustee shall not be charged with knowledge of the existence of any event of default with respect to any Senior Debt or of any other facts which would prohibit the making of any payment to or by the Trustee in respect of the QSC Guarantee unless and until the Trustee shall have received notice in writing at its Corporate Trust Office to that effect signed by an Officer of QSC, or by a holder of Senior Debt or trustee or agent therefor; and prior to the receipt of any such written notice, the Trustee shall, subject to Article VII, be entitled to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section 8.06 at least two Business Days prior to the date upon which by the terms of this Indenture any moneys shall become payable for any purpose (including, without limitation, the payment of the principal of or interest on any Note), then, regardless of anything herein to the contrary, the Trustee shall have full power and authority to receive any moneys from QSC and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary which may be received by it on or after such prior date. Nothing contained in this Section 8.06 shall limit the right of the holders of Senior Debt to recover payments as contemplated by Section 8.03. The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or itself to be a holder of any Senior Debt (or a trustee on behalf of, or other representative of, such holder) to establish that such notice has been given by a holder of such Senior Debt or a trustee or representative on behalf of any such holder.

61

        In the event that the Trustee determines in good faith that any evidence is required with respect to the right of any Person as a holder of Senior Debt to participate in any payment or distribution pursuant to this Article VIII, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article VIII, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment.

        SECTION 8.07. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets or securities referred to in this Article VIII, the Trustee and the Holders of the Notes shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which bankruptcy, dissolution, winding-up, liquidation or reorganization proceedings are pending, or upon a certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, delivered to the Trustee or to the Holders of the Notes for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of the Senior Debt and other indebtedness of QSC, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article VIII.

        SECTION 8.08. Trustee's Relation to Senior Debt. The Trustee and any Paying Agent shall be entitled to all the rights set forth in this Article VIII with respect to any Senior Debt which may at any time be held by it in its individual or any other capacity to the same extent as any other holder of Senior Debt, and nothing in this Indenture shall deprive the Trustee or any Paying Agent of any of its rights as such holder.

        With respect to the holders of Senior Debt, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article VIII, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt (except as provided in Section 8.03(b)). The Trustee shall not be liable to any such holders if the Trustee shall in good faith mistakenly pay over or distribute to Holders of Notes or to QSC or to any other person cash, property or securities to which any holders of Senior Debt shall be entitled by virtue of this Article VIII or otherwise.

        SECTION 8.09. Subordination Rights Not Impaired by Acts or Omissions of QSC or Holders of Senior Debt. No right of any present or future holders of any Senior Debt to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of QSC or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by QSC with the terms of this Article VIII, regardless of any knowledge thereof which any such holder may have or otherwise be charged with. The provisions of this Article VIII are intended to be for the benefit of, and shall be enforceable directly by, the holders of Senior Debt.

        SECTION 8.10. Holders Authorize Trustee To Effectuate Subordination of Notes. Each Holder of Notes by the Holder's acceptance of such Notes authorizes and expressly directs the Trustee on the Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article VIII, and appoints the Trustee his attorney-in-fact for such purposes, including, in the event of any dissolution, winding-up, total liquidation or reorganization of QSC (whether in bankruptcy, insolvency, receivership, reorganization or similar proceedings or upon an assignment for the benefit of creditors or otherwise) tending towards liquidation of the business and assets of QSC, the filing of a claim for the unpaid balance of its Notes in the form required in those proceedings.

        SECTION 8.11. This Article Not To Prevent Events of Default. The failure to make a payment on account of any Obligation due in respect of the Notes by reason of any provision of this Article VIII

62

shall not be construed as preventing the occurrence of an Event of Default specified in clause (a), (b) or (c) of Section 6.01.

        SECTION 8.12. Trustee's Compensation Not Prejudiced. Nothing in this Article VIII shall apply to amounts due to the Trustee pursuant to other sections in this Indenture.

        SECTION 8.13. No Waiver of Subordination Provisions. Without in any way limiting the generality of Section 8.09, the holders of Senior Debt may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Notes, without incurring responsibility to the Holders of the Notes and without impairing or releasing the subordination provided in this Article VIII or the obligations hereunder of the Holders of the Notes to the holders of Senior Debt, do any one or more of the following: (a) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Debt or any instrument evidencing the same or any agreement under which Senior Debt is outstanding or secured; (b) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt; (c) release any Person liable in any manner for the collection of Senior Debt; and (d) exercise or refrain from exercising any rights against QSC and any other Person.

        SECTION 8.14. Subordination Provisions Not Applicable to Money Held in Trust for Holders; Payments May Be Paid Prior to Dissolution. All cash in U.S. legal tender and U.S. Government Obligations deposited in trust with the Trustee by or on behalf of QSC pursuant to and in accordance with Article IX shall be for the sole benefit of the Holders and shall not be subject to this Article VIII.

        Nothing contained in this Article VIII or elsewhere in this Indenture shall prevent (i) QSC, except under the conditions described in Section 8.02, from making payments of any Obligation due in respect of the Notes or from depositing with the Trustee any moneys for such payments or from effecting a termination of the Company's obligations under the Notes and this Indenture as provided in Article IX, or (ii) the application by the Trustee of any moneys deposited with it for the purpose of making such payments of any Obligations due in respect of the Notes, to the holders entitled thereto unless at least two Business Days prior to the date upon which such payment becomes due and payable, the Trustee shall have received the written notice provided for in Section 8.02(b) or in Section 8.06 or (iii) subordinate the obligations of any obligor (other than QSC) to Senior Debt. QSC shall give prompt written notice to the Trustee of any dissolution, winding-up, liquidation or reorganization of QSC.

        SECTION 8.15. Acceleration of Notes. If payment of the Notes is accelerated because of an Event of Default, QSC shall promptly notify holders of the Senior Debt of the acceleration.

        SECTION 8.16. Termination of Subordination of QSC Guarantee upon Occurrence of Termination Event. Notwithstanding any other provision of this Article VIII, the subordination of the QSC Guarantee to Senior Debt provided for in this Article VIII shall terminate from and after the occurrence of any Termination Event and, from and after the date of a Termination Event, the obligations of QSC pursuant to the QSC Guarantee shall cease to be subject to the provisions of this Article VIII and thereafter, shall rank pari passu in right of payment with all Senior Debt.

ARTICLE IX
DISCHARGE OF INDENTURE; DEFEASANCE

        SECTION 9.01. Legal Defeasance and Covenant Defeasance. (a) The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 9.01(b) or 9.01(c) hereof be applied to all outstanding Notes of a designated maturity upon compliance with the conditions set forth below in this Article IX.

        (b)   Upon the Company's exercise in Section 9.01(a) hereof of the option applicable to this Section 9.01(b), the Company and each Guarantor shall, subject to the satisfaction of the conditions set

63

forth in Section 9.02 hereof, be deemed to have been discharged from their obligations with respect to all outstanding Notes of a designated maturity and any related Note Guarantee on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"), each such reference below being only to such designated maturity of Notes. For this purpose, Legal Defeasance means that the Company and each Guarantor shall be deemed to have paid and discharged the entire Indebtedness represented by such outstanding Notes and any related Note Guarantee, which Notes and Notes Guarantees shall thereafter be deemed to be "outstanding" only for the purposes of Section 9.03 hereof and the other Sections of this Indenture referred to in (i) and (ii) below, and to have satisfied all their other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of such outstanding Notes to receive solely from the trust fund described in this Article IX, as more fully set forth in such Article, payments in respect of the principal of, premium, if any, and interest and Additional Interest, if any, on such Notes when such payments are due, (ii) the Company's obligations with respect to the Notes in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.09, 7.07 and 7.08, which shall survive until the Notes have been paid in full (thereafter, the Company's obligations in Section 7.07 shall survive), and (iii) this Article IX. Subject to compliance with this Article IX, the Company may exercise its option under this Section 9.01(b) notwithstanding the prior exercise of its option under Section 9.01(c) hereof.

        (c)   Upon the Company's exercise under Section 9.01(a) hereof of the option applicable to this Section 9.01(c), the Company and each Guarantor shall, subject to the satisfaction of the conditions set forth in Section 9.02 hereof, be released from their obligations under Sections 4.06, 4.07, 4.08, 4.09, (other than with respect to collateral) 4.10, 4.13, 4.14, and 4.15 and 5.01 hereof with respect to the outstanding Notes of a designated maturity on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), each such reference below being only to such designated maturity of Notes, and such Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration of act of Holders (and the consequences of any thereof) in connection with such Sections, but shall continue to be deemed "outstanding" for all the other purposes hereunder (it being understood that such Notes and the related Notes Guarantees shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect of any term, condition or limitation set forth in any such Section, whether directly or indirectly, by reason of any reference elsewhere herein to any such Section or by reason of any reference in any such Section to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under Section 9.01(a) hereof of the option applicable to this Section 9.01(c) hereof, subject to the satisfaction of the conditions set forth in Section 9.02, Sections 6.01(a), 6.01(b), 6.01(d) (with respect to compliance with Sections 4.08, 4.10, 4.13, 4.14, and 4.15), 6.01(e) and (f) shall not constitute Events of Default.

        SECTION 9.02 Conditions to Legal or Covenant Defeasance. The following shall be the conditions to the application of either Section 9.01(b) or 9.01(c) hereof to the outstanding Notes:

        In order to exercise either Legal Defeasance or Covenant Defeasance:

        (a)   (i) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in U.S. legal tender, U.S. Government Obligations or a combination thereof, in such amounts as will be sufficient (without reinvestment), in the opinion of a nationally recognized firm of independent public accountants selected by the Company, to pay the principal of, premium, if any, and interest and Additional Interest, if any, on such outstanding Notes on the stated date for payment or on the applicable redemption date, as the case may be, (ii) the Holders must have a

64

valid, perfected exclusive security interest in such trust, and (iii) the Company must specify whether such Notes are being defeased to maturity or to a particular redemption date;

        (b)   in the case of an election under Section 9.01(b) hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (i) the Company has received from, or there has been published by, the Internal Revenue Service, a ruling or (ii) since the date of this Indenture, there has been a change in the applicable U.S. federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of such outstanding Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

        (c)   in the case of an election under Section 9.01(c) hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States, reasonably acceptable to the Trustee, confirming that the Holders of such outstanding Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

        (d)   no Default shall have occurred and be continuing on the date of such deposit (other than a Default resulting from the borrowing of funds to be applied to such deposit and the grant of any Lien securing such borrowing);

        (e)   such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which QCII, the Company or any of its Subsidiaries is bound;

        (f)    the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or the Guarantors, as applicable, or others; and

        (g)   the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that the conditions precedent provided for in, in the case of the Officers' Certificate, clauses (a) through (f) and, in the case of the Opinion of Counsel, clauses (a) (with respect to the validity and perfection of the security interest), (b) and/or (c) and (e) above have been complied with.

        SECTION 9.03. Deposited Money and Government Securities To Be Held in Trust; Other Miscellaneous Provisions. Subject to Section 9.04 hereof, all cash in U.S. legal tender and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 9.03, the "Trustee") pursuant to Section 9.02 hereof in respect of outstanding Notes of a particular maturity shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law.

        Anything in this Article IX to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any cash in U.S. legal tender or U.S. Government Obligations held by it as provided in Section 9.02 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof

65

delivered to the Trustee (which may be the opinion delivered under Section 9.02(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

        SECTION 9.04. Repayment to the Company. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium and Additional Interest, if any, or interest on any Note and remaining unclaimed for two years after such principal, premium and Additional Interest, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company, cause to be published once, in the New York Times (national edition) and the Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company.

        SECTION 9.05. Reinstatement. If the Trustee or Paying Agent is unable to apply any cash in U.S. legal tender or U.S. Government Obligations in accordance with this Article IX by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application or the funds deposited are insufficient to pay the principal of, premium, if any, interest and Additional Interest on the outstanding Notes, then the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to this Article IX until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with this Article IX; provided, however, that, if the Company or any Guarantor makes any payment of principal of, premium and Additional Interest, if any, or interest on any Note following the reinstatement of its obligations, the Company or any Guarantor, as the case may be, shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent.

        SECTION 9.06. Satisfaction and Discharge of Indenture. Upon the request of the Company, this Indenture will cease to be of further effect (except as to rights of registration of transfer or exchange of the Notes, which shall survive until all Notes of each maturity have been canceled), and all Liens on the Collateral shall be released and terminated, the Company and the Guarantors will be discharged from their obligations under the designated maturity of Notes and the related Note Guarantees, and the Trustee, at the expense of the Company, will execute proper instruments acknowledging satisfaction and discharge of this Indenture, such Note Guarantees, the Registration Rights Agreement and such Notes when:

        (a)   either (i) all such Notes of a particular maturity theretofore authenticated and delivered (other than mutilated, destroyed, lost or stolen Notes that have been replaced or paid and Notes that have been subject to defeasance under this Article IX) have been delivered to the Trustee for cancellation or (ii) (A) all such Notes of a particular maturity not theretofore delivered to the Trustee for cancellation have become due and payable or have been called for redemption pursuant to Section 3.07 and the Company, has irrevocably deposited or caused to be deposited with the Trustee funds in trust in an amount sufficient to pay and discharge the entire Indebtedness on such Notes not theretofore delivered to the Trustee for cancellation; (B) the Company has paid or caused to be paid all sums payable under this Indenture; (C) the Company has delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of the Notes of such series at maturity or on the date of redemption, as the case may be; and (D) the Holders have a valid, perfected exclusive security interest in this trust; and an

66

Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided in this Indenture relating to the satisfaction and discharge of this Indenture, the Note Guarantees, the security agreements relating thereto and the Notes have been complied with.

        (b)   the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that the conditions precedent relating to this Section 9.06 have been complied with.

        Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 7.07 and, if money shall have been deposited with the Trustee pursuant to clause (a)(ii) of this Section, the obligations of the Trustee under Section 9.03 and Section 2.04 shall survive.

ARTICLE X
AMENDMENTS

        SECTION 10.01. Without Consent of Holders. The Company, the Guarantors and the Trustee may amend or supplement this Indenture, the Notes (as to a designated maturity of Notes or as to all of the Notes), the Notes Guarantees or the Security Documents applicable thereto without notice to or consent of any Noteholder:

        (a)   to cure any ambiguity, defect or inconsistency;

        (b)   to provide for uncertificated Notes in addition to or in place of certificated Notes (provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code);

        (c)   to provide for the assumption of the Company's and Guarantors' obligations to Holders of such Notes, and related releases of the Company and Guarantors, in the case of a merger, consolidation or sale of assets pursuant to Section 5.01;

        (d)   to make any change that would provide any additional rights or benefits to the Holders of such Notes or that, as determined by the Board of Directors of the Company in good faith, does not materially adversely affect the rights of any such Holder under this Indenture, the Notes or the Note Guarantees, or the Security Documents;

        (e)   to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA;

        (f)    to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture;

        (g)   to add additional assets to the Collateral or additional guarantees;

        (h)   to make any change necessary to conform to the "Description of Notes" contained in the offering memorandum relating to the offering of the Initial Notes; or

        (i)    without limiting the effect of Section 8.16, to eliminate references to subordination of the QSC Guarantee.

        After an amendment under this Section becomes effective, the Company shall mail to the Holders of such Notes a notice briefly describing such amendment. The failure to give such notice to all the Holders of such Notes, or any defect therein, shall not impair or affect the validity of an amendment under this Section.

        SECTION 10.02. With Consent of Holders. The Company, the Guarantors and the Trustee may amend or supplement this Indenture, the Notes (as to a designated maturity of Notes or as to all of the

67

Notes), the Note Guarantees or the Security Documents with the written consent of the Holders of at least a majority in aggregate principal amount of all series of the Notes then outstanding (including Additional Notes, if any), voting together as a single group; provided that any such amendments that affect the terms of a particular maturity of Notes as distinct from any other maturity of Notes will require the consent of at least a majority in aggregate principal amount of such affected maturity of Notes then outstanding and any existing Default under, or compliance with any provisions of, this Indenture, the Notes, any Note Guarantee thereon or the Security Documents applicable thereto may be waived (other than any continuing Default in the payment of the principal of or interest on the Notes) with the consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding to be affected thereby (including consents obtained in connection with a tender offer or exchange offer for such Notes) and provided further that any such amendment may not effect any change that adversely affects the rights under Article VIII of any holder of Senior Debt then outstanding unless such holder, or its representative, shall have consented in writing to such amendment. Notwithstanding the foregoing, without the consent of each Noteholder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder):

        (i)    change the maturity of such Notes;

        (ii)   reduce the amount, extend the due date or otherwise affect the terms of any scheduled payment of interest on or principal of any such Note;

        (iii)  reduce any premium payable upon optional redemption of any such Notes, change the date on which any such Notes are subject to redemption or otherwise alter the provisions with respect to the redemption of such Notes;

        (iv)  make any such Notes payable in money or currency other than that stated therein;

        (v)   modify or change any provision of this Indenture or the related definitions to modify the ranking of such Notes or any Note Guarantee thereon or the subordination provisions thereof, or alter the relative priority of the security interests as provided for in the Security Documents, in a manner that adversely affects the Holder thereof;

        (vi)  reduce the percentage of Holders necessary to consent to an amendment or waiver to this Indenture or any such Notes;

        (vii) impair the rights of Holders to receive payments of principal of or interest on such Notes;

        (viii)   release any Guarantor from any of its obligations under its applicable Note Guarantee or this Indenture, except as permitted by this Indenture; or

        (ix)  make any changes in the foregoing amendment or waiver provisions.

        It shall not be necessary for the consent of the Holders under this Section 10.02 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof.

        After an amendment under this Section becomes effective, the Company shall mail to the Holders of such Notes a notice briefly describing such amendment. The failure to give such notice to all the Holders of such Notes, or any defect therein, shall not impair or affect the validity of an amendment under this Section.

        Notwithstanding the foregoing, no amendment may, without the consent of 66²/3% in aggregate principal amount of the Notes of all series then outstanding, voting together as single group, release any Collateral from any Lien under the Security Documents relating thereto, except in accordance with Sections 4.10 and 11.03; provided that such a release may be obtained as to a particular series with the consent of Holders of 66²/3% in aggregate principal amount of such series.

68

        SECTION 10.03. Compliance with Trust Indenture Act. Every amendment to this Indenture or the Notes shall comply with the TIA as then in effect.

        SECTION 10.04. Revocation and Effect of Consents and Waivers. A consent to an amendment or a waiver by a Holder of a Note shall bind the Holder and every subsequent Holder of that Note or portion of the Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent or waiver is not made on the Note. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Note or portion of the Note if the Trustee receives written notice of revocation before the date the amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Noteholder. Except if otherwise specified in such amendment or waiver, an amendment or waiver becomes effective once the requisite number of consents are received by the Company or the Trustee.

        The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Noteholders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Noteholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date.

        SECTION 10.05. Notation on or Exchange of Notes. If an amendment changes the terms of a Note, the Trustee may require the Holder of the Note to deliver it to the Trustee. The Trustee may place an appropriate notation on the Note regarding the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Note shall issue and the Trustee shall authenticate a new Note that reflects the changed terms. Failure to make the appropriate notation or to issue a new Note shall not affect the validity of such amendment.

        SECTION 10.06. Trustee To Sign Amendments. The Trustee shall sign any amendment authorized pursuant to this Article X if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture that such amendment is the legal, valid and binding obligation of the Company and the Guarantors enforceable against them in accordance with its terms, subject to customary exceptions, and complies with the provisions hereof (including Section 10.03).

ARTICLE XI
COLLATERAL DOCUMENTS

        SECTION 11.01. Security Documents. All obligations of QSC with respect to the QSC Guarantee and performance of all other obligations of QSC to the Holders of Notes or the Trustee under this Indenture, according to the terms hereunder or thereunder, are secured as provided in the Security Documents which QSC has entered into simultaneously with the execution of this Indenture. Each Holder of Notes, by its acceptance thereof, consents and agrees to the terms of the Security Documents (including, without limitation, the provisions providing for foreclosure and release of Collateral) as the same may be in effect or may be amended from time to time in accordance with its terms and authorizes and directs each of the Collateral Agent to enter into the Security Documents and to perform its obligations and exercise its rights thereunder in accordance therewith. QSC shall deliver to the Trustee (if it is not itself then the Collateral Agent) copies of all documents delivered to the Collateral Agent pursuant to the Security Documents, and will do or cause to be done all such acts and

69

things as may be required by the next sentence of this Section 11.01, to assure and confirm to the Trustee and the Collateral Agent, the security interest in the Collateral contemplated hereby, by the Security Documents or any part thereof, as from time to time constituted, so as to render the same available for the security and benefit of the Note Guarantee secured hereby, according to the intent and purposes herein expressed. QSC shall take any and all actions reasonably required to cause the Security Documents to create and maintain, as security for the Obligations of QSC hereunder, a valid and enforceable perfected Lien in and on all of the Collateral, in favor of the Collateral Agent for the benefit of the Holders of Notes, with such priority as provided for in the applicable Security Documents.

        SECTION 11.02. Recording and Opinions. (a) QSC shall each furnish to the Trustee:

        (1)   promptly after issuance of the Exchange Notes, an Opinion of Counsel that complies with TIA § 314(b)(1); and

        (2)   at least annually thereafter, an Opinion of Counsel that complies with TIA § 314(b)(2).

        (b)   QSC will otherwise comply with any successor provisions to TIA § 314(b).

        SECTION 11.03. Release of Collateral upon Asset Sale. (a) Subject to subsections (b) and (c) of this Section 11.03, Collateral may be released from the Lien and security interest created by the Security Documents at any time or from time to time in accordance with the provisions hereof. Upon the request of QSC and without the consent of any Holder of the Notes and the Note Guarantees, QSC will be entitled to an automatic release of assets included in the Collateral ("Released Interests") from the Liens securing the QSC Guarantee in connection with an Asset Sale if QSC shall have delivered to the Trustee and the Collateral Agent:

        (i)    a notice requesting the release of the Released Interests, which notice shall (A) describe the proposed Released Interests, (B) stating that the purchase price received is at least equal to the Fair Market Value of the Released Interest, and (C) in the event that any assets other than cash or Cash Equivalents comprise a portion of the consideration received in such Asset Sale, specifically describing such assets;

        (ii)   an Officers' Certificate of QSC stating that: (A) (1) the stated Fair Market Value of such Asset Sale of Collateral does not include the sale of assets other than the Released Interest and (2) such Asset Sale complies with the terms and conditions of this Indenture with respect to Asset Sales; (B) all Net Available Proceeds from the sale of the Released Interest will be applied pursuant to the provisions of the Pledge Agreement and this Indenture and the documents governing any Indebtedness secured by a Lien on the Released Interest senior to the Lien of the Notes with respect to Asset Sales; and (C) all conditions precedent in this Indenture relating to the release in question have been complied with;

        (iii)  the Net Available Proceeds and other non-cash consideration from the Asset Sale required to be pledged to secure the Notes have been so pledged in a manner that creates a perfected security interest therein of the same priority as the Collateral sold;

        (iv)  all documentation necessary or reasonably requested by the Trustee to evidence the grant to the Collateral Agent, on behalf of the Holders of the Notes, of a security interest in and Lien (of the same priority as the Lien on the assets subject to the Asset Sale) on all assets comprising a portion of the consideration received in such Asset Sale, if any; and

        (v)   all documentation required by the TIA prior to the release of Collateral by the Trustee.

        Upon receipt of such notice and Officers' Certificate each Collateral Agent shall execute, deliver or acknowledge any necessary or proper instruments of termination, satisfaction or release to evidence

70

the release of any Collateral permitted to be released pursuant to this Indenture or the Security Documents.

        The Trustee may, to the extent permitted by Sections 7.01 and 7.02 hereof, accept as conclusive evidence of compliance with the foregoing provisions the appropriate statements contained in such documents and such Opinion of Counsel.

        (b)   Except as otherwise provided in the Pledge Agreements, no Collateral may be released from the Lien and security interest created by the Security Documents pursuant to the provisions of the Security Documents unless the Officers' Certificate required by this Section 11.03 has been delivered to the Collateral Agent.

        (c)   The release of any Collateral from the terms of this Indenture and the Security Documents shall not be deemed to impair the security under this Indenture in contravention of the provisions hereof if and to the extent the Collateral is released pursuant to the terms of the Security Documents and this Indenture. To the extent applicable, QSC will cause TIA § 313(b), relating to reports, and TIA § 314(d), relating to the release of property or securities from the Lien and security interest of the Security Documents and relating to the substitution therefor of any property or securities to be subjected to the Lien and security interest of the Security Documents, to be complied with. Any certificate or opinion required by TIA § 314(d) may be made by an Officer of QSC, except in cases where TIA § 314(d) requires that such certificate or opinion be made by an independent Person, which Person will be an independent engineer, appraiser or other expert selected or approved by the Trustee and the Collateral Agents in the exercise of reasonable care.

        SECTION 11.04. Certificates of the Trustee. In the event that QSC wishes to release Collateral in accordance with the Security Documents at a time when the Trustee is not the Collateral Agent and has delivered the certificates and documents required by the Security Documents and Section 11.03 hereof, the Trustee will determine whether it has received all documentation required by TIA § 314(d) in connection with such release and, based on such determination and the Opinion of Counsel delivered pursuant to Section 11.03(a) (ii), will deliver a certificate to the Collateral Agents setting forth such determination.

        SECTION 11.05. Authorization of Actions To Be Taken by the Trustee Under the Security Documents. Subject to the provisions of Sections 7.01 and 7.02 hereof, the Trustee may, in its sole discretion and without the consent of the Holders of Notes, direct, on behalf of the Holders of Notes, the Collateral Agents to take all actions it deems necessary or appropriate in order to:

        (1)   enforce any of the terms of the Security Documents; and

        (2)   collect and receive any and all amounts payable in respect of the Obligations of QSC hereunder.

        SECTION 11.06. Authorization of Receipt of Funds by the Trustee Under the Security Documents. The Trustee is authorized to receive any funds for the benefit of the Holders of Notes distributed under the Security Documents, and to make further distributions of such funds to the Holders of Notes according to the provisions of this Indenture.

        SECTION 11.07. Termination of Security Interest. The Trustee will, at the request of QSC, deliver a certificate to the Collateral Agent instructing the Collateral Agent to release the Liens pursuant to this Indenture and the Security Documents upon (1) payment in full of the principal of, accrued and unpaid interest and Additional Interest, if any, on the Notes and all other Obligations under this Indenture, (2) a satisfaction and discharge of this Indenture as described in Section 9.06 hereof, (3) a legal defeasance or covenant defeasance as described in Article IX or (4) the occurrence of a Termination Event. Upon receipt of such instruction, the Collateral Agent shall execute, deliver or acknowledge any necessary or proper instruments of termination, satisfaction or release to evidence the release of all such Liens.

71

        SECTION 11.08. Collateral Agent. (a) BNY Asset Solutions LLC shall initially act as the Collateral Agent pursuant to the terms of the Security Documents and shall be authorized to appoint co-Collateral Agents as necessary in its sole discretion. Neither the Collateral Agent nor any of its officers, directors, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. The powers conferred on the Collateral Agent hereunder are solely to protect the Collateral Agent's interests in the Collateral and shall not impose any duty upon the Collateral Agent to exercise any such powers. The Collateral Agent shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither the Collateral Agent nor any of its officers, directors, employees or agents shall be responsible for any act or failure to act hereunder, except for its own gross negligence or willful misconduct.

        (b)   The Trustee and the Collateral Agent are each authorized and directed to (i) enter into the Security Documents, (ii) bind the Holders on the terms as set forth therein and (iii) perform and observe their respective obligations under the Security Documents.

        (c)   If QSC at any time incurs any Indebtedness which is permitted to be secured by a Lien on the Collateral by the terms hereof and desires to secure such Indebtedness, (ii) QSC delivers to the Collateral Agents an Officers' Certificate so stating and requesting that the Collateral Agents enter into Security Documents so providing and (iii) QSC delivers to the Collateral Agent an Opinion of Counsel stating that, in the opinion of such counsel, such Liens are permitted hereby; then such Liens may be granted with such priority and rank as set forth in such Officers' Certificate and permitted hereby.

        SECTION 11.09. Suits to Protect the Collateral. Subject to the provisions of the Security Documents, the Trustee shall have power to institute and to maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Collateral by any acts which may be unlawful or in violation of any of the Security Documents or this Indenture, and such suits and proceedings as the Trustee may deem expedient to preserve or protect its interests and the interests of the Trustee and the Holders in the Collateral (including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the security interests or be prejudicial to the interests of the Holders or the Trustee).

        SECTION 11.10. Powers Exercisable by Receiver or Trustee. In case the Collateral shall be in the possession of a receiver or trustee, lawfully appointed, the powers conferred in this Article XI upon QSC, with respect to the release, sale or other disposition of such property may be exercised by such receiver or trustee, and an instrument signed by such receiver or trustee shall be deemed the equivalent of any similar instrument of QSC or of any officer or officers thereof required by the provisions of this Article XI.

ARTICLE XII
NOTES GUARANTEES

        SECTION 12.01. Notes Guarantees. Each Guarantor hereby jointly and severally unconditionally and irrevocably guarantees as a primary obligor and not merely as a surety, to each Holder and to the Trustee and its successors and assigns (a) the full and punctual payment of principal of, premium, if any, and interest and Additional Interest, if any, on the Notes when due, whether at maturity, by acceleration, by redemption or otherwise, subject to any applicable grace period, and all other monetary Obligations of the Company under this Indenture (including obligations to the Trustee) and the Notes and (b) the full and punctual performance within applicable grace periods of all other Obligations of the Company whether for expenses, indemnification or otherwise under this Indenture

72

and the Notes (all of the foregoing being hereinafter collectively called the "Guaranteed Obligations"). Each Guarantor further agrees that the Guaranteed Obligations may be extended or renewed, in whole or in part, without notice or further assent from each such Guarantor, and that each such Guarantor shall remain bound under this Article XII notwithstanding any extension or renewal of any Guaranteed Obligation.

        Each Guarantor waives presentation to, demand of, payment from and protest to the Company of any of the Guaranteed Obligations and also waives notice of protest for nonpayment. Each Guarantor waives notice of any default under the Notes or the Guaranteed Obligations. The obligations of each Guarantor hereunder shall not be affected by (a) the failure of any Holder or the Trustee to assert any claim or demand or to enforce any right or remedy against the Company or any other Person under this Indenture, the Notes or any other agreement or otherwise; (b) any extension or renewal of any Guaranteed Obligations; (c) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Notes or any other agreement; (d) the release of any security held by any Holder or the Trustee for the Guaranteed Obligations or any of them; (e) the failure of any Holder or Trustee to exercise any right or remedy against any other guarantor of the Guaranteed Obligations; or (f) any change in the ownership of such Guarantor, except as provided in Section 12.02(b).

        Each Guarantor further agrees that its Note Guarantee herein constitutes a Guarantee of payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any Holder or the Trustee to any security held for payment of the Guaranteed Obligations.

        The obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any Holder or the Trustee to assert any claim or demand or to enforce any remedy under this Indenture, the Notes or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Guaranteed Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of any Guarantor or would otherwise operate as a discharge of any Guarantor as a matter of law or equity.

        Each Guarantor further agrees that its Note Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Guaranteed Obligation is rescinded or must otherwise be restored by any Holder or the Trustee upon the bankruptcy or reorganization of the Company or otherwise.

        In furtherance of the foregoing and not in limitation of any other right which any Holder or the Trustee has at law or in equity against any Guarantor by virtue hereof, upon the failure of the Company to pay the principal of or interest, premium or Additional Interest, if any, on any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Guaranteed Obligation, each Guarantor hereby promises to and shall, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal to the sum of (i) the unpaid principal amount of such Guaranteed Obligations, (ii) accrued and unpaid interest, premium and Additional Interest, if any, on such Guaranteed Obligations (but only to the extent not prohibited by law) and (iii) all other monetary Guaranteed Obligations of the Company to the Holders and the Trustee.

73

        Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any Guaranteed Obligations guaranteed hereby until payment in full of all Guaranteed Obligations. Each Guarantor further agrees that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Guaranteed Obligations guaranteed hereby may be accelerated as provided in Article VI for the purposes of any Note Guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Guaranteed Obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such Guaranteed Obligations as provided in Article VI, such Guaranteed Obligations (whether or not due and payable) shall forthwith become due and payable by such Guarantor for the purposes of this Section.

        Each Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys' fees and expenses) incurred by the Trustee or any Holder in enforcing any rights under this Section.

        SECTION 12.02. Limitation on Liability; Release. Any term or provision of this Indenture to the contrary notwithstanding, the maximum, aggregate amount of the obligations guaranteed hereunder by any Guarantor shall not exceed the maximum amount that can be guaranteed without rendering this Indenture, as it relates to any Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally.

        SECTION 12.03. Successors and Assigns. This Article XII shall be binding upon each Guarantor and its successors and assigns and shall ensure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges conferred upon that party in this Indenture and in the Notes shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture.

        SECTION 12.04. No Waiver. Neither a failure nor a delay on the part of either the Trustee or the Holders in exercising any right, power or privilege under this Article XII shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article XII at law, in equity, by statute or otherwise.

        SECTION 12.05. Modification. No modification, amendment or waiver of any provision of this Article XII, nor the consent to any departure by any Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Guarantor in any case shall entitle such Guarantor to any other or further notice or demand in the same, similar or other circumstances.

        SECTION 12.06. Evidence of Guarantee. To evidence their guarantees to the Holders set forth in this Article XII, each of the Guarantors hereby agrees to execute the notation of Note Guarantee in substantially the form included in Exhibit C. Each such notation of Note Guarantee shall be signed on behalf of each Guarantor by an Officer.

        Each Guarantor hereby agrees that its Note Guarantee set forth in Section 12.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee.

        If an Officer whose signature is on this Indenture or on the Note Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Note Guarantee is endorsed, the Note Guarantee shall be valid nevertheless.

74

        The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Note Guarantee set forth in this Indenture on behalf of the Guarantors.

ARTICLE XIII
MISCELLANEOUS

        SECTION 13.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control.

        SECTION 13.02. Notices. Any notice or communication shall be in writing and delivered in person or mailed by first-class mail addressed as follows:

        if to the Company or any Guarantor:

Qwest Communications International Inc.
1801 California Street
Denver, Colorado 80202

        with a copy to:

O'Melveny & Myers
400 South Hope Street
Los Angeles, California 90071

        if to the Trustee:

J.P. Morgan Trust Company, National Association
Attention: Institutional Trust Services
1 Bank One Plaza
Mail Code: IL1-0823
Chicago, IL 60670-0823

        The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications.

        Any notice or communication mailed to a Noteholder shall be made in compliance with Section 313(c) of the TIA and mailed to the Noteholder at the Noteholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed.

        Failure to mail a notice or communication to a Noteholder or any defect in it shall not affect its sufficiency with respect to other Noteholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it.

        SECTION 13.03. Communication by Holders with Other Holders. Noteholders may communicate pursuant to TIA § 312(b) with other Noteholders with respect to their rights under this Indenture or the Notes. The Company, the Guarantors, the Trustee, the Registrar and anyone else shall have the protection of TIA § 312(c).

        SECTION 13.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, at the request of the Trustee the Company shall furnish to the Trustee:

        (1)   an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 13.05 hereof) stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and

75

        (2)   an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 13.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent have been complied with.

        To the extent applicable, the Company shall comply with Section 314(c)(3) of the TIA.

        SECTION 13.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include:

        (1)   a statement that the individual making such certificate or opinion has read such covenant or condition;

        (2)   a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

        (3)   a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with or satisfied; and

        (4)   a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with.

        SECTION 13.06. When Notes Disregarded. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which the Trustee actually knows are so owned shall be so disregarded. Also, subject to the foregoing, only Notes outstanding at the time shall be considered in any such determination.

        SECTION 13.07. Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by or a meeting of Noteholders. The Registrar and the Paying Agent may make reasonable rules for their functions.

        SECTION 13.08. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected.

        SECTION 13.09. GOVERNING LAW. THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

        SECTION 13.10. No Recourse Against Others. A director, officer, incorporator, employee, stockholder or Affiliate as such, of the Company or any Guarantor shall not have any liability for any obligations of the Company or any Guarantor under the Notes, the Notes Guarantees, this Indenture, the Registration Rights Agreement or the Security Documents or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Noteholder waives and releases all such liability. The waiver and release shall be part of the consideration for the issue of the Notes.

76

        SECTION 13.11. Successors. All agreements of the Company and each Guarantor in this Indenture and the Notes shall bind their successors. All agreements of the Trustee in this Indenture shall bind its successors.

        SECTION 13.12. Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture.

        SECTION 13.13. Table of Contents; Headings. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof.

        SECTION 13.14. Severability. In case any one or more of the provisions in this Indenture, in the Notes or in the Guarantees shall be held invalid, illegal or unenforceable, in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions shall not in any way be affected or impaired thereby, it being intended that all of the provisions hereof shall be enforceable to the full extent permitted by law.

        SECTION 13.15. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or any of its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.

77

        IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above.

QWEST COMMUNICATIONS INTERNATIONAL INC.
By:	/s/  JANET K. COOPER Name: Janet K. Cooper Title: Senior Vice President and Treasurer
QWEST CAPITAL FUNDING, INC.
By:	/s/  JANET K. COOPER Name: Janet K. Cooper Title: Senior Vice President and Treasurer
QWEST SERVICES CORPORATION
By:	/s/  JANET K. COOPER Name: Janet K. Cooper Title: Senior Vice President and Treasurer
J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION
By:	/s/  SHARON MCGRATH Name: Sharon McGrath Title: Assistant Vice President

78

QuickLinks

INDENTURE

EX-10.27

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 10.27

[Conformed Copy]

Qwest Communications International Inc.

Qwest Services Corporation
Qwest Capital Funding, Inc.

$1,775,000,000

7¹/4% Senior Notes due 2011

7¹/2% Senior Notes due 2014

Floating Rate Senior Notes due 2009

PURCHASE AGREEMENT

dated January 30, 2004

Banc of America Securities LLC
Credit Suisse First Boston LLC
Deutsche Bank Securities Inc.
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
Lehman Brothers Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Morgan Stanley & Co. Incorporated
UBS Securities LLC
Wachovia Capital Markets, LLC

Purchase Agreement

January 30, 2004

BANC OF AMERICA SECURITIES LLC
CREDIT SUISSE FIRST BOSTON LLC
DEUTSCHE BANK SECURITIES INC.
GOLDMAN, SACHS & CO.
J.P. MORGAN SECURITIES INC.
LEHMAN BROTHERS INC.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
UBS SECURITIES LLC
WACHOVIA CAPITAL MARKETS, LLC
    As Initial Purchasers
c/o Banc of America Securities LLC
9 West 57th Street
New York, New York 10019

Ladies and Gentlemen:

        Introductory.    Qwest Communications International Inc., a Delaware corporation ("QCII" or the "Company"), proposes to issue and sell (the "Offering") to the several Initial Purchasers named in Schedule A (the "Initial Purchasers"), acting severally and not jointly, the respective amounts set forth in such Schedule A of an $525 million aggregate principal amount of the Company's 7¹/4% Senior Notes due 2011 (the "2011 Notes"), $500 million aggregate principal amount of the Company's 7¹/2% Senior Notes due 2014 (the "2014 Notes") and $750 million aggregate principal amount of the Company's Floating Rate Senior Notes due 2009 (the "Floating Rate Notes"). The 2011 Notes, the 2014 Notes and the Floating Rate Notes are sometimes hereinafter referred to as a "series" of Notes and collectively as the "Notes." Banc of America Securities LLC and the initial purchasers listed on Schedule A have agreed to act as the several Initial Purchasers in connection with the offering and sale of the Notes.

        The Notes will be issued pursuant to an indenture, dated as of February 5, 2004 (the "Indenture"), between the Company and J.P. Morgan Trust Company, N.A., as trustee (the "Trustee"). The Notes will be guaranteed by Qwest Services Corporation, a Colorado corporation ("QSC"), and Qwest Capital Funding, Inc., a Colorado corporation ("QCF" and, together with QSC the "Guarantors" and together with QSC and QCII, the "Qwest Companies"). Notes will be issued initially only in book-entry form in the name of Cede & Co., as nominee of The Depository Trust Company (the "Depositary") pursuant to a letter of representations, to be dated on or before the Closing Date (as defined in Section 2) (the "DTC Agreement"), among the Company, the Trustee and the Depositary.

        The holders of the Notes will be entitled to the benefits of a registration rights agreement, to be dated as of February 5, 2004 (the "Registration Rights Agreement"), among the Company, the Guarantors and the Initial Purchasers, pursuant to which the Company will agree to file a with the Commission, under the circumstances set forth therein, (i) a registration statement under the Securities Act (as defined below) relating to another series of debt securities of the Company (including the related guarantees of the Guarantors) with terms substantially identical to each respective series of the Notes (the "Exchange Notes") to be offered in exchange for each series of the Notes (the "Exchange Offer") and (ii) to the extent required by the Registration Rights Agreement, a shelf registration statement pursuant to Rule 415 of the Securities Act relating to the resale by certain holders of the Notes.

        The Guarantors will guarantee, on a joint and several basis, the payment of principal of, premium and Liquidated Damages (as defined in the Indenture), if any, and interest on the Notes and the Exchange Notes (the "Guarantees"), pursuant to and subject to the terms provided in the Indenture. The Guarantees will be on (i) a senior unsecured basis by QCF, and (ii) a senior subordinated secured

basis by QSC. The Notes and the Guarantees attached thereto are herein collectively referred to as the "Securities"; and the Exchange Notes and the Guarantees attached thereto are herein collectively referred to as the "Exchange Securities." The Guarantee by QSC will be secured by a second priority security interest in the same collateral of QSC (the "QSC Collateral") that secures the Existing Senior Sub Notes Indenture (as defined below) pursuant to an amended and restated Security and Pledge Agreement (the "Pledge Agreement") among QSC, BNY Asset Solutions LLC, as collateral agent (the "Collateral Agent") and other parties thereto, to be dated as of the Closing Date (as defined in Section 2(b) below and used hereafter with the same meaning).

        The Company understands that the Initial Purchasers propose to make an offering of the Securities on the terms and in the manner set forth herein and in the Offering Memorandum (as defined below) and agrees that the Initial Purchasers may resell, subject to the conditions set forth herein, all or a portion of the Securities to purchasers (the "Subsequent Purchasers") at any time after the date of this Agreement. The Securities are to be offered and sold to or through the Initial Purchasers without being registered with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933 (as amended, the "Securities Act," which term, as used herein, includes the rules and regulations of the Commission promulgated thereunder), in reliance upon exemptions therefrom. Pursuant to the terms of the Securities and the Indenture, investors that acquire Securities shall be deemed to have agreed that Securities may only be resold or otherwise transferred, after the date hereof, if such Securities are registered for sale under the Securities Act or if an exemption from the registration requirements of the Securities Act is available (including the exemptions afforded by Rule 144A ("Rule 144A") or Regulation S ("Regulation S") thereunder).

        The Company has prepared and delivered to each Initial Purchaser copies of a Preliminary Offering Memorandum, dated January 29, 2004 (the "Preliminary Offering Memorandum"), and has prepared and will deliver to each Initial Purchaser, copies of the Offering Memorandum, dated January 30, 2004, describing the terms of the Securities, each for use by such Initial Purchaser in connection with its solicitation of offers to purchase the Securities. As used herein, the "Offering Memorandum" shall mean, with respect to any date or time referred to in this Agreement, the Company's Offering Memorandum, dated January 30, 2004, including amendments or supplements thereto, any exhibits thereto and any documents incorporated by reference therein, in the most recent form that has been prepared and delivered by the Company to the Initial Purchasers in connection with their solicitation of offers to purchase Securities.

        All references in this Agreement to financial statements and schedules and other information which is "contained," "included" or "stated" in the Offering Memorandum (or other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which are incorporated by reference in the Offering Memorandum; and all references in this Agreement to amendments or supplements to the Offering Memorandum shall be deemed to mean and include the filing of any document under the Securities Exchange Act of 1934 (as amended, the "Exchange Act," which term, as used herein, includes the rules and regulations of the Commission promulgated thereunder) which is incorporated or deemed to be incorporated by reference in the Offering Memorandum.

        The Company hereby confirms its agreements with the Initial Purchasers as follows:

        Section 1. Representations and Warranties. Each of the Company and the Guarantors hereby represents, warrants and covenants to each Initial Purchaser as follows:

        (a)   No Registration Required. Subject to compliance by the Initial Purchasers with the representations and warranties set forth in Section 2 hereof and with the procedures set forth in Section 7 hereof, it is not necessary in connection with the offer, sale and delivery of the Securities to the Initial Purchasers, or in connection with the initial resale of the Securities by the Initial Purchasers in the manner contemplated by this Agreement and the Offering Memorandum to register the

2

Securities under the Securities Act or, until such time as the Exchange Securities are issued pursuant to an effective registration statement, to qualify the Indenture under the Trust Indenture Act of 1939 (the "Trust Indenture Act," which term, as used herein, includes the rules and regulations of the Commission promulgated thereunder).

        (b)   No Integration of Offerings or General Solicitation. The Company has not, directly or indirectly, solicited any offer to buy or offered to sell, and will not, directly or indirectly, solicit any offer to buy or offer to sell, in the United States or to any United States citizen or resident, any security which is or would be integrated with the sale of the Securities in a manner that would require the Securities to be registered under the Securities Act. None of the Company, its affiliates (as such term is defined in Rule 501 under the Securities Act (each, an "Affiliate")), or any person acting on its or any of their behalf (other than the Initial Purchasers, as to whom the Company makes no representation or warranty) has engaged or will engage, in connection with the offering of the Securities, in any form of general solicitation or general advertising within the meaning of Rule 502 under the Securities Act. With respect to those Securities sold in reliance upon Regulation S, (i) none of the Company, its Affiliates or any person acting on its or their behalf (other than the Initial Purchasers, as to whom the Company makes no representation or warranty) has engaged or will engage in any directed selling efforts within the meaning of Regulation S and (ii) each of the Company and its Affiliates and any person acting on its or their behalf (other than the Initial Purchasers, as to whom the Company makes no representation or warranty) has complied and will comply with the offering restrictions set forth in Regulation S.

        (c)   Eligibility for Resale under Rule 144A. The Securities are eligible for resale pursuant to Rule 144A and will not be, at the Closing Date, of the same class as securities listed on a national securities exchange registered under Section 6 of the Exchange Act or quoted in a U.S. automated interdealer quotation system.

        (d)   The Offering Memorandum. The Offering Memorandum does not, and at the Closing Date will not, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that this representation, warranty and agreement shall not apply to statements in or omissions from the Offering Memorandum made in reliance upon and in conformity with information furnished to the Company in writing by any Initial Purchaser through Banc of America Securities LLC expressly for use in the Offering Memorandum. The Company has not distributed and will not distribute, prior to the later of the Closing Date and the completion of the Initial Purchasers' distribution of the Securities, any offering material in connection with the offering and sale of the Securities other than a preliminary Offering Memorandum or the Offering Memorandum (it being understood and agreed that the offer to purchase notes of QCF dated January 29, 2004 and accompanying letter of transmittal does not and shall not be deemed in any way to constitute such offering material). The Offering Memorandum has been furnished to you or will be furnished to you no later than 5:00 p.m. on the date hereof.

        (e)   The Notes and the Exchange Notes. The Notes and the Exchange Notes, when issued, will be in the form contemplated by the Indenture and will conform in all material respects to the description thereof in the Offering Memorandum; the Notes and the Exchange Notes have each been duly authorized by QCII, and, when executed by QCII and authenticated by the Trustee in accordance with the provisions of the Indenture and, in the case of the Exchange Notes, when delivered to the exchanging holders of Notes in connection with the consummation of the Offering in accordance with the terms of the Offering Memorandum, will be duly executed, issued and delivered and will constitute valid and binding obligations of QCII, enforceable against QCII in accordance with their terms, and will be entitled to the benefits of the Indenture, except as may be limited by (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally, (ii) general principles of equity, including, without limitation,

3

concepts of materiality, reasonableness, good faith and fair dealing and the availability of specific performance or injunctive relief and the discretion of the court before which any proceeding therefor may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law) and (iii) public policy considerations.

        (f)    The Guarantees. The Guarantee to be issued by each of the Guarantors and the guarantees to be issued by each of the Guarantors in connection with the issuance of the Exchange Notes have been duly authorized by each Guarantor and, upon the execution, authentication and delivery of the Notes, will be duly executed and delivered, will be entitled to the benefits of the Indenture, and will constitute valid and binding obligations of each of the Guarantors, enforceable against each of the Guarantors in accordance with its terms, except as may be limited by (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditor's rights and remedies generally, (ii) general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing and the availability of specific performance or injunctive relief and the discretion of the court before which any proceeding therefor may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law) and (iii) public policy considerations.

        (g)   The Indenture. The Indenture has been duly authorized by QCII and each of the Guarantors and, when executed and delivered by QCII and each of the Guarantors (assuming the due authorization, execution and delivery by the Trustee), will have been duly executed and delivered, and on the Closing Date will constitute a valid and binding obligation of QCII and each of the Guarantors, enforceable against QCII and each of the Guarantors in accordance with its terms, except as may be limited by (i) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally, (ii) general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing and the availability of specific performance or injunctive relief and the discretion of the court before which any proceeding therefor may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law) and (iii) public policy considerations.

        (h)   The Registration Rights Agreement and DTC Agreement. The Registration Rights Agreement and the DTC Agreement have been duly authorized by QCII and each of the Guarantors and, when executed and delivered by QCII and each of the Guarantors (assuming the due authorization, execution and delivery by the Trustee, on behalf of the holders of the Notes and, in the case of the DTC Agreement, the Depositary), will have been duly executed and delivered and will constitute valid and binding obligations of QCII and each of the Guarantors, enforceable against QCII and each of the Guarantors in accordance with their terms, except as may be limited by (1) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally, (2) general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing and the availability of specific performance or injunctive relief and the discretion of the court before which any proceeding therefor may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law) and (3) public policy considerations and (ii) any rights to indemnity or contribution thereunder may be limited by federal and state securities laws and public policy considerations.

        (i)    The Purchase Agreement. This Agreement has been duly authorized, executed and delivered by each of the Qwest Companies.

        (j)    The Pledge Agreement. The Pledge Agreement has been duly authorized by QSC and, when executed and delivered by QSC (assuming the due authorization, execution and delivery thereof by the other parties thereto and the Collateral Agent), will have been duly executed and delivered on the Closing Date, and the Pledge Agreement will constitute a valid and binding obligation of QSC, enforceable against QSC in accordance with its terms and, upon delivery of the applicable documents

4

to the Collateral Agent in accordance with the provisions of the Pledge Agreement, a valid lien on the Collateral, on the Closing Date, securing obligations of QSC under the Indenture, which lien and security interest will be superior to and prior to the liens of all third persons existing on the Closing Date including the liens granted for the benefit of the holders of notes under the Existing QCII 2008 Indentures (as defined below) and the Existing Senior Sub Notes Indenture (as defined below), except for senior liens granted for the benefit of the lenders under the Existing QSC Credit Facility and to be granted under the New QSC Credit Facility (each as defined below), except as may be limited by (i) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally, (ii) general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing and the availability of specific performance or injunctive relief and the discretion of the court before which any proceeding therefor may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law), (iii) public policy considerations and (iv) the limitations described therein relating to regulatory restrictions.

        (k)   No Material Adverse Change. Except as otherwise disclosed in the Offering Memorandum, subsequent to the respective dates as of which information is given in the Offering Memorandum: (i) there has been no material adverse change in the financial position, results of operations or prospects of the Company and its Subsidiaries, taken as a whole (any such change is called a "Material Adverse Change"); and (ii) there has been no dividend or distribution of any kind declared, paid or made by the Company or, except for dividends paid to the Company or other subsidiaries, any of its subsidiaries on any class of capital stock or repurchase or redemption by the Company or any of its subsidiaries of any class of capital stock.

        (l)    Independent Accountants. KPMG LLP, who have performed a review of or expressed their opinion with respect to the financial statements (which term as used in this Agreement includes the related notes thereto) filed with the Commission included in the Offering Memorandum are independent public or certified public accountants within the meaning of Regulation S-X under the Securities Act and the Exchange Act. Any non-audit services provided by such accountants have been approved by the Audit Committee of the Company.

        (m)  Preparation of the Financial Statements. The financial statements, together with the related schedules and notes, included or incorporated by reference in the Offering Memorandum, present fairly the consolidated financial position of the Company and its subsidiaries as of and at the dates indicated and the results of their operations and cash flows for the periods specified. Such financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved, except as may be expressly stated in the related notes thereto. The financial data set forth in the Offering Memorandum under the captions "Offering Memorandum Summary—Summary Selected Financial Data" and "Selected Financial Data" fairly present the information set forth therein on a basis consistent with that of the audited financial statements contained in the Offering Memorandum.

        (n)   Incorporation and Good Standing of the Company and Its Subsidiaries. QCII and each of QCII's subsidiaries (each such subsidiary a "Subsidiary" and collectively, the "Subsidiaries"), that is a "significant subsidiary" of QCII (as such term is defined in Rule 1-02 of Regulation S-X) and each other Subsidiary that is an obligor under the QSC Credit Agreement, or any material intercompany loan (each such Subsidiary a "Significant Subsidiary" and, collectively, the "Significant Subsidiaries" and including, but not limited to, those Subsidiaries listed on Schedule 2), has been duly incorporated or formed, as the case may be, is validly existing and is in good standing under the laws of its jurisdiction of incorporation or formation, with all requisite corporate or other power and authority to own or lease its properties and conduct its businesses as now conducted as described in the Offering Memorandum, and is duly qualified to do business as a foreign corporation and is in good standing in all other jurisdictions where the ownership or leasing of its properties or the conduct of its businesses

5

requires such qualification, except where the failure to be so qualified would not have a material adverse effect on the financial position, results of operations or prospects of QCII and its Subsidiaries, taken as a whole (a "Material Adverse Effect").

        (o)   The Capital Stock. The outstanding shares of capital stock or other equity interests of each of QCII and each of the Significant Subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable, and were not issued in violation of any preemptive or similar rights; except as disclosed in the Offering Memorandum, all of the outstanding shares of capital stock or other equity interests of each of the Significant Subsidiaries are owned, directly or indirectly by QCII, free and clear of all liens, encumbrances, equities and claims (other than (i) liens to be released in connection with the payment of indebtedness outstanding under the Second Amended and Restated Credit Agreement, dated as of August 30, 2002, as amended, among QCII, QSC, other Subsidiaries of QCII, Bank of America, N.A., as administrative agent, and the other lenders named therein (the "Existing QSC Credit Facility"), (ii) liens to be created in connection with the execution of the Credit Agreement to be dated as of February 2004, among the Company, QSC, Bank of America, N.A., as administrative agent, and the other lenders named therein (the "New QSC Credit Facility"), (iii) liens created on December 26, 2002 under (x) the indenture among QSC, the guarantors named therein and Bank One Trust company, N.A. relating to the 13% Senior Subordinated Secured Notes due 2007, the 13¹/2% Senior Subordinated Secured Notes due 2010 and the 14% Senior Subordinated Secured Notes due 2014 (the "Existing Senior Sub Notes Indenture") and (y) the indentures dated as of November 4, 1998 and November 27, 1998, respectively, between QCII and Bankers Trust Company relating to the 7.50% Senior Notes due 2008 of QCII and the 7.25% Senior Notes due 2008 of QCII (the "Existing QCII 2008 Indentures")) and (iv) liens to be created on the Closing Date under the Indenture, or restrictions on transferability or voting (other than those imposed by the Securities Act, or the securities or "Blue Sky" laws of certain jurisdictions).

        (p)   Registration of Securities. No holder of securities of QCII or any Significant Subsidiary will be entitled to have such securities registered under the registration statements required to be filed by the Qwest Companies pursuant to the Registration Rights Agreements.

        (q)   Necessary Corporate Action. The Qwest Companies have taken all necessary corporate action to authorize the Offering.

        (r)   No Violations. Neither QCII nor any Significant Subsidiary is (i) in violation of its certificate of incorporation or bylaws (or similar organizational documents), (ii) except as set forth in the Offering Memorandum, in violation of any statute, judgment, decree, order, rule or regulation applicable to QCII or any Significant Subsidiary or any of their respective properties or assets, except for such violations which would not, individually or in the aggregate, have a Material Adverse Effect, or (iii) in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, note, lease, license, franchise agreement, permit, certificate, contract or other agreement or instrument to which QCII or any Significant Subsidiary is a party or to which QCII or any Significant Subsidiary is subject (each, a "Contract" and collectively, the "Contracts"), except for such defaults which would not, individually or in the aggregate, have a Material Adverse Effect.

        (s)   All Necessary Consents and Approvals. Assuming compliance with the limitations and restrictions contained under the heading "Notice to Investors" in the Offering Memorandum, no consent, approval, authorization or order of any court or governmental, legislative, judicial, administrative or regulatory agency, authority or body is required for the making of the Offering, the exchange of the Notes for the Exchange Notes pursuant to the Exchange Offer, the execution, delivery and performance of any of this Agreement, the Preliminary Offering Memorandum, the Offering Memorandum, the Pledge Agreement, the Notes, the Exchange Notes, the Indenture and the Registration Rights Agreement, collectively, the "Transaction Documents" or the consummation of the

6

other transactions contemplated in this Agreement, except (i) such as have been obtained on or prior the Closing Date, (ii) such as may be required under the Securities Act, the Exchange Act, state securities or "Blue Sky" laws in connection with the exchange of the New Securities for the Registered Exchange Notes, as applicable, (iii) such as may be required under the Registration Rights Agreements, and (iv) such filings and recordings with governmental authorities as may be required to perfect liens under the Pledge Agreement.

        (t)    No Liens or Encumbrances. The Offering, the exchange of the Notes for the Exchange Notes pursuant to the Registration Rights Agreement, the execution, delivery and performance of any of the Transaction Documents and the consummation of the transactions contemplated in this Agreement will not conflict with or constitute or result in a breach or violation of, or result in the creation or imposition of a lien, charge or encumbrance on any material property or assets of QCII or any Subsidiary (other than as permitted under the Indentures) under, any of (i) the terms or provisions of, or constitute a default by QCII or any Subsidiary under, any Contract, (ii) the certificate of incorporation or bylaws (or similar organizational documents) of QCII or any Subsidiary or (iii) any statute, judgment, decree, order, rule or regulation of any court or governmental, legislative, judicial, administrative or regulatory agency, authority or body applicable to QCII or any Subsidiaries or any of their respective properties, except for such conflicts, breaches, violations or defaults, in the case of clauses (i) and (iii), which would not, individually or in the aggregate, have a Material Adverse Effect.

        (u)   Compliance with the Offering Memorandum. The statements in the Offering Memorandum under the headings "Description of the Notes," "Description of Other Indebtedness" and "Certain United States Federal Income Tax Consequences" fairly summarize the matters described therein in all material respects.

        (v)   The Transaction Documents. The Transaction Documents conform or will conform in all material respects to the descriptions thereof in the Offering Memorandum.

        (w)  No Litigation. Except as set forth in the Offering Memorandum, there is no action, suit or proceeding by or before any court or governmental, legislative, judicial, administrative or regulatory agency, authority or body or any arbitrator involving QCII or any Subsidiary or property of QCII or any Subsidiary pending or, to the best knowledge of the Qwest Companies, threatened, except for such actions, suits or proceedings which would not, individually or in the aggregate, reasonably be expected to have (i) a material adverse effect on the performance by the Qwest Companies of any of the Transaction Documents, to the extent each will be a party thereto, the issuance of the Notes, or the consummation of any of the transactions contemplated hereby or by the Transaction Documents or (ii) a Material Adverse Effect.

        (x)   Intellectual Property. Except as set forth in the Offering Memorandum and except for licenses and other rights reasonably expected to be obtained or developed in the ordinary course of business, each of QCII and each of the Significant Subsidiaries own or possess all licenses or other rights to use all material patents, trademarks, service marks, trade names, copyrights and know-how necessary to conduct the businesses now operated by it as described in the Offering Memorandum, except where failure to possess such licenses or other rights would not, individually or in the aggregate, have a Material Adverse Effect, and neither QCII nor any Significant Subsidiary has received any notice of infringement of or conflict with (or knows of any such infringement of or conflict with) asserted rights of others with respect to any patents, trademarks, service marks, trade names, copyrights or know-how, except for such infringement or conflict which would not, individually or in the aggregate, have a Material Adverse Effect.

        (y)   Permits. Except as set forth in the Offering Memorandum and except for Permits (as defined below) reasonably expected to be obtained in the ordinary course of business, each of QCII and each of the Subsidiaries possesses all material licenses, permits, franchises and other governmental authorizations, consents and approvals necessary (collectively, the "Permits") to conduct the businesses

7

and own or lease its properties now or proposed to be operated by it as described in the Offering Memorandum and each of QCII and each of the Subsidiaries is in compliance with the terms of such Permits, except where failure to possess such Permits or to so comply would not, individually or in the aggregate, have a Material Adverse Effect; all of the Permits are valid and in full force and effect, except where failure to be in full force and effect would not, individually or in the aggregate, have a Material Adverse Effect; none of QCII or any Subsidiary has received any notice of any proceeding relating to the revocation or modification of any such Permit, except where such revocation or modification would not, individually or in the aggregate, have a Material Adverse Effect.

        (z)   Conduct of Business. Subsequent to the respective dates as of which information is given in the Offering Memorandum and except as described therein or contemplated thereby, neither QCII nor any Subsidiary has incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions, not in the ordinary course of business.

        (aa) Environmental Compliance. The Qwest Companies and their Significant Subsidiaries (i) are in compliance with any and all applicable federal, state, local and foreign laws, rules, regulations, decisions and orders relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (collectively, "Environmental Laws"); (ii) have received and are in compliance with all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses; and (iii) have not received notice of any actual or potential liability for the investigation or remediation of any disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants, except in any such case for any such failure to comply, or failure to receive required permits, licenses or approvals, or liability as would not, individually or in the aggregate, have a Material Adverse Effect.

        (bb) Tax Law Compliance. United States Federal income tax returns of QCII and its Subsidiaries have been examined and closed through the fiscal year ended December 31, 1992. QCII and its Subsidiaries have filed all United Stated Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by QCII or any Subsidiary, except for taxes the amounts, applicability or validity of which is being contested in good faith by appropriate proceedings. The charges, accruals and reserves on the books of QCII and its Subsidiaries in respect of taxes or other government charges are, in the opinion of QCII, adequate.

        (cc) Title to Property. Each of QCII and each of the Subsidiaries has good and marketable title to all real property described in the Offering Memorandum as being owned by it, and good and marketable title to a leasehold estate in the real property described in the Offering Memorandum as being leased by it (except for those leases of real property in which QCII or any Subsidiary has good title and that would be marketable but for the requirement that the landlord consent to an assignment or sublease of the lease) except in each case, to the extent the failure to have such title would not have a Material Adverse Effect.

        (dd) No Labor Disputes. There is no strike, labor dispute, slowdown or work stoppage with the employees of QCII or any of the Significant Subsidiaries which is pending or, to the best knowledge of the Qwest Companies, threatened in writing, except for such events that would not, individually or in the aggregate, have a Material Adverse Effect.

        (ee) Company not an "Investment Company." Neither QCII nor any Significant Subsidiary is now or, after giving effect to the offering and issuance of the Exchange Notes, and the cancellation of the Notes accepted in the Exchange Offer and the consummation of the other transactions contemplated by the Offering Memorandum, will be an "investment company" or a company "controlled by" an "investment company" within the meaning of the Investment Company Act of 1940, as amended.

8

        (ff)  No Price Stabilization or Manipulation. Neither QCII nor any Subsidiary or, to the best knowledge of the Qwest Companies, any of their directors, senior executive officers or controlling persons has taken, directly or indirectly, any action designed, or that might reasonably be expected, to cause or result, under the Securities Act or otherwise, in, or that has constituted, stabilization or manipulation of the price of any security of any of the Qwest Companies to facilitate the sale or resale of the Notes.

        (gg) Statistical and Market Data. The statistical and market-related data included or incorporated by reference in the Offering Memorandum are based on or derived from sources that the Qwest Companies believe to be reliable and accurate in all material respects.

        (hh) Solvency. After giving effect the transactions contemplated by this Agreement and the Offering Memorandum, (a) the fair value of the assets of each of the Qwest Companies, at a fair valuation, will exceed its debts and liabilities, subordinated, contingent or otherwise, (b) the present fair saleable value of the properties of each of the Qwest Companies will exceed the amount that will be required to pay the probable liability of its debts and other liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured, (c) each of the Qwest Companies will be able to pay its debts and other liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured, and (d) no Qwest Company will have unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and proposed to be conducted after the date hereof.

        (ii)   Officer's Certificate. Any certificate signed by any officer of the Qwest Companies and delivered to the Initial Purchasers or counsel for the Initial Purchasers in connection with the Offering shall be deemed a representation and warranty by the Qwest Companies as to matters covered thereby to the Initial Purchasers.

        (jj)   Insurance. Except as otherwise disclosed in the Offering Memorandum, each of the Company and its domestic subsidiaries are insured by recognized, financially sound institutions with policies in such amounts and with such deductibles and covering such risks as are generally deemed adequate and customary for their businesses.

        (kk) ERISA Compliance. Except as would not, individually or in the aggregate, have a Material Adverse Effect and except as otherwise disclosed in the Offering Memorandum, (i) the Company and its subsidiaries and any "employee benefit plan" (as defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, "ERISA")) established or maintained by the Company, its subsidiaries or their "ERISA Affiliates" (as defined below) are in compliance in all material respects with ERISA; (ii) no "reportable event" (as defined under ERISA) has occurred with respect to any "employee benefit plan" established or maintained by the Company, its subsidiaries or any of their ERISA Affiliates; (iii) no "employee benefit plan" established or maintained by the Company, its subsidiaries or any of their ERISA Affiliates has any "accumulated funding deficiency" (as defined in ERISA); (iv) neither the Company, its subsidiaries nor any of their ERISA Affiliates has incurred any liability under (a) Title IV of ERISA with respect to termination of, or withdrawal from, any "employee benefit plan" or (b) Sections 412, 4971, 4975 or 4980B of the Code and (v) each "employee benefit plan" established or maintained by the Company, its subsidiaries or any of their ERISA Affiliates that is intended to be qualified under Section 401 of the Code is so qualified and nothing has occurred, whether by action or failure to act, which would cause the loss of such qualification. "ERISA Affiliate" means, with respect to the Company or a subsidiary, any member of any group of organizations described in Sections 414, or of the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereunder (the "Code") of which the Company or such subsidiary is a member.

        (ll)   Compliance with Sarbanes-Oxley Act of 2002. The Company and, to the best of its knowledge, its officers and directors are in compliance in all material respects with the applicable provisions of the

9

Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith (the "Sarbanes-Oxley Act") that are effective.

        Section 2. Purchase, Sale and Delivery of the Securities.

        (a)   The Securities. The Company agrees to issue and sell to the several Initial Purchasers, severally and not jointly, all of the Securities upon the terms herein set forth. On the basis of the representations, warranties and agreements herein contained, and upon the terms but subject to the conditions herein set forth, the Initial Purchasers agree, severally and not jointly, to purchase from the Company the aggregate principal amount of each series of Notes to the extent set forth opposite their names on Schedule A, at the respective purchase price for each series of Securities, as set forth on Schedule A as a percentage of the principal amount thereof payable on the Closing Date.

        (b)   The Closing Date. Delivery of certificates for each series of Notes in definitive form to be purchased by the Initial Purchasers and payment therefor shall be made at the offices of Cahill Gordon & Reindel llp, 80 Pine Street, New York, New York 10005 (or such other place as may be agreed to by the Company and the Initial Purchasers) at 9:00 a.m. New York City time, on the date specified on Schedule A for such series of Notes, or such other time and date as the Initial Purchasers shall designate by notice to the Company (the time and date of such closing for each series of Notes is called the "Closing Date" with respect to that particular series).

        (c)   Delivery of the Securities. The Company shall deliver, or cause to be delivered, to Banc of America Securities LLC for the accounts of the several Initial Purchasers certificates for the Securities at the Closing Date against the irrevocable release of a wire transfer of immediately available funds for the amount of the purchase price therefor. The certificates for the Securities shall be in such denominations and registered in the name of Cede & Co., as nominee of the Depositary, pursuant to the DTC Agreement, and shall be made available for inspection on the business day preceding the Closing Date at a location in New York City, as the Initial Purchasers may designate. Time shall be of the essence, and delivery at the time and place specified in this Agreement is a further condition to the obligations of the Initial Purchasers.

        (d)   Initial Purchasers as Qualified Institutional Buyers. Each Initial Purchaser severally and not jointly represents and warrants to, and agrees with, the Company that it is a "qualified institutional buyer" within the meaning of Rule 144A (a "Qualified Institutional Buyer") and an "accredited investor" within the meaning of Rule 501 under the Securities Act (an "Accredited Investor").

        Section 3. Additional Covenants. The Qwest Companies further covenant and agree with each Initial Purchaser as follows:

        (a)   Initial Purchasers' Review of Proposed Amendments and Supplements. Until the later of the Closing Date and the resale of all of the Notes by the Initial Purchasers to the Subsequent Purchasers, prior to amending or supplementing the Offering Memorandum (including any amendment or supplement through incorporation by reference of any report filed under the Exchange Act), the Qwest Companies shall furnish to the Initial Purchasers for review a copy of each such proposed amendment or supplement, and the Qwest Companies shall not use any such proposed amendment or supplement to which the Initial Purchasers reasonably object.

        (b)   Amendments and Supplements to the Offering Memorandum and Other Securities Act Matters. If, prior to the completion of the placement of the Securities by the Initial Purchasers with the Subsequent Purchasers, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Offering Memorandum in order to make the statements therein, in the light of the circumstances when the Offering Memorandum is delivered to a purchaser, not misleading, or if in the reasonable opinion of the Initial Purchasers or counsel for the Initial Purchasers it is otherwise necessary to amend or supplement the Offering Memorandum to comply with law, the Company agrees to promptly prepare (subject to Section 3(a) hereof), and furnish at its own expense to the Initial

10

Purchasers, amendments or supplements to the Offering Memorandum so that the statements in the Offering Memorandum as so amended or supplemented will not, in the light of the circumstances when the Offering Memorandum is delivered to a purchaser, be misleading or so that the Offering Memorandum, as amended or supplemented, will comply with law.

        The Company hereby expressly acknowledges that the indemnification and contribution provisions of Sections 8 and 9 hereof are specifically applicable and relate to each offering memorandum, amendment or supplement referred to in this Section 3.

        (c)   Copies of the Offering Memorandum. The Company agrees to furnish the Initial Purchasers, without charge, as many copies of the Offering Memorandum and any amendments and supplements thereto as they shall have reasonably requested.

        (d)   Blue Sky Compliance. The Company shall cooperate with the Initial Purchasers and counsel for the Initial Purchasers to qualify or register the Securities for sale under (or obtain exemptions from the application of) the Blue Sky or state securities laws of those jurisdictions designated by the Initial Purchasers, shall comply with such laws and shall continue such qualifications, registrations and exemptions in effect so long as required for the distribution of the Securities. The Company shall not be required to qualify as a foreign corporation or to take any action that would subject it to general service of process in any such jurisdiction where it is not presently qualified or where it would be subject to taxation as a foreign corporation. The Company will advise the Initial Purchasers promptly of the suspension of the qualification or registration of (or any such exemption relating to) the Securities for offering, sale or trading in any jurisdiction or any initiation or threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending such qualification, registration or exemption, the Company shall use its reasonable best efforts to obtain the withdrawal thereof at the earliest possible moment.

        (e)   Use of Proceeds. The Company shall apply the net proceeds from the sale of the Securities sold by it in the manner described under the caption "Use of Proceeds" in the Offering Memorandum.

        (f)    The Depositary. The Company will cooperate with the Initial Purchasers and use its best efforts to permit the Securities to be eligible for clearance and settlement through the facilities of the Depositary.

        (g)   Future Reports. For so long as any Securities or Exchange Securities remain outstanding, the Company will furnish to Banc of America Securities LLC: (i) as soon as practicable after the end of each fiscal year, copies of the Annual Report of the Company containing the balance sheet of the Company as of the close of such fiscal year and statements of income, stockholders' equity and cash flows for the year then ended and the opinion thereon of the Company's independent public or certified public accountants; (ii) as soon as practicable after the filing thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other report filed by the Company with the Commission, the NASD or any securities exchange; and (iii) as soon as available, copies of any report or communication of the Company mailed generally to holders of its capital stock or debt securities (including the holders of the Securities). The availability of any such report, proxy statement or communication on the Commission's EDGAR system shall be sufficient to satisfy the Company's obligation to furnish such report, proxy statement or communication under this section.

        (h)   No Integration. The Company agrees that it will not and will cause its Affiliates not to make any offer or sale of securities of the Company of any class if, as a result of the doctrine of "integration" referred to in Rule 502 under the Securities Act, such offer or sale would render invalid (for the purpose of (i) the sale of the Securities by the Company to the Initial Purchasers, (ii) the resale of the Securities by the Initial Purchasers to Subsequent Purchasers or (iii) the resale of the Securities by such Subsequent Purchasers to others) the exemption from the registration requirements

11

of the Securities Act provided by Section 4(2) thereof or by Rule 144A or by Regulation S thereunder or otherwise.

        (i)    Legended Securities. Each certificate for a Note will bear the legend contained in "Transfer Restrictions" in the Offering Memorandum for the time period and upon the other terms stated in the Offering Memorandum.

        (j)    PORTAL. The Company will use its reasonable best efforts to cause such Notes to be eligible for the National Association of Securities Dealers, Inc. PORTAL market (the "PORTAL market").

        Banc of America Securities LLC, on behalf of the several Initial Purchasers, may, in its sole discretion, waive in writing the performance by the Company of any one or more of the foregoing covenants or extend the time for their performance.

        Section 4. Payment of Expenses. The Company agrees to pay all costs, fees and expenses incurred in connection with the performance of its obligations hereunder and in connection with the transactions contemplated hereby, including without limitation, (i) all expenses incident to the issuance and delivery of the Securities (including all printing and engraving costs), (ii) all necessary issue, transfer and other stamp taxes in connection with the issuance and sale of the Securities to the Initial Purchasers, (iii) all fees and expenses of the Company's and the Guarantors' counsel, independent public or certified public accountants and other advisors, (iv) all costs and expenses incurred in connection with the preparation, printing, filing, shipping and distribution of each preliminary Offering Memorandum and the Offering Memorandum (including financial statements and exhibits), and all amendments and supplements thereto, this Agreement, the Registration Rights Agreement, the Indenture, the DTC Agreement, and the Notes and the Guarantees, (v) all filing fees, attorneys' fees and expenses incurred by the Company or the Initial Purchasers in connection with qualifying or registering (or obtaining exemptions from the qualification or registration of) all or any part of the Securities for offer and sale under the Blue Sky laws and, if requested by the Initial Purchasers, preparing and printing a "Blue Sky Survey" or memorandum, and any supplements thereto, advising the Initial Purchasers of such qualifications, registrations and exemptions, (vi) the fees and expenses of the Trustee, including the fees and disbursements of counsel for the Trustee in connection with the Indenture, the Securities and the Exchange Securities, (vii) any fees payable in connection with the rating of the Securities or the Exchange Securities with the ratings agencies and the listing of the Securities with the PORTAL market, (viii) any filing fees incident to, and any reasonable fees and disbursements of counsel to the Initial Purchasers in connection with the review by the National Association of Securities Dealers, Inc., if any, of the terms of the sale of the Securities or the Exchange Securities, and (ix) all fees and expenses (including reasonable fees and expenses of counsel) of the Company and the Guarantors in connection with approval of the Securities by DTC for "book-entry" transfer, and the performance by the Company and the Guarantors of their respective other obligations under this Agreement. Except as provided in this Section 4, Section 6, Section 8 and Section 9 hereof, the Initial Purchasers shall pay their own expenses, including the fees and disbursements of their counsel.

        Section 5. Conditions of the Obligations of the Initial Purchasers. The obligations of the several Initial Purchasers to purchase and pay for the Securities as provided herein on the Closing Date shall be subject to the accuracy of the representations and warranties on the part of the Company set forth in Section 1 hereof as of the date hereof and as of the Closing Date as though then made and to the timely performance by the Company of its covenants and other obligations hereunder, and to each of the following additional conditions:

        (a)   Accountants' Comfort Letter. On the date hereof, the Initial Purchasers shall have received from KPMG LLP, independent public or certified public accountants for the Company, a letter dated the date hereof addressed to the Initial Purchasers, in form and substance satisfactory to the Initial Purchasers, containing statements and information of the type ordinarily included in accountant's

12

"comfort letters" to Initial Purchasers, with respect to the audited and unaudited financial statements and certain financial information contained in the Offering Memorandum.

        (b)   No Material Adverse Change or Ratings Agency Change. For the period from and after the date of this Agreement and prior to the Closing Date:

        (i)    in the judgment of the Initial Purchasers there shall not have occurred any Material Adverse Change; and

        (ii)   there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any securities of the Company or any of its subsidiaries by any "nationally recognized statistical rating organization" as such term is defined for purposes of Rule 436 under the Securities Act.

        (c)   Opinion of Counsel for the Company. On the Closing Date the Initial Purchasers shall have received the favorable opinions of in-house counsel of the Company and outside counsel for the Company, dated as of such Closing Date, the forms of which are attached as Exhibit A.

        (d)   Opinion of Counsel for the Initial Purchasers. On the Closing Date the Initial Purchasers shall have received the favorable opinion of Cahill Gordon & Reindel llp, counsel for the Initial Purchasers, dated as of such Closing Date, with respect to such matters as may be reasonably requested by the Initial Purchasers.

        (e)   Officers' Certificate. On the Closing Date the Initial Purchasers shall have received a written certificate executed by an executive officer of the Company and the Chief Financial Officer of the Company, dated as of the Closing Date, to the effect set forth in subsection (b)(ii) of this Section 5, and further to the effect that to the best knowledge of such officer:

        (i)    for the period from and after the date of this Agreement and prior to the Closing Date there has not occurred any Material Adverse Change;

        (ii)   the representations, warranties and covenants of the Company set forth in Section 1 of this Agreement are true and correct with the same force and effect as though expressly made on and as of the Closing Date; and

        (iii)  the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Closing Date.

        (f)    Bring-down Comfort Letter. On the Closing Date the Initial Purchasers shall have received from KPMG LLP, independent public or certified public accountants for the Company, a letter dated such date, in form and substance satisfactory to the Initial Purchasers, to the effect that they reaffirm the statements made in the letter furnished by them pursuant to subsection of this Section 5, except that the specified date referred to therein for the carrying out of procedures shall be no more than three business days prior to the Closing Date.

        (g)   PORTAL Listing. At the Closing Date the Notes shall have been designated for trading on the PORTAL market.

        (h)   Registration Rights Agreement. The Company shall have entered into the Registration Rights Agreement and the Initial Purchasers shall have received executed counterparts thereof.

        (i)    Additional Documents. On or before the Closing Date, the Initial Purchasers and counsel for the Initial Purchasers shall have received such information, documents and opinions as they may reasonably require for the purposes of enabling them to pass upon the issuance and sale of the Securities as contemplated herein, or in order to evidence the accuracy of any of the representations and warranties, or the satisfaction of any of the conditions or agreements, herein contained.

13

        If any condition specified in this Section 5 is not satisfied when and as required to be satisfied, this Agreement may be terminated by the Initial Purchasers by notice to the Company at any time on or prior to the Closing Date, which termination shall be without liability on the part of any party to any other party, except that Section 4, Section 6, Section 8 and Section 9 shall at all times be effective and shall survive such termination.

        Section 6. Reimbursement of Initial Purchasers' Expenses. If this Agreement is terminated by the Initial Purchasers pursuant to Section 5, or if the sale to the Initial Purchasers of the Securities on the Closing Date is not consummated because of any refusal, inability or failure on the part of the Company to perform any agreement herein or to comply with any provision hereof, the Company agrees to reimburse the Initial Purchasers (or such Initial Purchasers as have terminated this Agreement with respect to themselves), severally, upon demand for all out-of-pocket expenses that shall have been reasonably incurred by the Initial Purchasers in connection with the proposed purchase and the offering and sale of the Securities, including but not limited to fees and disbursements of counsel, printing expenses, travel expenses, postage, facsimile and telephone charges.

        Section 7. Offer, Sale and Resale Procedures. Each of the Initial Purchasers, on the one hand, and the Company and each of the Guarantors, on the other hand, hereby establish and agree to observe the following procedures in connection with the offer and sale of the Securities:

        (A)  Offers and sales of the Securities will be made only by the Initial Purchasers or Affiliates thereof qualified to do so in the jurisdictions in which such offers or sales are made. Each such offer or sale shall only be made to persons whom the offeror or seller reasonably believes to be qualified institutional buyers (as defined in Rule 144A under the Securities Act) or non-U.S. persons outside the United States to whom the offeror or seller reasonably believes offers and sales of the Securities may be made in reliance upon Regulation S under the Securities Act, upon the terms and conditions set forth in Annex I hereto, which Annex I is hereby expressly made a part hereof.

        (B)  The Securities will be offered by approaching prospective Subsequent Purchasers on an individual basis. No general solicitation or general advertising (within the meaning of Rule 502 under the Securities Act) will be used in the United States in connection with the offering of the Securities.

        (C)  With respect to offers and sales of Notes outside the United States, each Initial Purchaser understands that no action has been or will be taken in any jurisdiction by the Qwest Companies that would permit a public offering of the Notes, or possession or distribution of either the Preliminary Offering Memorandum or the Final Offering Memorandum or any other offering or publicity material relating to the Notes, in any country or jurisdiction where legal or regulatory action for that purpose is required.

        (D)  Upon original issuance by the Company, and until such time as the same is no longer required under the applicable requirements of the Securities Act, the Securities (and all securities issued in exchange therefor or in substitution thereof, other than the Exchange Securities) shall bear the following legend:

"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE

14

PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT, (b) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (c) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF APPLICABLE) OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN CLAUSE (A) ABOVE. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 FOR RESALE OF THE SECURITY EVIDENCED HEREBY."

        Following the sale of the Securities by the Initial Purchasers to Subsequent Purchasers pursuant to the terms hereof, the Initial Purchasers shall not be liable or responsible to the Company for any losses, damages or liabilities suffered or incurred by the Company, including any losses, damages or liabilities under the Securities Act, arising from or relating to any resale or transfer of any Security by any Persons other than the respective Initial Purchasers.

        Section 8. Indemnification. The Qwest Companies, jointly and severally, hereby agree to hold each Initial Purchaser harmless and to indemnify each Initial Purchaser (including any of its affiliated companies and any director, officer, agent or employee of such Initial Purchaser or any such affiliated company) in its capacity as Initial Purchaser and any director, officer or other person controlling (within the meaning of Section 20(a) of the Exchange Act) such Initial Purchaser (including any of such Initial Purchaser's affiliated companies) (collectively, "Indemnified Persons") from and against any and all losses, claims, damages, liabilities or expenses (whether direct or indirect, in contract, tort or otherwise) whatsoever, as incurred (including the cost of any investigation and preparation) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Offering Memorandum, or any omission or alleged omission to state in any the Offering Memorandum a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading except for any such loss, claim, damage, liability or expense which arises out of or is based upon (x) any untrue statement or alleged untrue statement of a material fact contained in the Offering Memorandum or (y) any omission or alleged omission to state in the Offering Memorandum a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading, if in any such case such statement or omission relates to such Initial Purchaser and was made in reliance upon and in conformity with information furnished in writing by such Initial Purchaser to the Qwest Companies expressly for use therein, it being understood and agreed that the only such

15

information furnished by or on behalf of each Initial Purchaser consists of the fifth, sixth and eighth paragraphs under the caption "Plan of Distribution" in the Offering Memorandum (the "Initial Purchaser Information"). The foregoing indemnity shall be in addition to any liability which the Qwest Companies might otherwise have to such Initial Purchaser and such other Indemnified Persons.

        Each Initial Purchaser severally hereby agrees to hold the Qwest Companies harmless and to indemnify the Qwest Companies (including any of their respective affiliated companies and any director, officer, agent or employee of the Qwest Companies or any such affiliated company) and any director, officer or other person controlling (within the meaning of Section 20(a) of the Exchange Act) the Qwest Companies (including any of the Qwest Companies' affiliated companies) from and against any and all losses, claims, damages, liabilities or expenses (whether direct or indirect, in contract, tort or otherwise) whatsoever, as incurred (including the cost of any investigation and preparation) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Initial Purchaser Information furnished by such Initial Purchaser for inclusion in the Offering Memorandum, or any omission or alleged omission to state in such Initial Purchaser Information a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

        If a claim is made against any Indemnified Person as to which such Indemnified Person may seek indemnity under this Section 8, such Indemnified Person shall notify the Qwest Companies promptly after any written assertion of such claim threatening to institute an action or proceeding with respect thereto and shall notify the Qwest Companies promptly of any action commenced against such Indemnified Person within a reasonable time after such Indemnified Person shall have been served with a summons or other first legal process giving information as to the nature and basis of the claim. Failure to so notify the Qwest Companies shall not, however, relieve the Qwest Companies from any liability which it may have on account of the indemnity under this Section 8, except to the extent such failure results in the forfeiture by the Qwest Companies of substantial rights and defenses. The Qwest Companies shall have the right to assume the defense of any such litigation or proceeding, including the engagement of counsel reasonably satisfactory to such Initial Purchaser. In any such litigation or proceeding the defense of which the Qwest Companies shall have so assumed, any Indemnified Person shall have the right to participate in such litigation or proceeding and to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Qwest Companies shall have failed promptly to assume the defense thereof and employ counsel as provided above, or (ii) counsel to the Indemnified Person reasonably determines that representation of such Indemnified Person by the Qwest Companies' counsel would present the Qwest Companies' counsel with a conflict of interest. It is understood that the Qwest Companies shall not, in connection with any litigation or proceeding or related litigation or proceeding in the same jurisdiction, be liable under this Agreement for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such Indemnified Persons and that all such fees and expenses shall be reimbursed as they are incurred. Such separate firm shall be designated by the Initial Purchasers.

        The Qwest Companies agree to notify each Initial Purchaser promptly of the written assertion of any claim in connection with the Offering against it, any of its officers or directors or any person who controls it within the meaning of Section 20(a) of the Exchange Act. The Qwest Companies will not settle, compromise or consent to entry of judgment with respect to any litigation or proceeding in respect of which indemnity may be sought hereunder, whether or not an Initial Purchaser or its related Indemnified Persons is an actual or potential party to such litigation or proceeding, without each Initial Purchaser's prior written consent (which consent shall not be unreasonably withheld or delayed), unless such settlement, compromise or consent (i) includes an unconditional release of each such Initial Purchaser and its related Indemnified Persons from all liability in any way related to or arising out of such litigation or proceeding and (ii) does not impose any actual or potential liability or any other obligation upon any such Initial Purchaser and its related Indemnified Persons and does not contain any factual or legal admission of fault, culpability or a failure to act by or with respect to any such Initial Purchaser and its related Indemnified Persons.

16

        Section 9. Contribution. If the indemnification provided for in Section 8 is for any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount paid or payable by such indemnified party, as incurred, as a result of any losses, claims, damages, liabilities or expenses referred to therein (i) in such proportion as is appropriate to reflect the relative benefits received by the Company in respect of one or more series of Securities in which the related Initial Purchasers participated as such, on the one hand, and the Initial Purchasers, on the other hand, from the offering of the Securities of such series pursuant to this Agreement or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and the Initial Purchasers, on the other hand, in connection with the statements or omissions or inaccuracies in the representations and warranties herein which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Initial Purchasers, on the other hand, in connection with the offering of the Securities pursuant to this Agreement in respect of one or more series of Securities in which the related Initial Purchaser participated as such shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Securities of such series pursuant to this Agreement (before deducting expenses) received by the Company, and the total discount received by the Initial Purchasers bear to the aggregate initial offering price of the Securities of such series. The relative fault of the Company, on the one hand, and the Initial Purchasers, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact or any such inaccurate or alleged inaccurate representation or warranty relates to information supplied by the Company, on the one hand, or the Initial Purchasers, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

        The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 8, any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in Section 8 with respect to notice of commencement of any action shall apply if a claim for contribution is to be made under this Section 9; provided, however, that no additional notice shall be required with respect to any action for which notice has been given under Section 8 for purposes of indemnification.

        The Company and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 9.

        Notwithstanding the provisions of this Section 9, no Initial Purchaser shall be required to contribute any amount in excess of the discount received by such Initial Purchaser in connection with the Securities distributed by it. No person guilty of fraudulent misrepresentation (within the meaning of Section 11 of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Initial Purchasers' obligations to contribute pursuant to this Section 9 are several, and not joint, in proportion to their respective commitments as set forth opposite their names in Schedule A. For purposes of this Section 9, each director, officer and employee of an Initial Purchaser and each person, if any, who controls an Initial Purchaser within the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution as such Initial Purchaser, and each director of the Company, and each person, if any, who controls the Company with the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution as the Company.

17

        Section 10. Termination of this Agreement. Prior to the Closing Date, this Agreement may be terminated by Banc of America Securities LLC, on behalf of the Initial Purchasers, by notice given to the Company if at any time: (i) trading or quotation in any of the Company's securities shall have been suspended or limited by the Commission or by the New York Stock Exchange, or trading in securities generally on either the Nasdaq Stock Market or the New York Stock Exchange shall have been suspended or limited, or minimum or maximum prices shall have been generally established on any of such stock exchanges by the Commission or the NASD; (ii) a general banking moratorium shall have been declared by any of federal or New York authorities; (iii) there shall have occurred any outbreak or escalation of national or international hostilities or any national or international crisis or calamity, or any change in the United States or international financial markets, or any substantial change or development involving a prospective substantial change in the United States' or international political, financial or economic conditions, as in the judgment of the Initial Purchasers is material and adverse and makes it impracticable to market the Securities in the manner and on the terms described in the Offering Memorandum or to enforce contracts for the sale of securities; or (iv) since the date of the Offering Memorandum, there shall have occurred any Material Adverse Change which in the judgment of the Initial Purchasers makes it impracticable to market the Securities in the manner and on the terms described in the Offering Memorandum. Any termination pursuant to this Section 10 shall be without liability on the part of (i) the Company to any Initial Purchaser, except that the Company shall be obligated to reimburse the expenses of the Initial Purchasers pursuant to Sections 4 and 6 hereof, (ii) any Initial Purchaser to the Company, or (iii) any party hereto to any other party except that the provisions of Section 8 and Section 9 shall at all times be effective and shall survive such termination.

        Section 11. Representations and Indemnities to Survive Delivery. The respective indemnities, agreements, representations, warranties and other statements of the Company, of its officers and of the several Initial Purchasers set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of any Initial Purchaser or the Company or any of its or their partners, officers or directors or any controlling person, as the case may be, and will survive delivery of and payment for the Securities sold hereunder and any termination of this Agreement.

        Section 12. Notices. All communications hereunder shall be in writing and shall be mailed, hand delivered or telecopied and confirmed to the parties hereto as follows:

        If to the Initial Purchasers:

Banc of America Securities LLC
9 West 57th Street
New York, NY 10019
Attention: Legal Department
Fax: (212) 583-8567

        with a copy to:

Cahill Gordon & Reindel LLP
80 Pine Street
New York, New York 10005
Attention: James J. Clark, Esq.
                  Jonathan A. Schaffzin, Esq.
Fax: (212) 269-5420

18

        If to the Qwest Companies:

Qwest Communications International Inc.
Qwest Services Corporation
Qwest Capital Funding, Inc.
1801 California Street
Denver, Colorado 80202
Attention: Chief Financial Officer
Fax: (303) 296-6920
General Counsel
Fax: (303) 296-5974

        with a copy to:

Gibson, Dunn & Crutcher LLP
1801 California Street, Suite 4200
Denver, Colorado 80202
Attention: Richard M. Russo, Esq.
Fax: (303) 313-2838

        and a copy to:

O'Melveny & Myers
400 South Hope Street
Los Angeles, California 90071
Attention: David J. Johnson, Jr., Esq.
Fax: (213) 430-6407

        Any party hereto may change the address for receipt of communications by giving written notice to the others.

        Section 13. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto, including any substitute Initial Purchasers pursuant to Section 16 hereof, and to the benefit of the employees, officers and directors and controlling persons referred to in Section 8 and Section 9, and in each case their respective successors, and no other person will have any right or obligation hereunder. The term "successors" shall not include any purchaser of the Securities as such from any of the Initial Purchasers merely by reason of such purchase.

        Section 14. Partial Unenforceability. The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable.

        Section 15. Governing Law Provisions. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE.

        Section 16. Default of One or More of the Several Initial Purchasers. If any one or more of the several Initial Purchasers with respect to a series of Notes shall fail or refuse to purchase Notes of such series that it or they have agreed to purchase hereunder on the Closing Date, and the aggregate principal amount of Notes of such series which such defaulting Initial Purchaser or Initial Purchasers agreed but failed or refused to purchase does not exceed 10% of the aggregate principal amount of the Notes of such series to be purchased on such date, the other Initial Purchasers with respect to such series shall be obligated, severally, in the proportions that the principal amount of Notes of such series set forth opposite their respective names on Schedule A bears to the aggregate principal amount of

19

Notes of such series set forth opposite the names of all such non-defaulting Initial Purchasers, or in such other proportions as may be specified by the Initial Purchasers with respect to such series with the consent of the non-defaulting Initial Purchasers with respect to such series, to purchase the Notes of such series which such defaulting Initial Purchaser or Initial Purchasers agreed but failed or refused to purchase on such date. If any one or more of the Initial Purchasers with respect to a series of Notes shall fail or refuse to purchase Notes of such series and the aggregate principal amount of Notes of such series with respect to which such default occurs exceeds 10% of the aggregate principal amount of Notes of such series to be purchased on the Closing Date, and arrangements satisfactory to the Initial Purchasers with respect to a series of Notes and the Company for the purchase of such Notes are not made within 48 hours after such default, this Agreement shall terminate with respect to such series of Notes without liability of any party to any other party except that the provisions of Section 4, Section 6, Section 8 and Section 9 shall at all times be effective and shall survive such termination. In any such case either the Initial Purchasers or the Company shall have the right to postpone the Closing Date, as the case may be, but in no event for longer than seven days in order that the required changes, if any, to the Offering Memorandum or any other documents or arrangements may be effected.

        As used in this Agreement, the term "Initial Purchaser" shall be deemed to include any person substituted for a defaulting Initial Purchaser under this Section 16. Any action taken under this Section 16 shall not relieve any defaulting Initial Purchaser from liability in respect of any default of such Initial Purchaser under this Agreement.

        Section 17. General Provisions. This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. This Agreement may be executed in two or more counterparts, each one of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement may not be amended or modified unless in writing by all of the parties hereto, and no condition herein (express or implied) may be waived unless waived in writing by each party whom the condition is meant to benefit. The Table of Contents and the section headings herein are for the convenience of the parties only and shall not affect the construction or interpretation of this Agreement.

20

        If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to the Company the enclosed copies hereof, whereupon this instrument, along with all counterparts hereof, shall become a binding agreement in accordance with its terms.

Very truly yours,
QWEST COMMUNICATIONS INTERNATIONAL INC. QWEST SERVICES CORPORATION QWEST CAPITAL FUNDING, INC.
By:	/s/  OREN SHAFFER Name: Oren Shaffer Title: Vice Chairman and Chief Financial Officer

        The foregoing Purchase Agreement is hereby confirmed and accepted by the Initial Purchasers as of the date first above written.

BANC OF AMERICA SECURITIES LLC
CREDIT SUISSE FIRST BOSTON LLC
DEUTSCHE BANK SECURITIES INC.
GOLDMAN, SACHS & CO.
J.P. MORGAN SECURITIES INC.
LEHMAN BROTHERS INC.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
UBS SECURITIES LLC
WACHOVIA CAPITAL MARKETS, LLC

By:	BANC OF AMERICA SECURITIES LLC
By:	/s/  LEE ANN GLIHA Name: Lee Ann Gliha Title: Vice President

21

QuickLinks

Purchase Agreement

EX-10.28

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 10.28

[Conformed Copy]

REGISTRATION RIGHTS AGREEMENT

Dated February 5, 2004

among

QWEST COMMUNICATIONS INTERNATIONAL INC.

and

THE GUARANTORS NAMED HEREIN,
as Issuers,

and

Banc of America Securities LLC
Credit Suisse First Boston LLC
Deutsche Bank Securities Inc.
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
Lehman Brothers Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Morgan Stanley & Co. Incorporated
UBS Securities LLC
Wachovia Capital Markets, LLC

REGISTRATION RIGHTS AGREEMENT

        This Registration Rights "Agreement (this "Agreement") is dated as of February 5, 2004, among QWEST COMMUNICATIONS INTERNATIONAL, INC., a Delaware corporation (the "Company"), QWEST SERVICES CORPORATION, a Colorado corporation ("QSC"), and QWEST CAPITAL FUNDING INC., a Colorado corporation ("QCF", and, together with QSC, the "Guarantors"), on the one hand, and the initial purchasers named on the Signature Pages hereto (each, an "Initial Purchaser" and collectively, the "Initial Purchasers"), on the other hand, who have each agreed to purchase, severally and not jointly, pursuant to the Purchase Agreement (as defined below) a specified amount of three series of newly issued senior notes: 7¹/4% Senior notes due 2011; 7¹/2% Senior Notes due 2014; and Floating Rate Senior Notes due 2009 (collectively with the guarantees endorsed thereon (the "Securities"). The Company and the Guarantors are hereinafter collectively referred to as the "Issuers".

        This Agreement is made pursuant to the Purchase Agreement, dated as of January 30, 2004 (the "Purchase Agreement"), by and among the Issuer, the Guarantors and the Initial Purchasers (i) for the benefit of the Issuer, the Guarantors and the Initial Purchasers and (ii) for the benefit of the holders form time to time of the Securities (including the Initial Purchasers). In order to induce the Initial Purchasers to purchase the Securities, the Issuer and the Guarantors have agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchasers set forth in Section 5 of the Purchase Agreement. Capitalized terms used herein and not otherwise defined shall have the meaning assigned to them in the Indenture, dated February 5, 2004, between the Company, the Guarantors and J.P. Morgan Trust Company, National Association, as Trustee (the "Indenture").

        In consideration of the foregoing, the parties hereto agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the Securities:

1.     Definitions.

        As used in this Agreement, the following capitalized defined terms shall have the following meanings:

        "1933 Act" shall mean the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time.

        "1934 Act" shall mean the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time.

        "Additional Interest" shall have the meaning set forth in Section 2(d) hereof.

        "Affiliate" shall mean with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person; for purposes of this definition, "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or otherwise.

        "Application" shall have the meaning set forth in Section 5(a) hereof.

        "Broker-Dealer Representative" means Banc of America Securities LLC, Credit Suisse First Boston LLC, Deutsche Bank Securities Inc., Goldman, Sachs & Co., J.P. Morgan Securities Inc., Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated, UBS Securities LLC and Wachovia Capital Markets, LLC.

        "Closing Date" shall have the meaning set forth in the Purchase Agreement.

        "Company" shall have the meaning set forth in the preamble and shall also include the Company's successors and assigns.

        "Effectiveness Target Date" shall have the meaning set forth in Section 2(a) hereof.

        "Exchange Date" shall have the meaning set forth in Section 2(a)(ii) hereof.

        "Exchange Offer" shall mean the exchange offer by the Issuers of Exchange Securities for Registrable Securities pursuant to Section 2(a) hereof.

        "Exchange Offer Registration" shall mean a registration under the 1933 Act effected pursuant to Section 2(a) hereof.

        "Exchange Offer Registration Statement" shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form) and all amendments and supplements to such registration statement, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.

        "Exchange Period" shall have the meaning set forth in Section 2(a) hereof.

        "Exchange Securities" shall mean securities, including guarantees attached thereto, issued by the Issuers under the Indenture containing terms identical to the Securities (except that the Exchange Securities will not contain restrictions on transfer and Additional Interest) and to be offered to Holders of Securities in exchange for Securities pursuant to the Exchange Offer.

        "Guarantors" shall have the meaning set forth in the Preamble.

        "Holder" shall mean a holder of Registrable Securities, for so long as such holder owns any Registrable Securities, and each of such holder's successors, assigns and direct and indirect transferees who become registered owners of Registrable Securities under the Indenture or who become beneficial owners of Registrable Securities, so long as in the case of beneficial owners, such owners have so notified the Issuers in writing; provided that for purposes of Sections 4 and 5 of this Agreement, the term "Holder" shall include Participating Broker-Dealers.

        "Indenture" shall mean the Indenture relating to the Securities dated as of February 5, 2004 among the Company, the Guarantors and the Trustee, pursuant to which the Securities are being issued, as the same may be amended or supplemented from time to time in accordance with the terms thereof.

        "Majority Holders" shall mean the Holders of a majority of the aggregate principal amount of outstanding Registrable Securities; provided that whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Issuers or any of their Affiliates shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage or amount.

        "Participant" shall have the meaning set forth in Section 5(a) hereof.

        "Participating Broker-Dealer" shall have the meaning set forth in Section 4(a) hereof.

        "Person" shall be construed broadly and shall include, without limitation, an individual, a partnership, a corporation, an association, a joint stock company, a limited liability company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

        "Prospectus" shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to such prospectus, and in each case including all material incorporated by reference therein.

        "Registrable Securities" shall mean the Securities; provided, however, that the Securities shall cease to be Registrable Securities (i) when, in the case of a Holder of such Securities who was entitled to participate in the Exchange Offer, an Exchange Offer Registration Statement with respect to such

2

Securities shall have been declared effective under the 1933 Act and either (a) such Securities shall have been exchanged pursuant to the Exchange Offer for Exchange Securities or (b) such Securities were not tendered by the Holder thereof in the Exchange Offer, (ii) when a Shelf Registration Statement with respect to such Securities shall have been declared effective under the 1933 Act and such Securities shall have been disposed of pursuant to such Shelf Registration Statement, (iii) when such Securities have been sold to the public pursuant to Rule 144(k) (or any similar provision then in force, but not Rule 144A) under the 1933 Act or are eligible to be sold without restriction thereunder or (iv) when such Securities shall have ceased to be outstanding.

        "Registration Default" shall have the meaning set forth in Section 2(g) hereof.

        "Registration Expenses" shall mean any and all expenses incident to performance of or compliance by the Issuers with this Agreement, including, without limitation: (i) all SEC, New York Stock Exchange or National Association of Securities Dealers, Inc. registration and filing fees, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws (including reasonable fees and disbursements of one counsel for all underwriters or Holders as a group in connection with blue sky qualification of any of the Exchange Securities or Registrable Securities) within the United States (x) where the Holders are located, in the case of the Exchange Securities, or (y) as provided in Section 3(d) hereof, in the case of Registrable Securities to be sold by a Holder pursuant to a Shelf Registration Statement, (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto and other documents relating to the performance of and compliance with this Agreement, (iv) all rating agency fees, (v) all fees and disbursements relating to the qualification of the Indenture under applicable securities laws, (vi) the fees and disbursements of the Trustee and its counsel, (vii) the fees and disbursements of counsel for the Issuers and, in the case of a Shelf Registration Statement, the fees and disbursements of one counsel for the Holders (which counsel shall be selected by the Majority Holders) and (viii) the fees and disbursements of the independent public accountants of the Issuers, including the expenses of any special audits, agreed-upon procedures or "cold comfort" letters required by or incident to such performance and compliance, but excluding fees and expenses of counsel to the underwriters (other than fees and expenses set forth in clause (ii) above) or the Holders and underwriting discounts and commissions and out-of-pocket expenses incurred by the Holders and transfer taxes, if any, relating to the sale or disposition of Registrable Securities by a Holder.

        "Registration Statement" shall mean any registration statement of any Issuer that covers any of the Exchange Securities or Registrable Securities pursuant to the provisions of this Agreement and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.

        "SEC" shall mean the Securities and Exchange Commission.

        "Securities" shall have the meaning set forth in the preamble.

        "Shelf Registration" shall mean a registration effected pursuant to Section 2(b) hereof.

        "Shelf Registration Statement" shall mean a "shelf" registration statement of the Issuers pursuant to the provisions of Section 2(b) of this Agreement which covers all of the Registrable Securities on an appropriate form under Rule 415 under the 1933 Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.

        "TIA" shall have the meaning set forth in Section 3(l) hereof.

3

        "Trustee" shall mean the trustee with respect to the Securities under the Indenture.

        "Underwriters" shall have the meaning set forth in Section 3 hereof.

        "Underwritten Offering" shall mean a registration in which Registrable Securities are sold to an Underwriter for reoffering to the public.

2.     Registration Under the 1933 Act.

        (a)   To the extent not prohibited by any applicable law or applicable interpretation of the Staff of the SEC, the Issuers shall file an Exchange Offer Registration Statement covering the offer by the Issuers to the Holders to exchange all of the Registrable Securities for Exchange Securities in a like aggregate principal amount and to use their commercially reasonable efforts to cause the Exchange Offer Registration Statement to be declared effective by December 31, 2004 (the "Effectiveness Target Date") and to have such Registration Statement remain effective until the closing of the Exchange Offer. The Issuers shall commence the Exchange Offer as promptly as practicable after the Exchange Offer Registration Statement has been declared effective by the SEC and use their commercially reasonable efforts to have the Exchange Offer consummated not later than 45 days after the earlier of the date on which the Exchange Offer Registration Statement is declared effective and the Effectiveness Target Date (such 45-day period being the "Exchange Period").

        The Issuers shall commence the Exchange Offer by mailing the related exchange offer Prospectus and accompanying documents to each Holder stating, in addition to such other disclosures as are required by applicable law:

        (i)    that the Exchange Offer is being made pursuant to this Registration Rights Agreement and that all Registrable Securities validly tendered will be accepted for exchange;

        (ii)   the date of acceptance for exchange (which shall be a period of at least 20 business days (or longer if required by applicable law) from the date such notice is mailed) (the "Exchange Date");

        (iii)  that any Registrable Security not tendered by a Holder who was eligible to participate in the Exchange Offer will remain outstanding and continue to accrue interest, but will not retain any rights under this Registration Rights Agreement;

        (iv)  that Holders electing to have a Registrable Security exchanged pursuant to the Exchange Offer will be required to surrender such Registrable Security, together with the enclosed letters of transmittal, to the institution and at the address (located in the Borough of Manhattan, The City of New York) specified in the notice prior to the close of business on the Exchange Date; and

        (v)   that Holders will be entitled to withdraw their election, not later than the close of business, New York City time, on the Exchange Date, by sending to the institution and at the address (located in the Borough of Manhattan, The City of New York) specified in the notice a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Securities delivered for exchange and a statement that such Holder is withdrawing his election to have such Securities exchanged.

        As soon as practicable after the Exchange Date, the Issuers shall:

        (vi)  accept for exchange Registrable Securities or portions thereof validly tendered and not properly withdrawn pursuant to the Exchange Offer; and

        (vii) deliver, or cause to be delivered, to the Trustee for cancellation all Registrable Securities or portions thereof so accepted for exchange by the Issuers and issue, and cause the Trustee to promptly authenticate and mail to each Holder, an Exchange Security equal in principal amount to the principal amount of the Registrable Securities surrendered by such Holder; provided that, in

4

the case of any Registrable Securities held in global form by a depositary, authentication and delivery to such depositary of one or more Exchange Securities in global form in an equivalent principal amount thereto for the account of such Holders in accordance with the Indenture shall satisfy such authentication and delivery requirement.

        Each Holder (including, without limitation, each Participating Broker-Dealer (as defined)) who participates in the Exchange Offer will be required to represent to the Issuers, in writing (which may be contained in the applicable letter of transmittal) that: (1) any Exchange Securities acquired in exchange for Registrable Securities tendered are being acquired in the ordinary course of business of the Person receiving such Exchange Securities, whether or not such recipient is a Holder of Registrable Securities, (2) neither such Holder nor, to the actual knowledge of such Holder, any other Person receiving Exchange Securities from such Holder has an arrangement or understanding with any Person to participate in the distribution of the Exchange Securities in violation of the provisions of the 1933 Act, (3) the Holder is not an Affiliate of any Issuer or, if it is an Affiliate, it will comply with the registration and prospectus delivery requirements of the 1933 Act to the extent applicable, (4) if such Holder is not a Participating Broker-Dealer, that it has not engaged in, and does not intend to engage in, the distribution of Exchange Securities, (5) if such Holder is a Participating Broker-Dealer, such Holder acquired the Registrable Securities as a result of market-making activities or other trading activities, it will deliver a prospectus in connection with any resale of the Exchange Securities and that it will comply with the applicable provisions of the 1933 Act with respect to resale of any Exchange Securities and (6) such Holder has full power and authority to transfer the Registrable Securities in exchange for the Exchange Securities.

        The Issuers shall comply with the applicable requirements of the 1933 Act, the 1934 Act and other applicable laws and regulations in connection with the Exchange Offer. The Exchange Offer shall not be subject to any conditions, other than (1) that the Exchange Offer does not violate applicable law or any applicable interpretation of the Staff of the SEC, (2) that no action or proceeding shall have been instituted or threatened in any court or by any governmental agency with respect to the Exchange Offer and no material adverse development shall have occurred with respect to any Issuer, (3) that all governmental approvals shall have been obtained that the Issuers deem necessary for the consummation of the Exchange Offer, (4) that the conditions precedent to the Issuers' obligations under this Agreement shall have been fulfilled and (5) such other conditions as shall be deemed necessary or appropriate by the Issuers in their reasonable judgment.

        (b)   In the event that (i) the Issuers determine that the Exchange Offer Registration provided for in Section 2(a) above is not available or may not be consummated as soon as practicable after the Exchange Date because it would violate applicable law or the applicable interpretations of the Staff of the SEC, (ii) the Exchange Offer Registration Statement is not declared effective by the Effectiveness Target Date, (iii) any Holder of Securities notifies the Issuers after the commencement of the Exchange Offer that due to a change in applicable law or SEC policy it is not entitled to participate in the Exchange Offer, or (iv) if any Holder that participates in the Exchange Offer (and tenders its Registrable Securities prior to the expiration thereof), does not receive Exchange Securities on the date of the exchange that may be sold without restriction under state and federal securities laws (other than due solely to the status of such Holder as an Affiliate of any of the Issuers), the Issuers shall cause to be filed as soon as practicable a Shelf Registration Statement providing for the sale by the Holders of all of the Registrable Securities and shall use their commercially reasonable efforts to have such Shelf Registration Statement declared effective by the SEC. In the event the Issuers are required to file a Shelf Registration Statement solely as a result of the matters referred to in clause (iii) of the preceding sentence, the Issuers shall file and use their commercially reasonable efforts to have declared effective by the SEC both an Exchange Offer Registration Statement pursuant to Section 2(a) with respect to all Registrable Securities and a Shelf Registration Statement (which may be a combined Registration Statement with the Exchange Offer Registration Statement) with respect to offers and sales of

5

Registrable Securities held by such other Holders after completion of the Exchange Offer. The Issuers agree to use their commercially reasonable efforts to keep the Shelf Registration Statement continuously effective until the expiration of the period referred to in Rule 144(k) (or any successor rule that permits the Registrable Securities to be eligible for resale without registration and without being subject to volume restrictions, but not Rule 144A) with respect to the Registrable Securities or such shorter period that will terminate when all of the Registrable Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement. The Issuers further agree to supplement or amend the Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used by the Issuers for such Shelf Registration Statement or by the 1933 Act or by any other rules and regulations thereunder for shelf registration or if reasonably requested by a Holder with respect to information relating to such Holder, and to use their commercially reasonable efforts to cause any such amendment to become effective and such Shelf Registration Statement to become usable as soon as thereafter practicable. The Issuers agree to furnish to the Holders of Registrable Securities, upon request, copies of any such supplement or amendment promptly after its being used or filed with the SEC.

        (c)   The Issuers shall pay all Registration Expenses in connection with the registration pursuant to Section 2(a) or Section 2(b). Each Holder shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the registration of such Holder's Registrable Securities pursuant to the Exchange Offer Registration Statement or the Shelf Registration Statement.

        (d)   An Exchange Offer Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the SEC; provided, however, that, if, after it has been declared effective, the offering of Registrable Securities pursuant to a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Registration Statement will be deemed not to have become effective during the period of such interference until the offering of Registrable Securities pursuant to such Registration Statement may legally resume. As provided for in the Indenture, the annual interest rate on the Securities will be increased (the "Additional Interest") under the following conditions:

        (i)    subject to Sections 2(f) and 2(g) if (A) the Issuers have not exchanged Exchange Securities for all Securities validly tendered in accordance with the terms of the Exchange Offer on or prior to the end of the Exchange Period (and the Shelf Registration Statement has not been declared effective), (B) the Exchange Offer Registration Statement or, if applicable, the Shelf Registration Statement has not been declared effective by the SEC on or prior to the Effectiveness Target Date or (C) if applicable, the Shelf Registration Statement is filed and declared effective but shall thereafter cease to be effective or usable (as a result of an order suspending the effectiveness of the Shelf Registration Statement or otherwise) (each such event referred to in clauses (A) through (C), a "Registration Default"), then Additional Interest shall accrue on the principal amount of the Registrable Securities at a rate of 0.25% per annum for the first 90 days commencing (x) at the end of the Exchange Period, in the case of (A) above, (y) on the Effectiveness Target Date in the case of (B) above, or (z) on the day such Shelf Registration Statement ceases to be effective in the case of (C) above, and such Additional Interest rate shall increase, by an additional 0.25% per annum with respect to each subsequent 90-day period, up to a maximum amount of Additional Interest of 0.50% per annum, from and including the date on which any such Registration Default shall occur to, but excluding, the earlier of (1) the date on which all Registration Defaults have been cured or (2) the date on which all the Securities and Exchange Securities otherwise become freely transferable by Holders other than Affiliates of the Issuers without further registration under the 1933 Act (it being understood and agreed that, notwithstanding any provision to the contrary, so long as any Securities not registered under an

6

Exchange Offer Registration Statement are then covered by an effective Shelf Registration Statement, no Additional Interest shall accrue on such Securities);

provided, however, that upon the exchange of Exchange Securities for all Securities tendered (in the case of clause (i)(A) above), upon the effectiveness of the Shelf Registration Statement (in the case of clause (i)(B) above) or upon the effectiveness of the Shelf Registration Statement which had ceased to remain effective (in the case of clause (i)(C) above), Additional Interest on the Securities as a result of such clause (or the relevant subclause thereof), as the case may be, shall cease to accrue; provided, further, however, that in the case of clauses (i)(B) and (i)(C) above, it is expressly understood that Additional Interest should be payable only with respect to the Registrable Securities so requested to be registered pursuant to Section 2(b)(iii) hereof; and provided, further, however, that if a Registration Default under Section 2(d)(i)(C) hereof occurs because of the filing of a post-effective amendment to such Registration Statement to incorporate annual audited financial information with respect to the Issuers where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related Prospectus, it is expressly understood that Additional Interest shall be payable only from and after the date such Registration Default continues for at least 30 days.

Notwithstanding the foregoing, (1) the amount of Additional Interest payable shall not increase because more than one Registration Default has occurred and is pending and (2) a Holder of Registrable Securities or Exchange Securities who is not entitled to the benefits of the Shelf Registration Statement (i.e., such Holder has not elected to include information) shall not be entitled to Additional Interest with respect to a Registration Default that pertains to the Shelf Registration Statement.

        (e)   Without limiting the remedies available to the Holders, the Issuers acknowledge that any failure by the Issuers to comply with their obligations under Section 2(a) and Section 2 (b) hereof may result in material irreparable injury to the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, any Holder may obtain such relief as may be required to specifically enforce the Issuers' obligations under Section 2(a) and Section 2(b) hereof.

        (f)    No Holder of Registrable Securities may include any of its Registrable Securities in any Shelf Registration unless and until such Holder furnishes to the Issuers, in writing within 15 days after receipt of a request therefor, the information with respect to such Holder specified in Regulation S-K under the 1933 Act and any other applicable rules, regulations or policies of the SEC for use in connection with any Shelf Registration or Prospectus included therein, on a form to be provided by the Issuers. Each selling Holder agrees to furnish promptly to the Issuers additional information to be disclosed so that the information previously furnished to the Issuers by such Holder does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. No Holder of Registrable Securities shall be entitled to Additional Interest pursuant to Section 2(d) hereof unless and until such Holder shall have provided all such information.

        (g)   The Issuers may delay the filing or the effectiveness of an Exchange Offer Registration Statement or a Shelf Registration Statement for a period of up to 30 days during any 90 day period if (i) such Registration Default occurs because of the occurrence of other material events or developments with respect to the Issuers that would need to be described in such Registration Statement or the related Prospectus, and the effectiveness of such Registration Statement is reasonably required to be suspended while such Registration Statement and related Prospectus are amended or supplemented to reflect such events or developments, (ii) such Registration Default results from the suspension of the effectiveness of such Registration Statement because of the existence of material events or developments with respect to the Issuers or any of their Affiliates, the disclosure of which the Issuers determine in good faith would have a material adverse effect on the business, operations or prospects of the Issuers, or (iii) such Registration Default results from the suspension of the

7

effectiveness of such Registration Statement because the Issuers do not wish to disclose publicly a pending material business transaction that has not yet been publicly disclosed; provided, however, that any delay period with respect to Registration Defaults arising under this Section 2(g) will not alter the obligations of the Issuers to pay Additional Interest with respect to a Registration Default.

        (h)   Additional Interest due on the Securities pursuant to Section 2(d) hereof will be payable in cash semiannually in arrears in the same interest payment dates as the Securities, commencing with the first interest payment date occurring after any such Additional Interest commences to accrue.

3.     Registration Procedures.

        In connection with the obligations of the Issuers with respect to the Registration Statements pursuant to Section 2(a) and Section 2(b) hereof, the Issuers shall:

        (a)   prepare and file with the SEC a Registration Statement on the appropriate form under the 1933 Act, which form (x) shall be selected by the Issuers and (y) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Securities by the selling Holders thereof and (z) shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith, and use their commercially reasonable efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2 hereof;

        (b)   prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period and, except for such periods as to which such action is not required pursuant to Section 2(g) hereof, cause each Prospectus to be supplemented by any prospectus supplement required by applicable law and, as so supplemented, to be filed pursuant to Rule 424 under the 1933 Act; to keep each Prospectus current during the period described under Section 4(3) and Rule 174 under the 1933 Act that is applicable to transactions by brokers or dealers with respect to the Registrable Securities or Exchange Securities;

        (c)   in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, to counsel for the Holders and to each Underwriter of an Underwritten Offering of Registrable Securities, if any, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder or Underwriter may reasonably request, in order to facilitate the public sale or other disposition of the Registrable Securities; and the Issuers consent to the use of such Prospectus and any amendment or supplement thereto in accordance with applicable law by each of the selling Holders of Registrable Securities and any such Underwriters in connection with the offering and sale of the Registrable Securities covered by and in the manner described in such Prospectus or any amendment or supplement thereto in accordance with applicable law;

        (d)   use their commercially reasonable efforts to register or qualify the Registrable Securities under all applicable state securities or "blue sky" laws of such jurisdictions as any Holder of Registrable Securities covered by a Registration Statement shall reasonably request in writing by the time the applicable Registration Statement is declared effective by the SEC, to cooperate with such Holders in connection with any filings required to be made with the New York Stock Exchange and the National Association of Securities Dealers, Inc. and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder to consummate the disposition in each such jurisdiction of such Registrable Securities owned by such Holder; provided, however, that no Issuer shall be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (ii) file any general consent to service of process or (iii) subject itself to taxation in any such jurisdiction if it is not so subject;

8

        (e)   in the case of a Shelf Registration, notify each Holder of Registrable Securities and counsel for the Holders promptly and, if requested by any such Holder or counsel, confirm such advice in writing (i) when a Registration Statement has become effective and when any post-effective amendment thereto has been filed and becomes effective, (ii) of any request by the SEC or any state securities authority for amendments and supplements to a Registration Statement and Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) if, between the effective date of a Registration Statement and the closing of any sale of Registrable Securities covered thereby, the representations and warranties of the Issuers contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to the offering cease to be true and correct in all material respects or if the Issuers receive any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose, (v) of the happening of any event during the period a Shelf Registration Statement is effective which makes any statement made in such Registration Statement or the related Prospectus untrue in any material respect or which requires the making of any changes in such Registration Statement or Prospectus in order to make the statements therein not misleading and (vi) of any determination by the Issuers that a post-effective amendment to a Registration Statement (other than an amendment that does nothing more substantive than add one or more Holders to the selling securityholder of such Registration Statement or to update any information set forth in such table) would be appropriate except, in the case of clauses (iv), (v) and (vi), with respect to any event, development or transaction permitted to be kept confidential under Section 2(g) hereof, the Issuers shall not be required to describe such event, development or transaction in the written notice provided;

        (f)    make commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement as promptly as practicable and provide reasonably prompt notice to each Holder of the withdrawal of any such order;

        (g)   in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested);

        (h)   in the case of a Shelf Registration, cooperate with the selling Holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends and enable such Registrable Securities to be in such denominations (consistent with the provisions of the Indenture) and registered in such names as the selling Holders may reasonably request at least one business day prior to the closing of any sale of Registrable Securities;

        (i)    in the case of a Shelf Registration, upon the occurrence of any event contemplated by Section 3(e)(v) hereof, as promptly as practicable prepare and file with the SEC a supplement or post-effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; the Issuers agree to notify the Holders to suspend use of the Prospectus as promptly as practicable after the occurrence of such an event, and the Holders hereby agree to suspend use of the Prospectus until the Issuers have amended or supplemented the Prospectus to correct such misstatement or omission and expressly agree to maintain the information contained in such notice

9

confidential (except that such information may be disclosed to its counsel) until it has been publicly disclosed by the Issuers; notwithstanding the foregoing, the Issuers shall not be required to amend or supplement a Registration Statement, any related Prospectus or any document incorporated or deemed to be incorporated therein by reference if (i) an event occurs and is continuing as a result of which the Shelf Registration, any related Prospectus or any document incorporated or deemed to be incorporated therein by reference, would, in the Issuers' good faith judgment, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading (with respect to such a Prospectus only, in the light of the circumstances under which they were made), and (ii) (a) the Issuers determine in their good faith judgment that the disclosure of such event at such time would have a material adverse effect on the business, operations or prospects of the Issuers, or (b) the disclosure otherwise relates to a pending material business transaction that has not yet been publicly disclosed;

        (j)    in the case of a Shelf Registration Statement, a reasonable time prior to the filing of any Registration Statement, any Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus or any document which is to be incorporated by reference into a Registration Statement or a Prospectus after initial filing of a Registration Statement, provide copies of such document to, the Holders and their counsel and make such of the representatives of the Issuers as shall be reasonably requested by the Holders or their counsel available for discussion of such document, and shall not at any time file or make any amendment to the Registration Statement, any Prospectus or any amendment of or supplement to a Registration Statement or a Prospectus or any document which is to be incorporated by reference into a Registration Statement or a Prospectus, of which the Holders and their counsel shall not have previously been advised and furnished a copy or to which the Holders or their counsel shall reasonably object on a timely basis, except for any Registration Statement or amendment thereto or related Prospectus or supplement thereto (a copy of which has been previously furnished as provided in the preceding sentence) which counsel to the Issuers has advised the Issuers in writing is required to be filed in order to comply with applicable law; provided, however, that the foregoing procedures shall be coordinated on behalf of the Holders by a representative designated by the majority in aggregate principal amount of the Holders selling Registrable Securities;

        (k)   obtain a CUSIP number for all Exchange Securities or Registrable Securities, as the case may be, not later than the effective date of a Registration Statement;

        (l)    cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended (the "TIA"), in connection with the registration of the Exchange Securities or Registrable Securities, as the case may be, cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and execute, and use their commercially reasonable efforts to cause the Trustee to execute, all documents as may be required to effect such changes and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner;

        (m)  in the case of a Shelf Registration, make available for inspection upon written request by a representative of the Holders of the Registrable Securities, any Underwriter participating in any disposition pursuant to such Shelf Registration Statement, and attorneys and accountants designated by the Holders, at reasonable times and in a reasonable manner, all pertinent financial and other records, pertinent documents and properties of the Issuers as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the respective officers, directors and employees of the Issuers to supply all information reasonably requested by any such representative, Underwriter, attorney or accountant in connection with their due diligence responsibilities under a Shelf Registration Statement; provided that each such

10

representative, Underwriter, attorney or accountant shall agree in writing that it will keep such information confidential and that it will not disclose any of the information that the Issuers determine, in good faith, to be confidential and notifies them in writing are confidential unless (i) the disclosure of such information is necessary to avoid or correct a material misstatement or material omission in an effective Registration Statement or Prospectus, (ii) the release of such information is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, or (iii) the information has been made generally available to the public other than by any of such persons or an Affiliate of any such persons; provided, however, that prior notice shall be provided as soon as practicable to the Issuers of the potential disclosure of any information by such person pursuant to clause (i) or (ii) of this sentence in order to permit the Issuers to obtain a protective order (or waive the provisions of this paragraph (m);

        (n)   if reasonably requested by any Holder of Registrable Securities covered by a Registration Statement, (i) promptly incorporate in a Prospectus supplement or post-effective amendment such information with respect to such Holder as such Holder reasonably requests to be included therein and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as the Issuers have received notification of the matters to be incorporated in such filing; and

        (o)   in the case of an Underwritten Offering pursuant to a Shelf Registration, enter into such customary agreements and take all such other actions in connection therewith (including those requested by the Holders of a majority of the Registrable Securities being sold) in order to expedite or facilitate the disposition of such Registrable Securities and in such connection, (i) to the extent possible, make such representations and warranties to the Holders and any Underwriters of such Registrable Securities with respect to the business of either of the Issuers and their subsidiaries, the Registration Statement, Prospectus and documents incorporated by reference or deemed incorporated by reference, if any, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings and confirm the same in writing if and when requested, (ii) obtain opinions of counsel to the Issuers (which counsel and opinions, in form, scope and substance, shall be reasonably satisfactory to the Holders and such Underwriters and their respective counsel) addressed to each selling Holder and Underwriter of Registrable Securities, covering the matters customarily covered in opinions requested in underwritten offerings, (iii) obtain "cold comfort" letters from the independent certified public accountants of the Issuers (and, if necessary, any other certified public accountant of any subsidiary of the Issuers, or of any business acquired by any of the Issuers for which financial statements and financial data are or are required to be included in the Registration Statement) addressed to each selling Holder and Underwriter of Registrable Securities, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings, (iv) if an underwriting agreement is entered into, include in such underwriting agreement indemnification provisions and procedures no less favorable to the selling Holders and underwriters, if any, than those set forth in Section 5 hereof (or such other provisions and procedures acceptable to Holders of a majority in aggregate principal amount of Registrable Securities covered by such Registration Statement and the underwriters (if any), and (v) deliver such documents and certificates as may be reasonably requested by the Underwriters, and which are customarily delivered in underwritten offerings, to evidence the continued validity of the representations and warranties of the Issuers made pursuant to clause (i) above and to evidence compliance with any customary conditions contained in an underwriting agreement.

        In the case of a Shelf Registration Statement, the Issuers may require each Holder of Registrable Securities to furnish to the Issuers such information regarding the Holder and the proposed distribution by such Holder of such Registrable Securities as the Issuers may from time to time reasonably request in writing. The Issuers may exclude from such registration the Registrable Securities of any seller so

11

long as such seller fails to furnish such information within a reasonable time after receiving such request. Each seller as to which any Shelf Registration is being effected agrees to furnish promptly to the Issuers all information required to be disclosed in order to make the information previously furnished to the Issuers by such seller not materially misleading.

        In the case of a Shelf Registration Statement, each Holder agrees that, upon receipt of any notice from the Issuers of the happening of any event of the kind described in Section 3(e)(v) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to a Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(i) hereof, and, if so directed by the Issuers, such Holder will deliver to the Issuers (at their expense) all copies in its possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice. If the Issuers shall give any such notice to suspend the disposition of Registrable Securities pursuant to a Registration Statement, the Issuers shall extend the period during which the Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from and including the date of the giving of such notice to and including the date when the Holders shall have received copies of the supplemented or amended Prospectus necessary to resume such dispositions.

        The Holders of Registrable Securities covered by a Shelf Registration Statement who desire to do so may sell such Registrable Securities in an Underwritten Offering. In any such Underwritten Offering, the investment banker or investment bankers and manager or managers (the "Underwriters") that will administer the offering will be selected by the Majority Holders of the Registrable Securities included in such offering.

4.     Participation of Broker-Dealers in Exchange Offer.

        (a)   The Staff of the SEC has taken the position that any broker-dealer that receives Exchange Securities for its own account in the Exchange Offer in exchange for Securities that were acquired by such broker-dealer as a result of market-making or other trading activities (a "Participating Broker-Dealer"), may be deemed to be an "underwriter" within the meaning of the 1933 Act and must deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchange Securities.

        The Issuers understand that it is the Staff's position that if the Prospectus contained in the Exchange Offer Registration Statement includes a plan of distribution containing a statement to the above effect and the means by which Participating Broker-Dealers may resell the Exchange Securities, without naming the Participating Broker-Dealers or specifying the amount of Exchange Securities owned by them, such Prospectus may be delivered by Participating Broker-Dealers to satisfy their prospectus delivery obligation under the 1933 Act in connection with resales of Exchange Securities for their own accounts, so long as the Prospectus otherwise meets the requirements of the 1933 Act.

        (b)   In light of the above, notwithstanding the other provisions of this Agreement, the Issuers agree that the provisions of this Agreement as they relate to a Shelf Registration shall also apply to an Exchange Offer Registration to the extent, and with such reasonable modifications thereto as may be, reasonably requested by one or more Participating Broker-Dealers as provided in clause (ii) below, in order to expedite or facilitate the disposition of any Exchange Securities by Participating Broker-Dealers consistent with the positions of the Staff recited in Section 4(a) above; provided that:

        (i)    the Issuers shall not be required to keep the Exchange Offer Registration Statement effective, as would otherwise be contemplated by Section 2(b) for a period exceeding 90 days after the date on which such Exchange Offer Registration Statement is declared effective (as such period may be extended pursuant to the penultimate paragraph of Section 3 of this Agreement as applied to such Exchange Offer Registration Statement);

12

        (ii)   the Issuers shall not be required to amend or supplement the Prospectus contained in the Exchange Offer Registration Statement, as would otherwise be contemplated by Section 3(i), for a period exceeding 90 days after the date on which such Exchange Offer Registration Statement is declared effective (as such period may be extended pursuant to the penultimate paragraph of Section 3 of this Agreement as applied to such Exchange Offer Registration Statement) and Participating Broker-Dealers shall not be authorized by the Issuers to deliver and shall not deliver such Prospectus after such period in connection with the resales contemplated by this Section 4; and

        (iii)  the application of the Shelf Registration procedures set forth in Section 3of this Agreement to an Exchange Offer Registration, to the extent not required by the positions of the Staff of the SEC or the 1933 Act and the rules and regulations thereunder, will be in conformity with the reasonable request in writing to the Issuers by one or more broker-dealers who certify to the Issuers in writing that they anticipate that they will be Participating Broker-Dealers; and provided, further, that, in connection with such application of the Shelf Registration procedures set forth in Section 3 to an Exchange Offer Registration, the Issuers shall be obligated (x) to deal only with the Broker-Dealer Representatives and (y) to pay the fees and expenses of only one counsel representing the Participating Broker-Dealers.

5.     Indemnification and Contribution.

        (a)   Each of the Issuers, jointly and severally, hereby agree to indemnify and hold harmless each Holder of Registrable Securities and each Participating Broker-Dealer selling Exchange Securities during the applicable period, and each Person, if any, who controls such Person or its affiliates within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act (each, a "Participant") from and against any and all losses, claims, damages, liabilities or expenses (whether direct or indirect, in contract, tort or otherwise) whatsoever, as incurred (including the cost of any investigation or preparation) arising out of or based upon:

        (i)    any untrue statement or alleged untrue statement of a material fact made by any Issuer contained in any application or any other document or any amendment or supplement thereto executed by any Issuer based upon written information furnished by or on behalf of any Issuer filed in any jurisdiction in order to qualify the Securities under the securities or "Blue Sky" laws thereof or filed with the SEC or any securities association or securities exchange (each, an "Application");

        (ii)   any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) or Prospectus (as amended or supplemented if any of the Issuers shall have furnished any amendments or supplements thereto) or any preliminary prospectus; or

        (iii)  the omission or alleged omission to state, in any Registration Statement (or any amendment thereto) or Prospectus (as amended or supplemented if any of the Issuers shall have furnished any amendments or supplements thereto) or any preliminary prospectus or any Application or any other document or any amendment or supplement thereto, a material fact or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading;

provided, however, the Issuers will not be liable in any such case to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in any Registration Statement (or any amendment thereto) or Prospectus (as amended or supplemented if any of the Issuers shall have furnished any amendments or supplements thereto) or any preliminary prospectus or any amendment or supplement thereto of a material fact necessary in order to make the statements made therein, in the light of the

13

circumstances under with they were made, not misleading, if in any case such statement or omission relates to such Participant and was made in reliance upon and in conformity with information furnished in writing to the Issuers by such Participant expressly for use therein. The indemnity provided for in this Section 5 will be in addition to any liability that the Issuers may otherwise have to the indemnified parties. No Issuer shall be liable under this Section 5 for any settlement of any claim or action effected without its prior written consent, which shall not be unreasonably withheld. No Participant shall, without the prior written consent of an Issuer, effect any settlement or compromise of any pending or threatened proceeding in respect of which such Issuer is or could have been a party, or indemnity could have been sought hereunder by such Issuer, unless such settlement (A) includes an unconditional release of such Issuer, from all liability in any way related to or arising out of such litigation or proceeding and (B) does not impose any actual or potential liability or any other obligation upon any Issuer and does not contain any factual or legal admission of fault, culpability or a failure to act by or with respect to any Issuer.

        Each Participant, severally and not jointly, agrees to hold the Issuers harmless and to indemnify the Issuers (including any of their respective affiliated companies and any director, officer, agent or employee of the Issuers or any such affiliated company) and any director, officer, or other person controlling (within the meaning of Section 20(a) of the 1934 Act) the Issuers (including any of the Issuers' affiliated companies) from and against any and all losses, claims, damages, liabilities or expenses (whether direct or indirect, in contract, tort or otherwise) whatsoever, as incurred (including the cost of any investigation and preparation) arising out of or based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus, any amendment or supplement thereto, or any preliminary prospectus, or (ii) the omission or the alleged omission to state therein a material fact necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission relates to such Participant and was made in reliance upon and in conformity with information furnished in writing by such Participant, expressly for use therein. The indemnity provided for in this Section 5 will be in addition to any liability that the Participants may otherwise have to the indemnified parties. The Participants shall not be liable under this Section 5 for any settlement of any claim or action effected without their consent, which shall not be unreasonably withheld. The Issuers shall not, without the prior written consent of such Participant, effect any settlement or compromise of any pending or threatened proceeding in respect of which such Participant is or could have been a party, or indemnity could have been sought hereunder by such Participant, unless such settlement (A) includes an unconditional release of such Participant, from all liability in any way related to or arising out of such litigation or proceeding and (B) does not impose any actual or potential liability or any other obligation upon any such Participant and does not contain any factual or legal admission of fault, culpability or a failure to act by or with respect to any such Participant.

        If a claim is made against any indemnified party as to which such indemnified party may seek indemnity under this Section 5, such indemnified person shall notify the indemnifying party promptly after any written assertion of such claim threatening to institute an action or proceeding with respect thereto and shall notify the indemnifying party promptly of any action commenced against such indemnified party within a reasonable time after such indemnified party shall have been served with a summons or other first legal process giving information as to the nature and basis of the claim. Failure to so notify the indemnifying party shall not, however, relieve the indemnifying party from any liability which it may have on account of the indemnity under this Section 5, except to the extent such failure results in the forfeiture by the indemnifying party of material rights and defenses. The indemnifying party shall have the right to assume the defense of any such litigation or proceeding, including the engagement of counsel reasonably satisfactory to the indemnified party. In any such litigation or proceeding the defense of which the indemnifying party shall have so assumed, any indemnified party shall have the right to participate in such litigation or proceeding and to retain its own counsel, but the

14

fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party shall have failed promptly to assume the defense thereof and employ counsel as provided above, or (ii) counsel to the indemnified party reasonably determines that representation of such indemnified party by the indemnifying party's counsel would present the indemnifying party's counsel with a conflict of interest. It is understood that the indemnifying party shall not, in connection with any litigation or proceeding or related litigation or proceeding in the same jurisdiction, be liable under this Agreement for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such indemnified parties and that all such fees and expenses shall be reimbursed as they are incurred. Such separate firm shall be designated by the indemnified party.

        To the extent the indemnity provided for in the foregoing paragraphs of this Section 5 is for any reason held unenforceable although otherwise applicable in accordance with its terms with respect to an indemnified party in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party agrees to contribute to the amount paid or payable by such indemnified person as a result of such losses, claims, damages, liabilities or expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party, on the one hand, and by such indemnified party, on the other, from the offering of the Securities or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in the foregoing clause (i), but also the relative fault of the indemnifying party, on the one hand, and of such indemnified party, on the other, in connection with the statements, actions or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Issuers, on the one hand, and by such Participant, on the other, shall be deemed in the same proportion as the total proceeds from the offering (before deducting expenses) of the Securities received by the Issuers bear to the total net profit received by such Participant in connection with the sale of the Securities. Relative fault shall be determined by reference to, among other things, whether any alleged untrue statement or omission or any other alleged conduct relates to information provided by the Issuers or other conduct by the Issuers (or their employees or other agents), on the one hand, or by such Participants, on the other hand.

        The parties agree that it would not be equitable if the amount of such contribution were determined by pro rata or per capita allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the first sentence of the previous paragraph. Notwithstanding any other provision of the previous paragraph, no Participant shall be obligated to make contributions hereunder that in the aggregate exceed the total net profit received by such Participant in connection with the sale of the Securities, less the aggregate amount of any damages that such Participant has otherwise been required to pay by reason of the untrue or alleged untrue statements or the omissions or alleged omissions to state a material fact, and no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (d), each person, if any, who controls a Participant within the meaning of Section 15 of 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Participants, and each director of any Issuer, each officer of any Issuer and each person, if any, who controls any Issuer within the meaning of Section 15 of 1933 Act or Section 20 of the 1934 Act, shall have the same rights to contribution as the Issuers.

15

6.     Miscellaneous.

        (a)   No Inconsistent Agreements. The Issuers have not entered into, and on or after the date of this Agreement will not enter into, any agreement which is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Issuers' other issued and outstanding securities under any such agreements.

        (b)   Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Issuers have obtained the written consent of Holders of at least a majority in aggregate principal amount of the outstanding Registrable Securities affected by such amendment, modification, supplement, waiver or consent; provided, however, that no amendment, modification, supplement, waiver or consent to any departure from the provisions of Section 5 hereof shall be effective as against any Holder of Registrable Securities unless consented to in writing by such Holder. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Securities whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders of Registrable Securities may be given by Holders of at least a majority in aggregate principal amount of the Registrable Securities being sold pursuant to such Registration Statement.

        (c)   Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (i) if to a Holder, at the most current address given by such Holder to the Issuers by means of a notice given in accordance with the provisions of this Section 6(c); (ii) if to the Issuers, initially at the Issuers' address set forth in the Indenture and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 6(c); and (iii) if to the Trustee, initially at the Trustee's address set forth in the Indenture and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 6(c).

        All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery.

        Copies of all such notices, demands, or other communications shall be concurrently delivered by the Person giving the same to the Trustee, at the address specified in the Indenture.

        (d)   Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Indenture. If any transferee of any Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such Person shall be entitled to receive the benefits hereof. The Trustee (in its capacity as Trustee under the Indenture or acting on behalf of the Holders pursuant to this Agreement) shall have no liability or obligation to either (i) the Issuers with respect to any failure by a Holder to comply with, or any breach by any Holder of, any of the obligations of such Holder under this Agreement or (ii) any Holder with respect to any failure by the Issuers to comply with, or any breach by the Issuers of, any of the obligations of the Issuers under this Agreement.

16

        (e)   Entire Agreement. This Agreement contains the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes and replaces all other prior agreements, written or oral, among the parties hereto with respect to the subject matter hereof.

        (f)    Third Party Beneficiary. The Holders shall be third party beneficiaries to the agreements made hereunder between the Issuers, on the one hand, and the Trustee, on the other hand, and shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder.

        (g)   Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

        (h)   Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

        (i)    Governing Law. The internal laws of the State of New York shall govern the enforceability and validity of this Agreement, the construction of its terms and the interpretation of the rights and duties of the parties hereto without giving effect to conflicts of laws, rules or principles.

        (j)    Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.

17

        IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

QWEST COMMUNICATIONS INTERNATIONAL INC.
By:	/s/  JANET K. COOPER Name: Janet K. Cooper Title: Senior Vice President and Treasurer
QWEST SERVICES CORPORATION
By:	/s/  JANET K. COOPER Name: Janet K. Cooper Title: Senior Vice President and Treasurer
QWEST CAPITAL FUNDING, INC.
By:	/s/  JANET K. COOPER Name: Janet K. Cooper Title: Senior Vice President and Treasurer
BANC OF AMERICA SECURITIES LLC CREDIT SUISSE FIRST BOSTON LLC DEUTSCHE BANK SECURITIES INC. GOLDMAN, SACHS & CO. J.P. MORGAN SECURITIES INC. LEHMAN BROTHERS INC. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED MORGAN STANLEY & CO. INCORPORATED UBS SECURITIES LLC WACHOVIA CAPITAL MARKETS, LLC
By:	BANC OF AMERICA SECURITIES LLC
By:	/s/  LEE ANN GLIHA Name: Lee Ann Gliha Title: Vice President

18

QuickLinks

REGISTRATION RIGHTS AGREEMENT

EX-10.29

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 10.29

CONFORMED COPY

$750,000,000

CREDIT AGREEMENT

dated as of

February 5, 2004

among

Qwest Services Corporation
Qwest Communications International Inc.

The Lenders Listed Herein

and

Bank of America, N.A.,
as Administrative Agent

J.P. Morgan Securities Inc.
Wachovia Capital Markets, LLC
Co-Lead Arrangers
and Joint Bookrunners

JPMorgan Chase Bank
Wachovia Bank, N.A.
Co-Syndication Agents

Lehman Commercial Paper Inc.
UBS Securities LLC
Co-Documentation Agents

TABLE OF CONTENTS

		Page
	ARTICLE 1 Definitions
Section 1.01.	The Definitions	1
Section 1.02.	Accounting Terms and Determinations	15
Section 1.03.	Types and Tranches of Borrowings of Loans	15
	ARTICLE 2 The Credits
Section 2.01.	Commitments to Lend	15
Section 2.02.	Notice of Borrowing	15
Section 2.03.	Notice to Lenders; Funding of Loans	16
Section 2.04.	Evidence of Debt	17
Section 2.05.	Maturity of Loans	17
Section 2.06.	Interest Rates	17
Section 2.07.	Commitment Fees	18
Section 2.08.	Termination or Reduction of Commitments; Scheduled Amortization of Term Loans	19
Section 2.09.	Method of Electing Interest Rates	19
Section 2.10.	Prepayments	20
Section 2.11.	General Provisions as to Payments	20
Section 2.12.	Funding Losses	21
Section 2.13.	Computation of Interest and Fees	21
Section 2.14.	Change of Control	21
Section 2.15.	Increase In Commitments; New Term Tranche	22
	ARTICLE 3 Conditions
Section 3.01.	Closing	23
Section 3.02.	Condition To Term Loans	24
Section 3.03.	All Borrowings	24
	ARTICLE 4 Representations And Warranties
Section 4.01.	Corporate Existence and Power	25
Section 4.02.	Corporate and Governmental Authorization; No Contravention	25
Section 4.03.	Binding Effect	25
Section 4.04.	Financial Information	25
Section 4.05.	Litigation	26
Section 4.06.	Compliance with ERISA	26
Section 4.07.	Environmental Matters	26
Section 4.08.	Taxes	26
Section 4.09.	Subsidiaries	27
Section 4.10.	Not an Investment Company	27
Section 4.11.	Full Disclosure	27
Section 4.12.	Solvency	27

i

	ARTICLE 5 Covenants
Section 5.01.	Information	27
Section 5.02.	Maintenance of Property; Insurance	30
Section 5.03.	Maintenance of Existence	30
Section 5.04.	Compliance with Laws	30
Section 5.05.	Inspection of Property, Books and Records	30
Section 5.06.	Financial Covenants	30
Section 5.07.	Negative Pledge	30
Section 5.08.	Consolidations, Mergers and Sales of Assets	32
Section 5.09.	Use of Proceeds	33
Section 5.10.	Restricted Payments and Payments of Certain Other Debt	33
Section 5.11.	Limitations on Restrictions Affecting Subsidiaries	34
Section 5.12.	Limitations on Debt	34
Section 5.13.	Limitations on Investments; Loans, Advances, Guarantees and Acquisitions	37
Section 5.14.	Further Assurances Regarding Collateral and Guaranty Requirement	38
Section 5.15.	Borrower A Holding Company	38
	ARTICLE 6 Defaults
Section 6.01.	Events of Default	38
Section 6.02.	Notice of Default	40
	ARTICLE 7 The Administrative Agent
Section 7.01.	Appointment and Authorization	40
Section 7.02.	Administrative Agent and Affiliates	40
Section 7.03.	Action by Administrative Agent	40
Section 7.04.	Consultation with Experts	41
Section 7.05.	Delegation of Duties	41
Section 7.06.	Liability of Administrative Agent	41
Section 7.07.	Indemnification	41
Section 7.08.	Credit Decision; Disclosure of Information by Administrative Agent	41
Section 7.09.	Successor Administrative Agent	42
Section 7.10.	Administrative Agent's Fee	42
	ARTICLE 8 Changes In Circumstances
Section 8.01.	Basis for Determining Interest Rate Inadequate or Unfair	42
Section 8.02.	Illegality	43
Section 8.03.	Increased Cost and Reduced Return	43
Section 8.04.	Taxes	44
Section 8.05.	Domestic Loans Substituted for Affected Euro-Dollar Loans	45
Section 8.06.	Substitution of Lender	46

ii

	ARTICLE 9 Guaranty
Section 9.01.	The Guaranty	46
Section 9.02.	Guaranty Unconditional	46
Section 9.03.	Discharge Only upon Payment in Full; Reinstatement in Certain Circumstances	47
Section 9.04.	Waiver by the Guarantor	47
Section 9.05.	Subrogation	47
Section 9.06.	Stay of Acceleration	47
	ARTICLE 10 Miscellaneous
Section 10.01.	Notices	47
Section 10.02.	No Waivers	48
Section 10.03.	Expenses; Indemnification	48
Section 10.04.	Sharing of Set-offs	48
Section 10.05.	Amendments and Waivers	49
Section 10.06.	Successors and Assigns	49
Section 10.07.	Governing Law; Submission to Jurisdiction	51
Section 10.08.	Counterparts; Integration	51
Section 10.09.	WAIVER OF JURY TRIAL	52
Section 10.10.	Confidentiality	52
Section 10.11.	No Reliance on Margin Stock	52
Section 10.12.	Co-Lead Arrangers, Joint Bookrunners, Co-Syndication Agents and Co-Documentation Agents	52
Section 10.13.	Payments Set Aside	52
Section 10.14.	USA Patriot Act Notice	52

Commitment Schedule

Schedule 4.05	—	Litigation
Schedule 4.07	—	Environmental Matters
Schedule 5.07	—	Existing Liens
Schedule 5.12	—	Existing Debt
Schedule 5.13	—	Existing Investments
Exhibit A	—	Note
Exhibit B	—	Security and Pledge Agreement
Exhibit C	—	Term Loan Addendum
Exhibit D	—	Opinions of Counsel for the Loan Parties
Exhibit E	—	Assignment and Assumption Agreement
Exhibit F	—	Notice of Borrowing

iii

CREDIT AGREEMENT

        AGREEMENT dated as of February 5, 2004 among QWEST SERVICES CORPORATION, QWEST COMMUNICATIONS INTERNATIONAL INC., the LENDERS listed on the signature pages hereof and BANK OF AMERICA, N.A., as Administrative Agent.

ARTICLE 1
Definitions

        Section 1.01. The Definitions.

        The following terms, as used herein, have the following meanings:

        "Adjusted London Interbank Offered Rate" has the meaning set forth in Section 2.06.

        "Administrative Agent" means Bank of America, N.A., in its capacities as administrative agent and collateral agent for the Lenders under the Loan Documents, and its successors in such capacity.

        "Administrative Agent-Related Person" means the Administrative Agent, together with its Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates.

        "Administrative Questionnaire" means, with respect to each Lender, an administrative questionnaire in the form prepared by the Administrative Agent and submitted to the Administrative Agent (with a copy to the Company) duly completed by such Lender.

        "Affiliate", as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise.

        "Aggregate Commitment" means the Commitments of all the Lenders.

        "Agreement" means this Credit Agreement dated as of February 5, 2004, as the same may from time to time be amended, amended and restated, modified or supplemented.

        "Applicable Lending Office" means, with respect to any Lender, (i) in the case of its Domestic Loans, its Domestic Lending Office and (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office.

        "Applicable Margin" means, from time to time, the following percentages per annum, based upon the Debt Rating as set forth below:

Applicable Margin
Pricing Level	Debt Ratings S&P/Moody's	Commitment Fee		Euro-Dollar Revolver Loans		Domestic Revolver Loans
1	BBB- or Baa3 or better	0.250	%	1.00	%	0.00	%
2	BB+ or Ba1	0.375	%	1.75	%	0.75	%
3	BB or Ba2	0.500	%	2.00	%	1.00	%
4	BB- or Ba3	0.500	%	2.25	%	1.25	%
5	B+ or B1	0.500	%	2.50	%	1.50	%
6	B/B2 or worse	0.750	%	3.00	%	2.00	%

        For purposes of this definition, "Debt Rating" means, as of any date of determination, the rating as determined by each of S&P and Moody's (collectively, the "Debt Ratings") of the Debt under this Agreement (or, if ratings of such Debt are not issued by both S&P and Moody's, of the Company's senior unsecured long-term debt (Guaranteed by the Borrower on a subordinated basis, with the Guaranty secured on a junior lien basis); provided that if there is a split in the Debt Ratings, then the Pricing Level that is one level higher than the Pricing Level of the lower Debt Rating shall apply (with

the Debt Rating for Pricing Level 1 being the highest and the Debt Rating for Pricing Level 6 being the lowest), and if Debt Ratings are not issued by both S&P and Moody's, Pricing Level 6 shall apply. Each change in the Applicable Margin resulting from a publicly announced change in the Debt Rating shall be effective during the period commencing on the date of the public announcement thereof and ending on the date immediately preceding the effective date of the next such change.

        "Asset Sale" means, with respect to any Person, any sale, transfer or other disposition (including pursuant to a sale and leaseback transaction) of any property of such Person, except (i) sales of inventory, customer premises equipment and other equipment, conduit, fiber and capacity (including indefeasible rights of use), Permitted Investments and sales or licenses of technology, in each case in the ordinary course of business, (ii) write-offs of accounts receivable or settlements of accounts receivable for less than the total unpaid balance thereof, in each case in the ordinary course of business and consistent with such Person's historical collection practices, (iii) sales or dispositions of shares of Equity Interests in any of its Subsidiaries in order to qualify members of the governing body of the Subsidiary, if required by applicable laws and in such amounts as required by applicable laws, (iv) any transfer of assets pursuant to any merger or consolidation permitted by Section 5.08(a) and (v) any sale, transfer or other disposition of assets from any Subsidiary of the Company (other than the Borrower or a Corp. Company (other than of or from Wireless)) to any other Subsidiary of the Company other than to a Corp. Company. Nothing in this definition shall be construed to limit or modify any restriction contained in Sections 5.08(a), 5.08(b) or 5.08(e).

        "Asset Swap" means any Asset Sale or portion thereof the sole consideration for which is substantially similar assets used in the same line of business as the assets being sold, transferred or otherwise disposed pursuant thereto and of substantially equivalent fair market value.

        "Assignee" has the meaning set forth in Section 10.06(c).

        "Available Increase Amount" means on each day the amount, if any, by which (a) the Maximum Amount exceeds (b) the sum of the Aggregate Commitments and the Term Outstandings (after giving effect to any Term Loan Borrowings on such day).

        "Available Net Proceeds" means, with respect to any Net Proceeds referred to in Section 5.08(d), 50% of such Net Proceeds.

        "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of ¹/2 of 1% plus the Federal Funds Rate for such day.

        "Benefit Arrangement" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group.

        "Borrower" means Qwest Services Corporation, a Colorado corporation and its successors.

        "Borrowing" has the meaning set forth in Section 1.03.

        "Capital Funding" means Qwest Capital Funding, Inc., a Colorado corporation, and its successors.

        "Closing Date" means the date on which the Administrative Agent shall have received the documents or evidence specified in or pursuant to Section 3.01.

        "Collateral" means any and all "Collateral", as defined in any Collateral Document.

        "Collateral Agent" has the meaning set forth in the Security and Pledge Agreement.

        "Collateral and Guaranty Requirement" means the requirement that:

        (a)   the Collateral Agent shall have received from the Borrower a counterpart of the Security and Pledge Agreement duly executed and delivered on behalf of the Borrower;

2

        (b)   all outstanding Equity Interests constituting Collateral shall have been pledged pursuant to the Security and Pledge Agreement and the Collateral Agent shall have received all certificates or other instruments representing all outstanding Equity Interests of Corp. and all outstanding Equity Interests of QwestDex, in each case together with stock powers or other instruments of transfer with respect thereto endorsed in blank;

        (c)   all Instruments constituting Collateral shall have been pledged pursuant to the Security and Pledge Agreement and the Collateral Agent shall have received all such Instruments (subject to any limitations set forth in the Security and Pledge Agreement), together with instruments of transfer with respect thereto endorsed in blank;

        (d)   all documents and instruments, including Uniform Commercial Code financing statements, required by law or reasonably requested by the Collateral Agent to be filed, registered or recorded to create the Liens intended to be created by the Security and Pledge Agreement and perfect or record such Liens to the extent, and with the priority, required by the Security and Pledge Agreement, shall have been filed, registered or recorded or delivered to the Collateral Agent for filing, registration or recording; and

        (e)   the Borrower shall have obtained all consents and approvals required to be obtained by it in connection with (i) the execution and delivery of the Security and Pledge Agreement and (ii) subject to any limitations set forth in the Security and Pledge Agreement, the performance of its obligations thereunder and the granting of the Liens purported to be granted by it thereunder.

        "Collateral Documents" means the Security and Pledge Agreement and each other security agreement, pledge agreement, instrument or document executed and delivered pursuant to Section 5.14 to secure any of the Lender Secured Obligations (as defined in the Security and Pledge Agreement).

        "Commitment" means, with respect to each Revolver Lender, the amount set forth opposite the name of such Lender on the Commitment Schedule attached hereto or in the applicable Assignment and Assumption Agreement, as such amount may be reduced from time to time pursuant to Section 2.08 or increased from time to time pursuant to Section 2.15(a). For the avoidance of doubt, the term "Commitment" refers to the obligation of a Revolver Lender to make Revolver Loans and not to any obligation to make Term Loans, which is in addition to, and separate from, such Commitment.

        "Company" means Qwest Communications International Inc., a Delaware corporation, and its successors.

        "Company Consolidated Leverage Ratio" means the ratio of Debt of the Company and its Consolidated Subsidiaries, determined on a consolidated basis as of the last day of each fiscal quarter of the Company, to Consolidated Company EBITDA, determined for the four consecutive fiscal quarters ending on such date.

        "Company's 2002 Form 10-K" means the Company's annual report on Form 10-K for 2002, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934.

        "Consolidated Company EBITDA" means, for any period, the net income of the Company and its Consolidated Subsidiaries determined on a consolidated basis for such period (adjusted to exclude the effect of (r) cash charges of up to $20,000,000 in respect of severance costs paid in the fiscal year ended December 31, 2003, (s) any loss reflected in net income all or any portion of which is paid or reimbursed by an insurer, indemnitor or other third party source to the extent such payment or reimbursement is not reflected in net income, (t) any payment, charge or reserve for payment made or taken in connection with the restructuring or termination of an Outstanding UPO, to the extent such payment, charge or reserve exceeds the amount that would otherwise have been payable during the fiscal quarter in which such payment, charge or reserve was made or taken with respect to such

3

Outstanding UPO, (u) any non-cash losses as a result of impairment of goodwill as required by Statement of Financial Accounting Standards No. 142, (v) equity gains or losses in unconsolidated Persons, (w) any preferred dividend income and any extraordinary or other non-recurring non-cash gain or loss, provided that any cash payments received or made as a result of such gain or loss (regardless of when the gain or loss was incurred) shall be included in the calculation of EBITDA for the period in which they are received or made (unless previously included for purposes of this calculation), (x) any gain or loss on the disposition of investments, (y) income (or loss) of any Person, or attributable to any assets, disposed of during such period and (z) income (or loss) of any Person, or attributable to any assets, accrued prior to the date of acquisition of such Person or assets), plus, to the extent deducted in determining such adjusted net income, the aggregate amount of (i) interest expense, (ii) income tax expense, (iii) depreciation, amortization, reserves and other non-cash charges, and (iv) transaction costs incurred in connection with this Agreement, and minus, to the extent included in determining such adjusted net income, the aggregate amount of (1) interest income and (2) income tax benefit.

        "Consolidated Corp. EBITDA" means, for any period, the net income of Corp. and its Consolidated Subsidiaries determined on a consolidated basis for such period (adjusted to exclude the effect of (r) cash charges of up to $20,000,000 in respect of severance costs paid in the fiscal year ended December 31, 2003, (s) any loss reflected in net income all or any portion of which is paid or reimbursed by an insurer, indemnitor or other third party source to the extent such payment or reimbursement is not reflected in net income, (t) any payment, charge or reserve for payment made or taken in connection with the restructuring or termination of an Outstanding UPO, to the extent such payment, charge or reserve exceeds the amount that would otherwise have been payable during the fiscal quarter in which such payment, charge or reserve was made or taken with respect to such Outstanding UPO, (u) any non-cash losses as a result of impairment of goodwill as required by Statement of Financial Accounting Standards No. 142, (v) equity gains or losses in unconsolidated Persons, (w) any preferred dividend income and any extraordinary or other non-recurring non-cash gain or loss, provided that any cash payments received or made as a result of such gain or loss (regardless of when the gain or loss was incurred) shall be included in the calculation of EBITDA for the period in which they are received or made (unless previously included for purposes of the calculation), (x) any gain or loss on the disposition of investments, (y) income (or loss) of any Person, or attributable to any assets, disposed of during such period and (z) income (or loss) of any Person, or attributable to any assets, accrued prior to the date of acquisition of such Person or assets), plus, to the extent deducted in determining such adjusted net income, the aggregate amount of (i) interest expense, (ii) income tax expense, (iii) depreciation, amortization, reserves and other non-cash charges, and (iv) transaction costs incurred in connection with this Agreement, and minus, to the extent included in determining such adjusted net income, the aggregate amount of (1) interest income and (2) income tax benefit.

        "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the Company, the Borrower or Corp., as applicable, in its consolidated financial statements if such statements were prepared as of such date.

        "Corp." means Qwest Corporation, a Colorado corporation, and its successors.

        "Corp. Company" means Corp. or any of its Subsidiaries.

        "Corp. Equity Collateral" has the meaning set forth in the Security and Pledge Agreement.

        "Corp. Qualifying Asset Sale" means any Asset Sale by a Corp. Company (other than a disposition of or by Wireless), except (i) any Asset Sale to any Corp. Company, and (ii) any other single disposition or series of related dispositions resulting in aggregate Net Proceeds not exceeding $100,000,000 for any single disposition or series of related dispositions or $1,000,000,000 in the aggregate.

4

        "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with generally accepted accounting principles, (v) all Debt secured by a Lien on any asset of such Person, whether or not such Debt is otherwise an obligation of such Person, and (vi) all Debt of others Guaranteed by such Person. Notwithstanding the foregoing, for purposes of Section 5.06 Debt shall in no event include the following:

        (x)   Debt of Persons which are not Consolidated Subsidiaries ("Joint Ventures") (i) which is secured by a Lien on the assets or capital stock of a Minor Subsidiary or the equity interests in such Joint Ventures or is Guaranteed by a Minor Subsidiary, which Lien or Guaranty is incurred in connection with the operations of the Company and its Subsidiaries, and (ii) for the payment of which no other recourse may be had to the Company or any of its Subsidiaries;

        (y)   Debt of the Company or the Borrower issued in connection with the issuance of Trust Originated Preferred Securities or substantially similar securities, so long as such Debt is subordinated and junior in right of payment to substantially all liabilities of the Company or the Borrower, as the case may be, including, without limitation, the Loans; and

        (z)   any mandatorily convertible equity-linked securities issued by the Company, so long as any such securities satisfy each of the following conditions: (i) the terms thereof require no repayments or prepayments and no mandatory redemptions or repurchases, in each case prior to the Outside Date in effect as of the date such securities are issued, and (ii) such securities are subordinated and junior in right of payment to all obligations of the Company, as the case may be, for or in respect of borrowed money (unless the instrument governing such obligations expressly provides that such obligations are not senior or superior to such securities or are subordinated or junior in right of payment to them), including, without limitation, to all obligations under the Loan Documents.

        "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.

        "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City, New York or Dallas, Texas are authorized by law to close.

        "Domestic Lending Office" means, as to each Lender, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Lender may hereafter designate as its Domestic Lending Office by notice to the Company and the Administrative Agent.

        "Domestic Loan" means (i) a Loan which bears interest at the Base Rate pursuant to the applicable Notice of Borrowing or Notice of Interest Rate Election or the provisions of Article 8 or (ii) an overdue amount which was a Domestic Loan immediately before it became overdue.

        "Eligible Assignee" means a Lender; a Lender Affiliate; and any other Person approved pursuant to Section 10.06(c).

        "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to the environment, the effect of the environment on human health or to emissions, discharges or releases of pollutants, contaminants, Hazardous Substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture,

5

processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, Hazardous Substances or wastes or the clean-up or other remediation thereof.

        "Equity Interests" means (i) shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person or (ii) any warrants, options or other rights to acquire such shares or interests.

        "Equity/Income Basket" means, on any date, the cumulative sum as of such date of (i) the Net Proceeds of issuances after the Closing Date by the Company of common stock and preferred stock (other than Mandatorily Redeemable Equity)(including the principal amount of Debt and Mandatorily Redeemable Equity converted to common stock of the Company when converted) and (ii) consolidated net income of the Company for the period starting January 1, 2004 and ending on the last day of the fiscal quarter of the Company most recently ended on or prior to such date (calculated as a single accounting period).

        "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute.

        "ERISA Group" means the Company, any Subsidiary and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Company or any Subsidiary, are treated as a single employer under Section 414 of the Internal Revenue Code.

        "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London.

        "Euro-Dollar Lending Office" means, as to each Lender, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Lender as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Company and the Administrative Agent.

        "Euro-Dollar Loan" means (i) a Loan which bears interest at a Euro-Dollar Rate pursuant to the applicable Notice of Borrowing or Notice of Interest Rate Election or (ii) an overdue amount which was a Euro-Dollar Loan before it became overdue.

        "Euro-Dollar Rate" means a rate of interest determined pursuant to Section 2.06 on the basis of an Adjusted London Interbank Offered Rate.

        "Euro-Dollar Reserve Percentage" has the meaning set forth in Section 2.06.

        "Event of Default" has the meaning set forth in Section 6.01.

        "Existing Credit Agreement" means the Second Amended and Restated Credit Agreement dated as of May 4, 2001, amended and restated as of March 12, 2002, further amended and restated as of August 30, 2002, and further amended by Amendments Nos. 1 and 2 thereto among the Borrower, the Company, QwestDex, QwestDex Inc., the banks party thereto and Bank of America, N.A., as Administrative Agent.

        "Existing Debt" means Debt of the Company or any Subsidiary existing on the Closing Date, as in effect on the Closing Date and listed in Schedule 5.12.

        "Existing Notes" means, collectively, the QCII Notes Issued 1998 and the QSC Notes Issued 2002.

        "Facility Liens" has the meaning set forth in Section 5.07(i).

6

        "Federal Funds Rate" means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Bank of America, N.A., on such day on such transactions as determined by the Administrative Agent.

        "Foreign Subsidiary" means any Subsidiary of the Borrower (other than a Corp. Company) that is not incorporated or organized in the United States or any State thereof.

        "Group of Loans" means at any time a group of Loans consisting of (i) all Loans which are Domestic Loans at such time or (ii) all Loans which are Euro-Dollar Loans having the same Interest Period at such time; provided that, if a Loan of any particular Lender is converted to or made as a Domestic Loan pursuant to Section 8.02 or 8.05, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been in if it had not been so converted or made.

        "Guaranteed Obligations" means, with respect to the Guarantor, all advances to, and debts, liabilities (including without limitation the Loans), obligations, covenants and duties of, the Borrower, arising under any Loan Document, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after, or would accrue but for, the commencement of an insolvency proceeding, whether or not allowed or allowable in such proceeding.

        "Guarantor" means the Company.

        "Guaranty" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guaranty shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning.

        "Hazardous Substances" means any toxic, radioactive, caustic or otherwise hazardous substance, including petroleum, its derivatives, by-products and other hydrocarbons, or any substance having any constituent elements displaying any of the foregoing characteristics.

        "Indemnitee" has the meaning set forth in Section 10.03(b).

        "Instrument" has the meaning set forth in the Security and Pledge Agreement.

        "Interest Period" means, with respect to each Euro-Dollar Loan, a period commencing on the date of borrowing specified in the applicable Notice of Borrowing or the date specified in the applicable Notice of Interest Rate Election and ending one, two, three, six or (if requested by the

7

Borrower and consented to by all the applicable Lenders) twelve months thereafter, as the Borrower may elect in the applicable notice; provided that:

        (a)   any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day;

        (b)   any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and

        (c)   any Interest Period beginning prior to the Revolver Maturity Date (in the case of any Revolver Loan) or the Term Maturity Date (in the case of any Term Loan) which would otherwise end after such date shall end on such date.

        "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute.

        "Legal Matter Costs" means any liability with respect to (i) any judgments, fines, levies, settlement or other payments made or agreed to be made in connection with any agreements with, or judgments sought or obtained by, any governmental agency or regulator, including but not limited to the United States Department of Justice, the Securities and Exchange Commission and any other federal or state enforcement agencies or regulators, with respect to the Pending Matters, or (ii) any payments made or agreed to be made in satisfaction of any civil judgments or awards obtained by a private plaintiff or class thereof, including any award of attorneys' fees and/or costs, with respect to the Pending Matters, or any settlement payments made to a private plaintiff or class thereof that settle, compromise and/or terminate any legal proceeding based upon any Pending Matters.

        "Lender" means a Revolver Lender or a Term Lender.

        "Lender Affiliate" means, (a) with respect to any Lender, (i) an Affiliate of such Lender or (ii) an entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or an Affiliate of such Lender and (b) with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed by the same investment advisor as such Lender or by an affiliate of such investment advisor.

        "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, or any other type of preferential arrangement that has the practical effect of creating a security interest, in respect of such asset. For the purposes of this Agreement, the Company or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset.

        "Loan" means a Revolver Loan or a Term Loan; provided that if any such loan or loans are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be.

        "Loan Documents" means this Agreement, the Notes and the Collateral Documents.

        "Loan Party" means the Company and the Borrower.

        "London Interbank Offered Rate" has the meaning set forth in Section 2.06.

8

        "Mandatorily Redeemable Equity" of any Person means Equity Interests of such Person which are subject to redemption, repurchase or retirement prior to the date that falls 90 days after the Revolver Maturity Date other than at the sole option of such Person.

        "Mandatory Reduction Period" means the period from and including the Closing Date to but excluding the date on which a certificate is delivered pursuant to Section 5.01(c) establishing that the Company Consolidated Leverage Ratio, determined as of the end of the most recently ended fiscal quarter of the Company, is 3.5:1 or less.

        "Margin Stock" means "margin stock" as such term is defined in Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time.

        "Material Adverse Change" means a material adverse change in the financial condition or results of operations of the Company and its Subsidiaries, taken as a whole.

        "Material Debt" means Debt (other than the Loans) of the Company and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, in an aggregate principal amount exceeding $100,000,000.

        "Material Plan" means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $100,000,000.

        "Maximum Amount" means $1,750,000,000.

        "Minor Subsidiary" means, for purposes of the last sentence of the definition of Debt and of Section 5.07(f) (the "Relevant Provisions"), any Subsidiary (other than the Borrower or Wireless) which, at the time of the issuance of a Guaranty or grant of a Lien referred to in the Relevant Provisions, had assets which, when taken together with all assets of Subsidiaries at any earlier time when such Subsidiaries were deemed to be Minor Subsidiaries pursuant to this definition, did not exceed $250,000,000.

        "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period.

        "Net Proceeds" means, with respect to any event, the cash proceeds received in respect of such event including, without limitation, any cash received in respect of any non-cash proceeds, but only as and when received, in each case net of the sum of (1) all reasonable fees and out-of-pocket costs and expenses paid (or reasonably estimated to be payable) by a Prepayment Party to third parties (other than Affiliates) in connection with such event, (2) in the case of a sale, transfer or other disposition of an asset (including, without limitation, pursuant to a sale and leaseback transaction), the amount of all payments required to be made by a Prepayment Party as a result of such event to repay Debt secured by such asset or otherwise subject to mandatory prepayment as a result of such event (but excluding (x) the Loans and (y) any Debt secured by such asset if such Debt or the Lien securing such Debt is subordinated (or is required to be subordinated) to the Loans, and (3) the amount of all taxes paid (or reasonably estimated to be payable) by a Prepayment Party, the amount of any reserves established by a Prepayment Party to fund contingent liabilities reasonably estimated to be payable and the amount of capital and operating expenditures that would not otherwise have been incurred and are required in writing or by application of policy by a public utility commission to be incurred as a condition to its consent, in each case during the year that such event occurred or the next succeeding year and that are directly attributable to such event (as determined reasonably and in good faith by the chief financial officer, treasurer or assistant treasurer (or any such officer's designee, designated in writing by such officer) of the Company); provided that "Net Proceeds" shall not include (a) any cash payment received

9

by a Prepayment Party and constituting a deposit or advance with respect to an Asset Sale that has not been consummated on or prior to the date of receipt thereof (it being understood that upon consummation of such Asset Sale such cash payment shall constitute "Net Proceeds" with respect thereto) and (b) any cash proceeds received by any Foreign Subsidiary from any Asset Sale to the extent relating to assets held by Foreign Subsidiaries.

        "New Holding Company" means any direct or indirect wholly-owned Subsidiary of the Company (other than the Borrower, any Subsidiary of the Borrower, Capital Funding or any Subsidiary of Capital Funding) created after the Closing Date.

        "New QSC Security and Pledge Agreement" means the Security and Pledge Agreement dated as of February 5, 2004 between QSC and BNY Asset Solutions LLC, as Collateral Agent.

        "Notes" means promissory notes of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loans made to it, and "Note" means any one of such promissory notes issued hereunder.

        "Notice of Borrowing" has the meaning set forth in Section 2.02.

        "Outside Date" means the date that falls 90 days after the later of the Revolver Maturity Date and, if one is in effect, the Term Maturity Date.

        "Outstanding Amount" means with respect to Revolver Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any Revolver Borrowings and prepayments of Revolver Loans occurring on such date.

        "Outstanding UPO" has the meaning set forth in Section 5.12(g).

        "Parent" means, with respect to any Lender, any Person controlling such Lender.

        "Participant" has the meaning set forth in Section 10.06(b).

        "Payments Basket" means, on any date, the sum of (i) the Equity/Income Basket on such date and (ii) $1,400,000,000.

        "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.

        "Pending Matters" means the matters that are specifically identified on Schedule 4.05.

        "Permitted Corp. Exchange Debt" has the meaning set forth in Section 5.12(d).

        "Permitted Investments" means investments in:

        (a)   direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States), in each case maturing within one year from the date of acquisition thereof;

        (b)   commercial paper maturing within one year from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from Standard & Poor's or from Moody's Investors Service, Inc.;

        (c)   certificates of deposit, banker's acceptances and time deposits maturing within one year from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial lender organized under the laws of the United States or any State thereof which has a combined capital and surplus and undivided profits of at least $500,000,000;

10

        (d)   fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above;

        (e)   in the case of any Foreign Subsidiary, (i) marketable direct obligations issued by, or unconditionally guaranteed by, the sovereign nation in which such Person is organized and is conducting business or issued by any agency of such sovereign nation and backed by the full faith and credit of such sovereign nation, in each case maturing within one year from the date of acquisition, so long as the indebtedness of such sovereign nation is rated at least A by Standard & Poor's, A2 by Moody's Investors Service, Inc. or A mid by Dominion Bond Rating Service Limited or carries an equivalent rating from a comparable foreign rating agency or (ii) investments of the type and maturity described in clauses (b) through (d) above of foreign obligors, which investments or obligors have ratings described in such clauses or equivalent ratings from comparable foreign rating agencies; and

        (f)    any other Investments made in compliance with the Cash Management Investment Policy of the cash management group of the Borrower with respect to cash investments, substantially as in effect on the Closing Date.

        "Permitted Non-Corp. Exchange Debt" has the meaning set forth in Section 5.12(c).

        "Permitted Payments" means, on any date, the sum of all Restricted Payments made in reliance on Section 5.10(a)(iv), payments made in reliance on Section 5.10(b)(viii) and investments made in reliance on Section 5.13(m).

        "Permitted Purchase Money Debt" has the meaning set forth in Section 5.12(m).

        "Permitted QCII/ QCF Unsecured Debt" has the meaning set forth in Section 5.12(h)(i).

        "Permitted QSC Junior Lien Debt" has the meaning set forth in Section 5.12(i).

        "Permitted QSC Senior Secured Debt" has the meaning set forth in Section 5.12(k).

        "Permitted QSC Senior Unsecured Debt" has the meaning set forth in Section 5.12(j).

        "Permitted QSC Subordinated Unsecured Debt" has the meaning set forth in Section 5.12(h)(ii).

        "Permitted QSC Subsidiary Debt" has the meaning set forth in Section 5.12(l).

        "Permitted UPO Retirement Debt" has the meaning set forth in Section 5.12(g).

        "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

        "Plan" means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group.

        "Prepayment Party" means the Company, the Borrower or any of their respective Subsidiaries.

        "Prime Rate" means the rate of interest publicly announced by Bank of America, N.A., from time to time as its Prime Rate.

11

        "Pro Rata Share" means, with respect to each Revolver Lender at any time, a fraction (expressed as a percentage, carried out to the ninth decimal place), the numerator of which is the amount of the Commitment of such Revolver Lender at such time and the denominator of which is the amount of the Aggregate Commitments at such time; provided that if the commitment of each Revolver Lender to make Loans has been terminated pursuant to Section 6.01, then the Pro Rata Share of each Revolver Lender shall be determined based on the Pro Rata Share of such Revolver Lender immediately prior to such termination and after giving effect to any subsequent assignments made pursuant to the terms hereof. The initial Pro Rata Share of each Revolver Lender is set forth opposite the name of such Revolver Lender on the Commitment Schedule or in the Assignment and Assumption pursuant to which such Revolver Lender becomes a party hereto, as applicable.

        "Purchase Money Debt" means Debt of any Person incurred for the purpose of financing all or any part of the cost of the acquisition of any asset by such Person, so long as the proceeds of any such Debt are applied by such Person upon receipt thereof (and in any event within ten (10) Business Days after receipt thereof) to acquire such asset.

        "Purchase Money Obligor" has the meaning set forth in Section 5.07(c).

        "QCC" means Qwest Communications Corporation, a Delaware corporation, and its successors.

        "QCC 2007 Notes" means those certain notes issued by QCC under an Indenture dated June 23, 1997, between QCC and First Trust National Association, as Trustee.

        "QCII Notes Issued 1998" means the "Existing 2008 Notes" (as defined in the QSC Notes Security and Pledge Agreement).

        "QSC Notes Indenture" means the indenture dated December 26, 2002 between the Borrower, the guarantors named therein and Bank One Trust Company, N.A., as Trustee.

        "QSC Notes Issued 2002" means the notes issued by the Borrower pursuant to the QSC Notes Indenture.

        "QSC Notes Security and Pledge Agreement" means the Security and Pledge Agreement dated December 26, 2002, between the Borrower and BNY Asset Solutions LLC, as successor to Bank of America, N.A. as Collateral Agent.

        "Qualifying Terms" means, with respect to any Debt, each of the following terms: (i) such Debt does not mature prior to the Outside Date in effect as of the date such Debt is incurred, (ii) no payments with respect to such Debt (including without limitation scheduled amortization payments and mandatory prepayments) are required to be made prior to the Outside Date in effect as of the date such Debt is incurred (other than regularly scheduled interest payments with respect thereto), (iii) the terms and conditions governing such Debt (including without limitation covenants and events of default) are no more restrictive in any material respect than the terms and conditions applicable to the Loans and (iv) such Debt is subordinated to the Loans (or the Guaranty thereof pursuant to Article 9, as applicable) in an insolvency proceeding to the prior payment in full of the Loans (or the payment in full of the Guaranty of the Loans, as the case may be) and is otherwise subordinated to the Loans (or to the Guaranty thereof pursuant to Article 9, as applicable), pursuant to subordination arrangements reasonably satisfactory to the Administrative Agent.

        "QwestDex" means Qwest Dex Holdings, Inc., a Delaware corporation, and its successors.

        "QwestDex Company" means QwestDex or any of its Subsidiaries.

        "QwestDex Inc." means Qwest Dex, Inc., a Colorado corporation, and its successors.

"Qwest Entity" has the meaning set forth in Section 7.02.

        "Required Lenders" means at any time the Lenders holding a majority of the Total Exposure.

12

        "Required Revolver Lenders" means at any time the Revolver Lenders holding a majority of the Aggregate Commitments, if any Commitments are still in existence, or the Revolver Outstandings, if all the Commitments have been terminated.

        "Restricted Payment" means any dividend or other distribution (whether in cash, securities or other property, including without limitation pursuant to a "spin-off" or other distribution to equity holders generally) with respect to any Equity Interest of the Company or any of its Subsidiaries, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interest.

        "Revolver Credit Period" means the period from and including the Closing Date to but excluding the Revolver Maturity Date.

        "Revolver Lenders" means each lender listed on the signature pages hereof, each lender executing a joinder agreement pursuant to Section 2.15(a), each Assignee which becomes a Revolver Lender pursuant to Section 10.06(c), and their respective successors.

        "Revolver Lender Obligations" has the meaning set forth in the Security and Pledge Agreement.

        "Revolver Loan" means a loan made or to be made by a Revolver Lender pursuant to Section 2.01(a).

        "Revolver Maturity Date" means February 5, 2007, or, if such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day.

        "Revolver Outstandings" means the aggregate Outstanding Amount of all Revolver Loans.

        "Revolver Portion" means on any date, prior to giving effect to any mandatory Commitment reduction or mandatory prepayment on such date, a fraction (expressed as a percentage, carried out to the ninth decimal place), the numerator of which is the Aggregate Commitments on such date and the denominator of which is the sum of the Total Exposure and the aggregate principal and face amount of Permitted QSC Senior Secured Debt then outstanding which, by its terms, is required to share in such reduction or prepayment.

        "Revolver Replacement Debt" means Debt of the Company or any of its Subsidiaries prior to or concurrently with the incurrence of which the Borrower permanently reduces the Commitments in an amount equal to the aggregate principal amount of such Debt.

        "Security and Pledge Agreement" means the Security and Pledge Agreement, substantially in the form of Exhibit B, dated as of the Closing Date among the Borrower and the Collateral Agent, as amended from time to time.

        "Significant Subsidiary" means any Subsidiary which would meet the definition of "significant subsidiary" contained as of the date hereof in Regulation S-X of the Securities and Exchange Commission.

        "Subject Debt" means (i) Existing Debt (other any Debt of Corp. and its Subsidiaries) and (ii) Permitted Non-Corp. Exchange Debt, Permitted QCII/QCF Unsecured Debt, Permitted QSC Junior Lien Debt, Permitted QSC Subordinated Unsecured Debt and Permitted UPO Retirement Debt.

        "Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Company.

        "Super-Majority Lenders" means at any time Lenders having at least 85% of the Total Exposure.

13

        "Term Lender" means each lender executing the Term Loan Addendum pursuant Section 2.15(d), each Assignee which becomes a Term Lender pursuant to Section 10.06(c), and their respective successors.

        "Term Loan Addendum" means the Term Loan Addendum substantially in the form of Exhibit C.

        "Term Loan" means a loan made or to be made by a Lender pursuant to Section 2.01(b).

        "Term Maturity Date" means the "Term Maturity Date" set forth in the Term Loan Addendum.

        "Term Outstandings" means with respect to Term Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any prepayments of Term Loans on such date.

        "Term Portion" means on any date, prior to giving effect to any mandatory Commitment reduction or mandatory prepayment on such date, a fraction (expressed as a percentage, carried out to the ninth decimal place), the numerator of which is the Term Outstandings on such date and the denominator of which is the sum of the Total Exposure and the aggregate principal and face amount of Permitted QSC Senior Secured Debt then outstanding which, by its terms, is required to share in such reduction or prepayment.

        "Term Secured Obligations" has the meaning set forth in the Security and Pledge Agreement.

        "Total Exposure" means, at any time, the sum of (i) the Aggregate Commitments, if any Commitments are still in existence, or the Revolver Outstandings, if all the Commitments have been terminated and (ii) the Term Outstandings.

        "Total Outstandings" means, at any time, the sum of the Revolver Outstandings and the Term Outstandings.

        "Unsubordinated Qualifying Terms" means, with respect to any Debt, each of the following terms: (i) such Debt does not mature prior to the date that falls 90 days after the Revolver Maturity Date, and (ii) no payments with respect to such Debt (including without limitation scheduled amortization payments and mandatory prepayments) are required to be made prior to the date that falls 90 days after the Revolver Maturity Date (other than regularly scheduled interest payments with respect thereto and scheduled amortization payments not to exceed 1% of the principal amount of such Debt in any year).

        "Unused Commitments" means on any day the amount, if any, by which the Aggregate Commitments exceed the Revolver Outstandings.

        "Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the value of all benefit liabilities under such Plan, determined on a plan termination basis using the assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value of all Plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA.

        "United States" means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions.

        "Wireless" means Qwest Wireless LLC, a Delaware limited liability company, and its successors.

        "Wireless Assets" means any Equity Interests in Wireless and any assets held by Wireless.

        "Wireless/Borrower Debt" has the meaning set forth in Section 5.12(e).

        "Wireless Intercompany Debt" has the meaning set forth in Section 5.12(e).

14

        "Wireless Note" means the $1,794,210,000 Loan Agreement dated as of January 8, 2004, governing loans from Capital Funding to Wireless and the Debt outstanding thereunder.

        Section 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time in the United States, applied on a basis consistent (except for changes concurred in by the Company's independent public accountants) with the most recent audited consolidated financial statements of the Company and its Consolidated Subsidiaries or Corp. and its Consolidated Subsidiaries, as the case may be, in each case delivered to the Lenders; provided that, if the Company notifies the Administrative Agent that the Company wishes to amend any covenant in Article 5 to eliminate the effect of any change in such generally accepted accounting principles on the operation of such covenant (or if the Administrative Agent notifies the Company that the Required Lenders wish to amend Article 5 for such purpose), then compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect in the United States immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Company and the Required Lenders.

        Section 1.03. Types and Tranches of Borrowings of Loans. The term "Borrowing" denotes the aggregation of Loans of one or more Lenders to be made to the Borrower or converted or continued, pursuant to Article 2 on a single date, all of which Loans are of the same type and tranche (subject to Article 8) and, except in the case of Domestic Loans, have the same Interest Period or initial Interest Period. Borrowings are classified for purposes of this Agreement and referred to by reference to the type (e.g., a "Euro-Dollar Borrowing" or a "Domestic Borrowing") or tranche (e.g., a "Revolver Borrowing" or a "Term Borrowing") of Loans comprising such Borrowing. Loans are classified for purposes of this Agreement and referred to by reference to type (e.g., a "Euro-Dollar Loan") or by tranche (e.g., a "Revolver Loan") or by type and tranche (e.g., a "Euro-Dollar Revolver Loan" or a "Domestic Revolver Loan").

ARTICLE 2
The Credits

        Section 2.01. Commitments to Lend. (a) Revolver Loans. During the Revolver Credit Period each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make loans to the Borrower from time to time in amounts such that such Lender's Pro Rata Share of the Revolver Outstandings shall not exceed the amount of its Commitment. Each Borrowing under this Section shall be in an aggregate principal amount of $25,000,000 or any larger multiple of $5,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.03(c)) and shall be made from each Lender in accordance with its Pro Rata Share. Within the foregoing limits, the Borrower may borrow, repay, or to the extent permitted by Section 2.10, prepay Loans and reborrow at any time prior to the Revolver Maturity Date. The Commitments shall terminate at the close of business on the Revolver Maturity Date.

        (b)   Term Loans. Each Term Lender severally agrees, on the terms and conditions set forth in this Agreement and in the Term Loan Addendum, to make Term Loans in the amounts and on the date set forth in the Term Loan Addendum to the Borrower.

        Section 2.02. Notice of Borrowing. The Borrower shall give the Administrative Agent notice, substantially in the form of Exhibit F (a "Notice of Borrowing"), not later than 10:30 A.M. (New York City time) on (x) the date of each Domestic Borrowing, and (y) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing; provided that if the Borrower wishes to request a Euro-Dollar Borrowing having an Interest Period twelve months in duration as provided in the definition of

15

"Interest Period", the applicable notice must be received by the Administrative Agent not later than 11:00 A.M. four Euro-Dollar Business Days prior to the requested date of such Borrowing, whereupon the Administrative Agent shall give prompt notice to the Lenders of such request and determine whether the requested Interest Period is acceptable to all of them. Not later than 11:00 A.M., three Business Days before the requested date of such Borrowing, the Administrative Agent shall notify the Borrower (which notice may be by telephone) whether or not the requested Interest Period has been consented to by all the Lenders. Each Notice of Borrowing shall specify:

        (i)    the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing,

        (ii)   the aggregate amount of Loans comprising such Borrowing and whether they are Revolver Loans or Term Loans,

        (iii)  whether the Loans comprising such Borrowing bear interest initially at the Base Rate or at a Euro-Dollar Rate, and

        (iv)  in the case of a Euro-Dollar Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period.

        Section 2.03. Notice to Lenders; Funding of Loans. (a) Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly notify each Revolver Lender or Term Lender, as applicable, of the contents thereof and of such Lender's share of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower.

        (b)   Not later than 1:00 P.M. (New York City time) on the date of each Borrowing, each Lender shall (except as provided in subsection (c) of this Section) make available its share of such Borrowing, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address referred to in Section 10.01. Unless any applicable condition specified in Article 3 has not been satisfied, as determined by the Administrative Agent in accordance with Article 3, the Administrative Agent will make the funds so received from the Lenders immediately available to the Borrower at the Administrative Agent's aforesaid address.

        (c)   If any Lender makes a new Loan hereunder on a day on which the Borrower is to repay all or any part of an outstanding Loan from such Lender, such Lender shall apply the proceeds of its new Loan to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed by the Borrower and the amount being repaid shall be made available by such Lender to the Administrative Agent as provided in subsection (b) of this Section, or remitted by the Borrower to the Administrative Agent as provided in Section 2.11, as the case may be.

        (d)   Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing (or, in the case of a Base Rate Borrowing, prior to Noon (New York City time) on the date of such Borrowing) that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available to the Administrative Agent on the date of such Borrowing in accordance with subsections (b) and (c) of this Section 2.03 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such share available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.06 and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's Loan included in such Borrowing for

16

purposes of this Agreement. If the Borrower shall have repaid such corresponding amount of such Lender, such Lender shall reimburse the Borrower for any loss on account thereof incurred by the Borrower. Nothing contained in the foregoing shall be construed as relieving a Lender of its obligation to fund a Loan when required under the terms of this Agreement.

        Section 2.04. Evidence of Debt. The Loans made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Loans made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower to pay any amount owing with respect to its obligations under the Loan Documents. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. Upon the request of any Lender made through the Administrative Agent, the Borrower shall execute and deliver to such Lender (through the Administrative Agent) a Note, which shall evidence such Lender's Loans in addition to such accounts or records. Each Lender may attach schedules to its Note and endorse thereon the date, type, tranche, amount and maturity of its Loans and payments with respect thereto.

        Section 2.05. Maturity of Loans. Each Revolver Loan shall mature, and the principal amount thereof shall be due and payable, together with accrued interest thereon, on the Revolver Maturity Date. Each Term Loan shall mature, and the principal amount thereof shall be due and payable, together with accrued interest thereon, on the Term Maturity Date.

        Section 2.06. Interest Rates. (a) Each Domestic Revolver Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the sum of the Applicable Margin plus the Base Rate for such day. Such interest shall be payable quarterly in arrears on the last day of each calendar quarter and, with respect to the principal amount of any Domestic Revolver Loan converted to a Euro-Dollar Loan, on each date a Domestic Revolver Loan is so converted. Any overdue principal of or interest on any Domestic Revolver Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the rate otherwise applicable to Domestic Revolver Loans for such day.

        (b)   Each Euro-Dollar Revolver Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the Applicable Margin plus the applicable Adjusted London Interbank Offered Rate. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof.

        The "Adjusted London Interbank Offered Rate" applicable to any Interest Period means a rate per annum equal to the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage.

        The "London Interbank Offered Rate" applicable to any Interest Period means:

        (i)    the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate that appears on the page of the Telerate screen (or any successor thereto) that displays an average British Bankers Association Interest Settlement Rate for deposits in dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 A.M. (London time) two Euro-Dollar Business Days prior to the first day of such Interest Period, or

17

        (ii)   if the rate referenced in the preceding clause (i) does not appear on such page or service or such page or service shall cease to be available, the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 A.M. (London time) two Euro-Dollar Business Days prior to the first day of such Interest Period, or

        (iii)  if the rates referenced in the preceding clauses (i) and (ii) are not available, the rate per annum determined by the Administrative Agent as the rate of interest at which deposits in dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Euro-Dollar Loan being made, continued or converted by Bank of America, N.A., and with a term equivalent to such Interest Period, would be offered by Bank of America, N.A.'s London Branch to major banks in the London interbank eurodollar market at their request at approximately 4:00 P.M. (London time) two Euro-Dollar Business Days prior to the first day of such Interest Period.

        "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Lender to United States residents). The Adjusted London Interbank Offered Rate shall be adjusted automatically on and as of the effective date of any change in the Euro-Dollar Reserve Percentage.

        (c)   Any overdue principal of or interest on any Euro-Dollar Revolver Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 2% plus the higher of (i) the Applicable Margin plus the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (x) the rate per annum at which one day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such other period of time not longer than six months as the Administrative Agent may select) deposits in dollars in an amount approximately equal to such overdue payment due to Bank of America, N.A. are offered to Bank of America, N.A., in the London interbank market for the applicable period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the circumstances described in clause (a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of 2% plus the rate applicable to Domestic Loans for such day) and (ii) the sum of the Applicable Margin plus the Adjusted London Interbank Offered Rate applicable to such Loan at the date such payment was due.

        (d)   Each Term Loan shall bear interest on the outstanding principal amount thereof from the date such Term Loan is made until it becomes due at the rate or rates per annum provided in the Term Loan Addendum and such interest shall be payable on the dates set forth in the Term Loan Addendum.

        (e)   The Administrative Agent shall determine each interest rate applicable to the Loans hereunder. The Administrative Agent shall give prompt notice to the Borrower and the Lenders of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error.

        Section 2.07. Commitment Fees. (a) The Company shall pay to the Administrative Agent for the account of each Revolver Lender in accordance with its Pro Rata Share a commitment fee at a rate per annum equal to the Applicable Margin. Such commitment fee shall accrue from and including the

18

Closing Date to but excluding the Revolver Maturity Date (or earlier date of termination of the Commitments in their entirety), on the actual daily amount of the Unused Commitments, and shall be payable quarterly in arrears on the last day of each calendar quarter and upon the date of termination of the Commitments in their entirety.

        (b)   The Company shall pay to the Administrative Agent for the account of each Term Lender such fees in such amounts and at such times as shall be set forth in the Term Loan Addendum.

        Section 2.08. Termination or Reduction of Commitments; Scheduled Amortization of Term Loans. (a) Optional Reductions. During the Revolver Credit Period, the Company may, upon at least three Domestic Business Days' notice to the Administrative Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time or (ii) ratably reduce from time to time by an aggregate amount of $25,000,000 or any larger multiple of $5,000,000, the Aggregate Commitments in excess of the Revolver Outstandings.

        (b)   Scheduled Amortization of Term Loans. The Borrower shall repay the Term Loans in accordance with the amortization schedule set forth in the Term Loan Addendum.

        Section 2.09. Method of Electing Interest Rates. (a) The Loans included in each Borrowing shall bear interest initially at the type of rate specified by the Borrower in the applicable Notice of Borrowing. Thereafter, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject in each case to the provisions of Article 8), as follows:

        (i)    if such Loans are Domestic Loans, the Borrower may elect to convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day; and

        (ii)   if such Loans are Euro-Dollar Loans, the Borrower may elect to convert such Loans to Domestic Loans or elect to continue such Loans as Euro-Dollar Loans for an additional Interest Period, in each case effective on the last day of the then current Interest Period applicable to such Loans.

Each such election shall be made by delivering a notice (a "Notice of Interest Rate Election") to the Administrative Agent at least three Euro-Dollar Business Days (or, if the Borrower wishes to request an Interest Period of twelve months, four Euro-Dollar Business Days, subject to the notice and consent conditions set forth in Section 2.02) before the conversion or continuation selected in such notice is to be effective. A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans; provided that (i) such portion is allocated ratably among the Loans comprising such Group and (ii) the portion to which such Notice applies, and the remaining portion to which it does not apply, are each $25,000,000 or any larger multiple of $5,000,000.

        (b)   Each Notice of Interest Rate Election shall specify:

        (i)    the Group of Loans (or portion thereof) to which such notice applies;

        (ii)   the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of subsection (a) above;

        (iii)  if the Loans comprising such Group are to be converted, the new type of Loans and, if such new Loans are Euro-Dollar Loans, the duration of the initial Interest Period applicable thereto; and

        (iv)  if such Loans are to be continued as Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period.

19

Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of Interest Period.

        (c)   Upon receipt of a Notice of Interest Rate Election from the Borrower pursuant to subsection (a) above, the Administrative Agent shall promptly notify each Lender of the contents thereof and such notice shall not thereafter be revocable by the Borrower. If the Borrower fails to deliver a timely Notice of Interest Rate Election to the Administrative Agent for any Group of Euro-Dollar Loans, such Loans shall be converted into Domestic Loans on the last day of the then current Interest Period applicable thereto.

        Section 2.10. Prepayments.

        (a)   Subject in the case of any Euro-Dollar Loans to Section 2.12, the Borrower may, upon at least one Domestic Business Day's notice to the Administrative Agent, prepay the Group of Domestic Revolver Loans, or, upon three Euro-Dollar Business Days' notice to the Administrative Agent, prepay any Group of Euro-Dollar Revolver Loans, in each case in whole at any time, or from time to time in part in amounts aggregating $25,000,000 or any larger multiple of $5,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment.

        (b)   Upon receipt of a notice of prepayment pursuant to this Section or Section 5.08(d) or the Term Loan Addendum, the Administrative Agent shall promptly notify each applicable Lender of the contents thereof and of such Lender's ratable share of such prepayment and such notice shall not thereafter be revocable by the Borrower or the Company. Each such prepayment shall be applied to prepay ratably the Loans of the several Lenders included in the relevant Group or Borrowing.

        (c)   On the date of any reduction of Commitments pursuant to Section 2.08, the Borrower shall repay such principal amount (together with accrued interest thereon) of outstanding Revolver Loans in an aggregate amount equal to the amount, if any, by which the Revolver Outstandings exceed the Aggregate Commitments as then reduced. Each prepayment of the Revolver Loans pursuant to this subsection (c) shall be applied to prepay ratably the Revolver Loans of all the Revolver Lenders, and shall be applied to prepay such Group or Groups of Loans as shall have been designated in the applicable notice (or, if no such designation shall have been made, as the Administrative Agent shall select in its discretion).

        Section 2.11. General Provisions as to Payments. (a) The Borrower shall make each payment of principal of, and interest on, the Loans and of fees and other amounts payable hereunder, not later than 12:00 Noon (New York City time) on the date when due, in Federal or other funds immediately available in New York City, without off set or counterclaim, to the Administrative Agent at its address referred to in Section 10.01. The Administrative Agent will promptly distribute to each Lender its ratable share of each such payment received by the Administrative Agent for the account of the Lenders. Whenever any payment of principal of, or interest on, the Domestic Loans or of fees or other amounts payable hereunder shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day.

        (b)   Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due from the Borrower to the Lenders hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent that the Borrower shall not have so

20

made such payment, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at the Federal Funds Rate.

        Section 2.12. Funding Losses. If the Borrower makes any payment of principal with respect to any Euro-Dollar Loan or any Euro-Dollar Loan is converted to a Domestic Loan (pursuant to Articles 2, 6 or 8 or otherwise) on any day other than the last day of an Interest Period applicable thereto, or the last day of an applicable period fixed pursuant to Section 2.06(c), or if the Borrower fails to borrow, convert, continue or prepay any Euro-Dollar Loans after notice has been given to any Lender in accordance with Sections 2.10(a) or 5.08(d), the Company shall reimburse each Lender within 15 days after written demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or conversion or failure to borrow or prepay, provided that such Lender shall have delivered to the Company a certificate as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. Any Lender requesting compensation pursuant to this Section 2.12 shall notify the Borrower of such request on or before the date that is three Euro-Dollar Business Days after the event giving rise to such request.

        Section 2.13. Computation of Interest and Fees. Interest based on the Prime Rate hereunder and commitment fees hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees hereunder shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day).

        Section 2.14. Change of Control. If a Change of Control shall occur, the Company will, within ten days after the occurrence thereof, give each Lender notice thereof, which notice shall describe in reasonable detail the facts and circumstances giving rise thereto and shall specify an Optional Termination Date for purposes of this Section (the "Optional Termination Date") which date shall not be less than 30 nor more than 60 days after the date of such notice. Each Lender may, by notice to the Company and the Administrative Agent given not less than three Domestic Business Days prior to the Optional Termination Date, terminate its Commitment (if any), which shall thereupon be terminated, and declare the Note held by it (together with accrued interest thereon) and any other amounts payable hereunder for its account to be, and such Note and such other amounts shall thereupon become, due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company and the Borrower, in each case effective on the Optional Termination Date.

        A "Change of Control" shall occur if any person or group of persons (within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended), other than Philip F. Anschutz, Anschutz Company or any of their Affiliates, obtain ownership or control (whether in one transaction or one or more series of transactions) of more than 50% of the outstanding shares of common stock of the Company or of the shares of the Company entitled to vote on the election of members of the board of directors of the Company or if a change of control event shall occur under any agreement or instrument evidencing any Material Debt.

21

        Section 2.15. Increase In Commitments; New Term Tranche.

        (a)   Provided there exists no Default, upon notice to the Administrative Agent (which shall promptly notify the Revolver Lenders), the Borrower may from time to time, request an increase in the Aggregate Commitments in an amount equal to the lesser of $50,000,000 and the Available Increase Amount. At the time of sending such notice, the Borrower (in consultation with the Administrative Agent) shall specify the time period within which each Revolver Lender is requested to respond (which shall in no event be less than ten Domestic Business Days from the date of delivery of such notice to the Revolver Lenders). Each Revolver Lender shall notify the Administrative Agent within such time period whether or not it agrees to increase its Commitment and, if so, whether by an amount equal to, greater than, or less than its Pro Rata Share of such requested increase. Any Revolver Lender not responding within such time period shall be deemed to have declined to increase its Commitment. The Administrative Agent shall notify the Borrower and each Revolver Lender of the Lenders' responses to each request made hereunder. To achieve the full amount of a requested increase, the Borrower may also invite additional Eligible Assignees to become Lenders pursuant to a joinder agreement in form and substance reasonably satisfactory to the Administrative Agent.

        (b)   If the Aggregate Commitments are increased in accordance with this Section, the Administrative Agent and the Borrower shall determine the effective date (the "Increase Effective Date") and the final allocation of such increase. The Administrative Agent shall promptly notify the Borrower and the Revolver Lenders of the final allocation of such increase and the Increase Effective Date. As a condition precedent to such increase, the Borrower shall deliver to the Administrative Agent a certificate of each Loan Party dated as of the Increase Effective Date (in sufficient copies for each Revolver Lender) signed by the chief financial officer, treasurer or assistant treasurer (or any such officer's designee, designated in writing by such officer) of such Loan Party (i) certifying and attaching the resolutions adopted by such Loan Party approving or consenting to such increase and (ii) in the case of the Company and the Borrower, certifying that, before and after giving effect to such increase, (A) the representations and warranties contained in Article 4 and the other Loan Documents are true and correct (or, with respect to any representation or warranty which is not qualified by materiality or material adverse effect, shall be true in all material respects) on and as of the Increase Effective Date except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, (B) no Default exists and (C) the sum of the Aggregate Commitments and the Outstanding Amount of the Term Loans does not exceed the Maximum Amount. The Borrower shall prepay any Revolver Loans outstanding on the Increase Effective Date (and pay any additional amounts required pursuant to Section 2.12) to the extent necessary to keep the outstanding Revolver Loans ratable with any revised Pro Rata Shares arising from any nonratable increase in the Commitments under this Section.

        (c)   This Section shall supersede any provisions in Sections 10.04 or 10.05 to the contrary.

        (d)   At any one time during the Revolver Credit Period, the Borrower may arrange for any one or more Lenders or other financial institutions (approved by the Administrative Agent, acting in its reasonable discretion) to provide Term Loans on the terms hereof, as supplemented by a Term Loan Addendum; provided that (i) immediately after giving effect to the Term Borrowing in the aggregate principal amount permitted under the Term Loan Addendum, the Total Exposure shall not exceed the Maximum Amount; (ii) as of the date of the Term Loan Addendum, the incurrence of the additional Debt in the form of Term Loans in the aggregate principal amount permitted under the Term Loan Addendum and the Liens securing such Term Loans under the Collateral Documents are permitted under each then outstanding indenture of the Company and its Subsidiaries; (iii) the Term Maturity Date shall not be prior to the Revolver Maturity Date; and (iv) if, pursuant to the Term Loan Addendum any scheduled amortizations of the Term Loans during a calendar year will exceed 1% of the Term Outstandings in such year, such scheduled amortizations shall have been approved by the Administrative Agent. Upon execution and delivery by the Company, the Borrower, the Administrative

22

Agent and each Lender or other financial institution party thereto of the Term Loan Addendum, each such Lender or other financial institution shall be a "Term Lender" for all purposes hereunder with all rights and obligations of a Term Lender hereunder and the Term Loans made pursuant to such Term Loan Addendum shall be "Term Loans" for all purposes hereunder.

ARTICLE 3
Conditions

        Section 3.01. Closing. The closing hereunder shall occur upon receipt by the Administrative Agent (or its counsel) of the following (in the case of any document, dated the Closing Date unless otherwise indicated):

        (a)   duly executed counterparts hereof signed by each of the Borrower, the Guarantor, the Revolver Lenders and the Administrative Agent (or, in the case of any party as to which an executed counterpart shall not have been received, written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page) that such party has signed a counterpart hereof);

        (b)   a duly executed Note for the account of each Revolver Lender requesting a Note, dated on or before the Closing Date;

        (c)   (i) duly executed counterparts of the Security and Pledge Agreement and (ii) evidence satisfactory to the Administrative Agent that the Collateral and Guaranty Requirement shall have been satisfied;

        (d)   opinions of John K. Lines, associate general counsel of the Company and the Borrower, O'Melveny & Myers LLP, special counsel to the Loan Parties, Gibson, Dunn & Crutcher LLP, special counsel to the Loan Parties, and Hogan and Hartson, L.L.P., special regulatory counsel to the Loan Parties, covering the matters set forth in Exhibit D-1, D-2, D-3 and D-4 hereto, respectively, and such additional matters relating to the transactions contemplated hereby as the Required Lenders may reasonably request;

        (e)   evidence satisfactory to the Administrative Agent of the payment of all fees and other amounts payable to the Administrative Agent for the account of the Lenders or the Administrative Agent on or prior to the Closing Date, including, to the extent invoiced, reimbursement of all out-of-pocket expenses (including, without limitation, legal fees and expenses) required to be reimbursed or paid by the Borrower or the Company hereunder;

        (f)    (i) a copy of the Wireless Note and each other note in existence on the Closing Date evidencing Debt owed by the Company, the Borrower or any Corp. Company to the Company or any Subsidiary and outstanding on the Closing Date, (ii) a certificate of the Assistant Treasurer of Capital Funding certifying that Capital Funding has delivered pursuant to clause (i) a copy of each note described in clause (i) and that each such copy is a true, correct and complete copy of the original note as in effect on the Closing Date, and (iii) evidence satisfactory to the Administrative Agent that the Wireless Note is subordinated to the Loans and the Guarantee hereunder on terms and conditions satisfactory to the Administrative Agent;

        (g)   a certificate signed by the chief financial officer, treasurer or assistant treasurer (or any such officer's designee, designated in writing by such officer) of the Company certifying (A) as to the facts specified in clauses (d) and (e) of Section 3.03 as of the Closing Date, and (B) that if Loans were outstanding the Company and Corp. would be in compliance with Section 5.06 as of September 30, 2003, calculated on a pro forma basis after giving effect to the consummation of the offers to purchase outstanding notes and debt for equity exchanges completed in the fiscal quarter ended December 31, 2003, and attaching a calculation on such basis of each of the ratios set forth in Section 5.06 as of such date;

23

        (h)   evidence satisfactory to the Administrative Agent that all commitments under the Existing Credit Agreement have been or concurrently with the Closing Date are being terminated, all loans outstanding thereunder have been repaid in full (together with accrued and unpaid interest thereon, any applicable breakage costs and accrued fees and expenses), all Liens securing obligations under the Existing Credit Agreement have been or concurrently with the Closing Date are being released and the Company's guarantee under the Existing Credit Agreement has been or concurrently with the Closing Date is being released; and

        (i)    all documents the Administrative Agent may reasonably request relating to the existence of the Company and its Subsidiaries, the corporate authority for and the validity of the Loan Documents, and any other matters relevant hereto, all in form and substance satisfactory to the Administrative Agent.

        The Administrative Agent shall promptly notify the Company and the Lenders of the Closing Date, and such notice shall be conclusive and binding on all parties hereto.

        Section 3.02. Condition To Term Loans. The obligation of any Term Lender to make a Term Loan shall be subject to the satisfaction of the following conditions:

        (a)   the Administrative Agent (or its counsel) shall have received counterparts of the Term Loan Addendum signed by the Borrower and the Company and each of the Term Lenders listed on the signature pages thereof (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Administrative Agent in form satisfactory to it of telex, facsimile or other written confirmation from such party that it has executed a counterpart thereof);

        (b)   the Administrative Agent shall have received such evidence (including such opinions of counsel to the Loan Parties) as it may reasonably request to confirm the Borrower's due authorization of the transactions contemplated by the Term Loan Addendum and the validity and enforceability of the obligations of the Borrower and the Company resulting therefrom;

        (c)   the fact that immediately after such Term Loan is made, the limitation in Section 2.15(d)(i) shall have been complied with; and

        (d)   any other conditions set forth in the Term Loan Addendum.

        Section 3.03. All Borrowings. The obligation of any Lender to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions:

        (a)   the fact that the Closing Date shall have occurred on or prior to February 27, 2004;

        (b)   receipt by the Administrative Agent of a Notice of Borrowing as required by Section 2.02;

        (c)   the fact that, immediately before and after such Borrowing, the Total Outstandings do not exceed the Total Exposure;

        (d)   the fact that, immediately before and after such Borrowing, no Default shall have occurred and be continuing;

        (e)   the fact that the representations and warranties of the Loan Parties contained in the Loan Documents shall be true (or, with respect to any representation and warranty which is not qualified by materiality or material adverse effect, shall be true in all material respects) on and as of the date of such Borrowing, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true (or, with respect to any such representation and warranty which is not qualified by materiality or material adverse effect, shall be true in all material respects) on and as of such earlier date; and

        (f)    if no Loans were outstanding as of the last day of the most recently ended fiscal quarter for which financial statements are required to have been delivered pursuant to Section 5.01, the fact that

24

the Company and Corp. would have been in compliance with Section 5.06 had Loans been outstanding on such date.

        Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the facts specified in clauses (c), (d), (e) and (f) of this Section.

ARTICLE 4
Representations And Warranties

        Each of the Loan Parties party to this Agreement represents and warrants that:

        Section 4.01. Corporate Existence and Power. Each Loan Party is a corporation duly incorporated, validly existing and in good standing under the laws of the state of its incorporation, and has all corporate powers and all material governmental licenses, authorizations, qualifications, consents and approvals required to carry on its business as now conducted.

        Section 4.02. Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by each Loan Party of each Loan Document to which it is a party are within such Person's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official except, with respect to the Security and Pledge Agreement and the transactions contemplated thereby, as set forth in the Collateral Documents, and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of such Person or of any material agreement (including in any event the QSC Notes Indenture), judgment, injunction, order, decree or other instrument binding upon such Person or any Significant Subsidiary or result in the creation or imposition of any Lien on any material asset of such Person or any Significant Subsidiary (other than the Liens created by the Collateral Documents).

        Section 4.03. Binding Effect. Each Loan Document (other than the Notes) constitutes a valid and binding agreement of each Loan Party thereto, and the Notes, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Borrower, in each case enforceable in accordance with its terms except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity.

        Section 4.04. Financial Information.

        (a)   (i) The restated consolidated balance sheet of the Company and its Consolidated Subsidiaries as of each of December 31, 2000, December 31, 2001 and December 31, 2002 and the related consolidated statements of income and cash flows for each fiscal year then ended, reported on by KPMG and set forth in the Company's 2002 Form 10-K and (ii) the consolidated balance sheet of the Company and its Consolidated Subsidiaries as of September 30, 2003 and the related consolidated statements of income and cash flows for the portion of the Company's fiscal year ended at the end of such quarter and set forth on the Company's Form 10-Q, a copy of each of which has been made available to each of the Lenders, taken together, fairly present in all material respects, in conformity with generally accepted accounting principles, the consolidated financial position of the Company and its Consolidated Subsidiaries as of such date specified therein and their consolidated results of operations and cash flows for such period specified therein, subject, in the case of the financial statements described in clause (ii) of this Section 4.04(a), to changes resulting from audit and year-end adjustments and the absence of footnotes.

        (b)   (i) The restated consolidated balance sheet of Corp. as of each of December 31, 2000, December 31, 2001 and December 31, 2002 and the related consolidated statement of income and cash flows for each fiscal year then ended, reported on by KPMG and (ii) the consolidated balance sheet of Corp. as of September 30, 2003 and the related consolidated statements of income and cash flows for the portion of Corp.'s fiscal year then ended, a copy of each of which has been made available to each

25

of the Lenders, fairly present in all material respects, in conformity with generally accepted accounting principles, the consolidated financial position of Corp. and its Consolidated Subsidiaries as of the date specified therein and their consolidated results of operations for the period specified therein, subject, in the case of the financial statements described in clause (ii) of this Section 4.04(b), to changes resulting from audit and year-end adjustments and the absence of footnotes.

        (c)   Except as set forth in Schedule 4.05, since December 31, 2002, there has been no Material Adverse Change.

        Section 4.05. Litigation. Except for the Pending Matters, to the knowledge of the Company there is no action, suit or proceeding pending, against the Company or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which would materially adversely affect the consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries, considered as a whole, or which in any manner draws into question the validity of any Loan Document.

        Section 4.06. Compliance with ERISA. Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all respects with the presently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan, except where failure to comply would not have a material adverse effect on the consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries, considered as a whole. No member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, in either case which has resulted or could reasonably be expected to result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code, or (iii) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA.

        Section 4.07. Environmental Matters. (a) The operations of the Company and each of its Subsidiaries comply in all respects with all Environmental Laws except such non-compliance which would not (if enforced in accordance with applicable law) reasonably be expected to result, individually or in the aggregate, in a material adverse effect on the financial position or results of operations of the Company and its Consolidated Subsidiaries, considered as a whole.

        (b)   Except as specifically identified in Schedule 4.07, the Company and each of its Subsidiaries have obtained all material licenses, permits, authorizations and registrations required under any Environmental Laws ("Environmental Permits") necessary for their respective operations, and all such Environmental Permits are in good standing, and the Company and each of its Subsidiaries is in compliance with all material terms and conditions of such Environmental Permits.

        (c)   Except as specifically identified in Schedule 4.07, there are neither any conditions or circumstances known to the Company which may give rise to any claims or liabilities respecting any Environmental Laws or Hazardous Substances arising from the operations of the Company or its Subsidiaries (including, without limitation, off-site liabilities), nor any additional costs of compliance with Environmental Laws, which collectively have an aggregate potential liability in excess of $50,000,000.

        Section 4.08. Taxes. United States Federal income tax returns of the Company and its Subsidiaries have been examined and closed through the fiscal year ended December 31, 1992. The Company and its Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Company or any Subsidiary, except for taxes the amount,

26

applicability or validity of which is being contested in good faith by appropriate proceedings. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Company, adequate.

        Section 4.09. Subsidiaries. Each of the Company's corporate Significant Subsidiaries (including, but not limited to, the Borrower) is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, qualifications, consents and approvals required to carry on its business as now conducted.

        Section 4.10. Not an Investment Company. No Loan Party is an "investment company" within the meaning of the Investment Company Act of 1940, as amended.

        Section 4.11. Full Disclosure. All written information heretofore furnished by any Loan Party to the Administrative Agent or any Lender for purposes of or in connection with the Loan Documents or any transaction contemplated hereby is, and all such information hereafter furnished by any Loan Party to the Administrative Agent or any Lender will be, true and accurate in all material respects on the date as of which such information is stated or certified, in each case in light of the circumstances in which the same were made. Any projections or pro forma financial information contained in such materials are based upon good faith estimates and assumptions believed by the applicable Loan Party to be reasonable at the time they were made, it being recognized that such projections are not to be viewed as facts and that actual results may differ and such differences may be material.

        Section 4.12. Solvency. On the Closing Date, immediately after giving effect to the transactions contemplated herein (including without limitation or the application of the proceeds of any Loans made on the Closing Date) (a) the fair value of the assets of each Loan Party, at a fair valuation, will exceed its debts and liabilities, subordinated, contingent or otherwise, (b) the present fair saleable value of the properties of each Loan Party will exceed the amount that will be required to pay the probable liability of its debts and other liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured, (c) each Loan Party will be able to pay its debts and other liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured, and (d) no Loan Party will have unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and proposed to be conducted after the Closing Date.

ARTICLE 5
Covenants

        The Company agrees that, so long as any Lender has any Commitment hereunder or any Loan or any other amount payable under any Loan Document remains unpaid:

        Section 5.01. Information. The Company will deliver to the Administrative Agent for distribution to each of the Lenders:

        (a)   (i) as soon as available and in any event within 90 days after the end of each fiscal year of the Company, a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner acceptable to the Securities and Exchange Commission by KPMG or other independent public accountants of nationally recognized standing, (ii) as soon as available and in any event within 90 days after the end of each fiscal year of Corp., a consolidated balance sheet of Corp. and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner acceptable to the Securities and Exchange

27

Commission by KPMG or other independent public accountants of nationally recognized standing, and (iii) as soon as available and in any event within 90 days after the end of each fiscal year of the Borrower (provided that in the case of the fiscal year ended December 31, 2003, such information need only be provided on or before May 31, 2004), an unaudited consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all certified (subject to the absence of footnotes) as to fairness of presentation, generally accepted accounting principles and consistency by the chief financial officer, the chief accounting officer treasurer or assistant treasurer (or any such officer's designee, designated in writing by such officer) of the Company;

        (b)   (i) as soon as available and in any event within 50 days after the end of each of the first three quarters of each fiscal year of the Company, a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of income and cash flows for such quarter and for the portion of the Company's fiscal year ended at the end of such quarter, setting forth in the case of such statements of income and cash flows in comparative form the figures for the corresponding quarter and the corresponding portion of the Company's previous fiscal year, all certified (subject to changes resulting from audit, year-end adjustments and absence of footnotes) as to fairness of presentation, generally accepted accounting principles and consistency by the chief financial officer, chief accounting officer, treasurer or assistant treasurer (or any such officer's designee, designated in writing by such officer) of the Company, (ii) as soon as available and in any event within 50 days after the end of each of the first three quarters of each fiscal year of Corp., a consolidated balance sheet of Corp. and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of income and cash flows for such quarter and for the portion of Corp.'s fiscal year ended at the end of such quarter, setting forth in the case of such statements of income and cash flows in comparative form the figures for the corresponding quarter and the corresponding portion of Corp.'s previous fiscal year, all certified (subject to changes resulting from audit, year-end adjustments and absence of footnotes) as to fairness of presentation, generally accepted accounting principles and consistency by the chief financial officer, the chief accounting officer, treasurer or assistant treasurer (or any such officer's designee, designated in writing by such officer) of Corp., and (iii) as soon as available and in any event within 50 days after the end of each of the first three quarters of each fiscal year of the Borrower, an unaudited consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of income for such quarter and for the portion of the Borrower's fiscal year ended at the end of such quarter, setting forth in the case of such statements of income in comparative form the figures for the corresponding quarter and the corresponding portion of the Borrower's previous fiscal year, all certified (subject to changes resulting from audit, year-end adjustments and absence of footnotes) as to fairness of presentation, generally accepted accounting principles and consistency by the chief financial officer, the chief accounting officer treasurer or assistant treasurer (or any such officer's designee, designated in writing by such officer) of the Company;

        (c)   simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the chief financial officer, treasurer or assistant treasurer (or any such officer's designee, designated in writing by such officer) or the chief accounting officer of the Company, (i) (x) in the case of financial statements of the Company, setting forth in reasonable detail the calculations required to establish whether the Company was in compliance with the requirements of Sections 5.06(a) (or, if no Loans were outstanding, setting forth in reasonable detail the calculation of the Company Consolidated Leverage Ratio), 5.07, 5.10, 5.12, and 5.13 on the date of such financial statements and (y) in the case of financial statements of Corp., setting forth in reasonable detail the calculations required to establish whether Corp. was in compliance with the requirements of Section 5.06(b) (or, if no Loans were outstanding, setting forth in reasonable detail the calculation of

28

the ratio described in Section 5.06(b)) on the date of such financial statements, (ii) describing in reasonable detail the investments of the type described in Section 5.13(f)(i) of the relevant Loan Party and its Subsidiaries outstanding on the date of such financial statements, and (iii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Company, Corp. or the Borrower, as applicable, is taking or proposes to take with respect thereto;

        (d)   within five Domestic Business Days after any officer of the Company or the Borrower obtains knowledge of any Default, if such Default is then continuing, a certificate of the chief financial officer, the chief accounting officer, treasurer or assistant treasurer (or any such officer's designee, designated in writing by such officer) of the Company or the Borrower setting forth the details thereof and the action which the Company or the Borrower is taking or proposes to take with respect thereto;

        (e)   promptly upon the mailing thereof to the shareholders of the Company generally, copies of all financial statements, reports and proxy statements so mailed;

        (f)    promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) (other than any amendment on Form 8-K the sole purpose of which is to file exhibits relating to Existing Debt meeting the requirements of clause (ii) of the definition of Debt) which the Company shall have filed with the Securities and Exchange Commission;

        (g)   if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC, (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice, (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice, (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application, (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC, (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice, or (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or makes any amendment to any Plan or Benefit Arrangement, in either case which has resulted or could reasonably be expected to result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief financial officer, chief accounting officer, treasurer or assistant treasurer (or any such officer's designee, designated in writing by such officer) of the Company setting forth details as to such occurrence and action, if any, which the Company or applicable member of the ERISA Group is required or proposes to take; and

        (h)   from time to time such additional information regarding the financial position or business of the Company and its Subsidiaries and the Borrower and its Subsidiaries as the Administrative Agent, at the request of any Lender, may reasonably request.

Information required to be delivered pursuant to clauses 5.01(a), (b), (e), or (f) above shall be deemed to have been delivered on the date on which the Company provides notice to the Lenders that such information has been posted on the Company's website on the Internet at the website address listed on the signature pages hereof, at sec.gov/edaux/searches.htm or at another website identified in such notice and accessible by the Lenders without charge; provided that (i) such notice may be included in a certificate delivered pursuant to clause 5.01(c) and (ii) the Company shall deliver paper copies of the information referred to in clauses 5.01(a), (b), (e), or (f) to any Lender which requests such delivery.

29

        Section 5.02. Maintenance of Property; Insurance. (a) The Company will keep, and will cause each other Loan Party and each Significant Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted.

        (b)   The Company will maintain, and will cause each other Loan Party and each Significant Subsidiary to maintain (either in the name of the Borrower or in such Loan Party's or Significant Subsidiary's own name), with financially sound and responsible insurance companies, insurance on all their respective properties in at least such amounts and against at least such risks (and with such risk retention) as are usually insured against in the same general area by companies of established repute engaged in the same or a similar business; and will furnish to the Lenders, upon request from the Administrative Agent, information presented in reasonable detail as to the insurance so carried; provided that, in lieu of any such insurance, the Company and any other Loan Party and any Significant Subsidiary may maintain a system or systems of self-insurance and reinsurance which will accord with sound practices of similarly situated corporations maintaining such systems and with respect to which the Company or such other Loan Party or such Significant Subsidiary will maintain adequate insurance reserves, all in accordance with generally accepted accounting principles and in accordance with sound insurance principles and practice.

        Section 5.03. Maintenance of Existence. The Company will, and will cause each other Loan Party and each Significant Subsidiary to, preserve, renew and keep in full force and effect their respective corporate existence and their respective material rights, privileges, franchises and licenses necessary or desirable in the normal conduct of business.

        Section 5.04. Compliance with Laws. The Company will comply, and will cause each other Loan Party and each Significant Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, Environmental Laws and ERISA and the rules and regulations thereunder), except where the necessity of compliance therewith is contested in good faith by appropriate proceedings and for which adequate reserves in conformity with generally accepted accounting principles have been established.

        Section 5.05. Inspection of Property, Books and Records. The Company will keep, and will cause each other Loan Party and each Significant Subsidiary to keep, proper books of record and account in accordance with generally accepted accounting principles in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities; and will permit, and will cause each other Loan Party and each Significant Subsidiary to permit, representatives of any Lender at such Lender's expense to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all at such reasonable times and as often as may reasonably be desired.

        Section 5.06. Financial Covenants. (a) Company Consolidated Leverage Ratio. The Company Consolidated Leverage Ratio as of the last day of each fiscal quarter when Loans are outstanding shall not be greater than 6:1.

        (b)   Corp. Consolidated Leverage Ratio. The ratio of Debt of Corp. and its Consolidated Subsidiaries (other than the Wireless Intercompany Debt), determined on a consolidated basis as of the last day of each fiscal quarter of Corp. when Loans are outstanding, to Consolidated Corp. EBITDA, determined for the four consecutive fiscal quarters ending on such date, shall not be greater than 2.5:1.

        Section 5.07. Negative Pledge. Neither the Company nor the Borrower will, and the Company will not permit any Subsidiary to, create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except:

        (a)   Liens existing on the Closing Date and listed in Schedule 5.07;

30

        (b)   any Lien existing on any asset of any corporation at the time such corporation becomes a Subsidiary and not created in contemplation of such event;

        (c)   any Lien on any asset of the Company or any of its Subsidiaries (other than the Borrower) (each, a "Purchase Money Obligor") securing Purchase Money Debt incurred by such Purchase Money Obligor in connection with the purchase of such asset (but not any other Purchase Money Obligor) and permitted under Section 5.12; provided that such Lien attaches to such asset concurrently with or within 180 days after the incurrence of such Purchase Money Debt;

        (d)   any Lien on any asset of any corporation existing at the time such corporation is merged or consolidated with or into the Company or a Subsidiary (to the extent any such merger or consolidation is permitted under Section 5.08(a)) and not created in contemplation of such event;

        (e)   any Lien existing on any asset prior to the acquisition thereof by the Company or a Subsidiary (to the extent such acquisition is permitted under this Agreement) and not created in contemplation of such acquisition;

        (f)    any Lien on assets or capital stock of Minor Subsidiaries which secures Debt of Persons which are not Consolidated Subsidiaries in which the Company or any of its Subsidiaries has made investments ("Joint Ventures"), but for the payment of which Debt no other recourse may be had to the Company or any Subsidiaries ("Limited Recourse Debt"), or any Lien on equity interests in a Joint Venture securing Limited Recourse Debt of such Joint Venture;

        (g)   any Lien (other than Liens on the Collateral) arising out of the refinancing, replacement, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing clauses of this Section; provided that such Debt is not increased and is not secured by any additional assets and the refinancing, replacement, extension, renewal or refunding of any such Debt is permitted pursuant to Section 5.12;

        (h)   (x) Liens arising in the ordinary course of business which (i) do not secure Debt, (ii) do not secure any obligation in an amount exceeding $100,000,000 and (iii) do not in the aggregate materially detract from the value of the grantor's assets or materially impair the use thereof in the operation of its business, and (y) Liens not described in clause (x) on cash and cash equivalents and securities (other than the Collateral) which Liens secure any obligation with respect to letters of credit or surety bonds, which obligation in each case does not exceed $100,000,000;

        (i)    (i) Liens ("Facility Liens") on the Collateral pursuant to the Collateral Documents securing Debt under this Agreement, (ii) junior Liens on the Collateral securing the Existing Notes so long as the Liens described in this clause (ii) shall be junior and subordinated to the Facility Liens, as provided in the QSC Notes Security and Pledge Agreement (or on other terms and conditions reasonably approved by the Administrative Agent), (iii) Liens on (x) the Collateral securing Permitted QSC Junior Lien Debt (including pursuant to clause (x) of the last sentence of Section 5.12) and (y) on any Collateral (other than the Corp. Equity Collateral) securing Permitted QSC Senior Unsecured Debt (including pursuant to clause (x) of the last sentence of Section 5.12), so long as the Liens described in this clause (iii) shall, in each case, be junior and subordinated to the Facility Liens (A) as provided in the QSC Notes Security and Pledge Agreement, with respect to any obligation designated as "Additional Pari Passu Secured Obligations" under (and as defined in) the QSC Notes Security and Pledge Agreement, (B) as provided in the New QSC Security and Pledge Agreement or (C) on other terms and conditions satisfactory to the Administrative Agent), (iv) Liens securing Permitted QSC Senior Secured Debt (including pursuant to clause (x) of the last sentence of Section 5.12) which are secured equally and ratably with the Facility Liens on terms and conditions reasonably approved by the Administrative Agent, and (v) Liens on the Collateral securing Revolver Cash Management Obligations or Hedging Obligations (each as defined in the Security and Pledge Agreement) pursuant to the Security and Pledge Agreement (in each case, it being understood that monetary obligations under or

31

related to any such Debt (but not constituting Debt) may be secured by Liens securing such related Debt pursuant to this subsection (i));

        (j)    Liens on any assets of any Subsidiary of the Company other than the Borrower or a Corp. Company; and

        (k)   Liens (other than Liens on any Collateral) not otherwise permitted by and in addition to the foregoing clauses of this Section 5.07 securing Debt permitted under Section 5.12 (and on terms permitted under Section 5.12).

        Section 5.08. Consolidations, Mergers and Sales of Assets. (a) No Loan Party or any of its Subsidiaries will merge or consolidate with or into any other Person; provided that (i) any Corp. Company may merge with or into any other Corp. Company (other than Wireless), (ii) any QwestDex Company may merge with or into any other QwestDex Company or any Corp. Company (other than Wireless) (so long as a Corp. Company is the Person surviving any such merger), (iii) any Foreign Subsidiary may merge or consolidate with or into any other Foreign Subsidiary, and (iv) any Subsidiary (other than the Borrower or a Corp. Company, but excluding Wireless) may merge into any other Subsidiary of the Company other than the Borrower or a Corp. Company (other than Wireless); provided that, in the case of clause (i) and (ii), after giving effect to any such merger, no Default has occurred and is continuing.

        (b)   The Company will not sell, lease or otherwise transfer, directly or indirectly, all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, to any other Person; provided that nothing in this subsection (b) shall be construed to prohibit the contribution to any single New Holding Company by the Company of the capital stock of the Borrower or any other direct Subsidiary of the Company. No Corp. Company will sell, lease or otherwise transfer, directly or indirectly, any of its assets (other than the Wireless Assets) to the Company or any of its Subsidiaries, other than to another Corp. Company (other than Wireless).

        (c)   None of the Company, the Borrower or any Corp. Company shall consummate any Asset Sale (except any single disposition or series of related dispositions for which the aggregate consideration does not exceed $100,000,000) unless at least 75% of the aggregate consideration therefor (other than any portion of such Asset Sale which constitutes an Asset Swap) shall consist of cash payable at closing and Debt (other than subordinated Debt) of the transferor which is expressly assumed by the transferee. Any Corp. Company may consummate any Asset Sale that does not satisfy the requirements of the immediately preceding sentence to the extent such Asset Sale is an Asset Swap and, after giving effect thereto, the aggregate amount of assets that have been sold, transferred or otherwise disposed of by the Corp. Companies on or after the Closing Date pursuant to Asset Swaps shall not exceed 10% of the consolidated tangible assets of the Corp. Companies.

        (d)   The Available Net Proceeds of any Corp. Qualifying Asset Sale received during the Mandatory Reduction Period shall only be (i) applied to permanently retire Debt owing by Corp. or to acquire assets similar to the assets disposed of in such sale or other productive assets of the general type used in the business of a Corp. Company, (ii) held by Corp. in cash or Permitted Investments, or (iii) applied to reduce ratably the Commitments in an amount equal to the Revolver Portion of such Available Net Proceeds, prepay the Term Loans ratably in an amount equal to the Term Portion of such Available Net Proceeds, and make any other payments of Debt that may be required concurrently with such reduction and prepayment. The Company shall notify the Administrative Agent by telephone (confirmed by telecopy) of the proposed consummation of any Corp. Qualifying Asset Sale not later than 10:30 A.M., New York City time, on the date of the proposed consummation thereof. Each such notice shall specify (i) the date of consummation of the applicable Corp. Qualifying Asset Sale, (ii) a reasonably detailed calculation of the Net Proceeds thereof, and (iii) anticipated Available Net Proceeds as a result of such Corp. Qualifying Asset Sale. Upon receipt of a notice of a Corp.

32

Qualifying Asset Sale pursuant to this subsection, the Administrative Agent shall promptly notify each Lender of the contents thereof.

        (e)   The Company will retain ownership, directly or indirectly, of 100% of the capital stock and the voting power of the Borrower and the Borrower will retain ownership, directly, of 100% of the capital stock and the voting power of Corp.

        Section 5.09. Use of Proceeds. The proceeds of the Revolver Loans made under this Agreement will be used by the Borrower for general corporate purposes. None of the proceeds of the Revolver Loans shall be used directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of paying Legal Matter Costs or making Restricted Payments. None of the proceeds of any Loans will be used, directly or indirectly, in violation of any applicable law or regulation, and no use of such proceeds will include any use for the purpose, whether immediate, incidental or ultimate, of buying or carrying any Margin Stock.

        Section 5.10. Restricted Payments and Payments of Certain Other Debt. (a) Neither the Company nor any of its Subsidiaries will declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except that (i) any Subsidiary may declare and pay dividends with respect to its Equity Interests, (ii) the Company may make Restricted Payments pursuant to and in accordance with stock or other benefit plans for management or employees of the Company and its Subsidiaries, (iii) the Company may declare and pay stock dividends on its capital stock so long as the stock dividends (which may include options or warrants) are of the same class of capital stock, and (iv) the Company may make other Restricted Payments, so long as, in the case of this clause (iv), after giving effect to any such dividend on any date, the aggregate amount of Permitted Payments declared or paid by the Borrower does not exceed the Equity/Income Basket during the Mandatory Reduction Period and the Payments Basket thereafter; provided that, in the case of clause (iv), immediately before and after giving effect to any such dividend, no Default has occurred and is continuing.

        (b)   Neither the Company nor any of its Subsidiaries will, directly or indirectly (including without limitation through any Person that has received the proceeds of any investment permitted by Section 5.13), refinance, redeem, retire, purchase, repurchase, acquire, defease, exchange or otherwise make any payment in respect of the principal of any Subject Debt, other than:

        (i)    mandatory interest or principal payments, so long as such payments were required on such dates as of the Closing Date (in the case of Existing Debt) or on the date such Debt was incurred (in the case of other Subject Debt),

        (ii)   any of the foregoing made with Equity Interests of the Company (other than Mandatorily Redeemable Equity),

        (iii)  any payments with respect to Debt incurred by the Borrower in lieu of Corp. in reliance on clause (x) of the last sentence of Section 5.12,

        (iv)  any payments with respect to the QCC 2007 Notes,

        (v)   refinancings, repurchases and redemptions of Subject Debt of the Company or Capital Funding that matures prior to the Revolver Maturity Date ("Inside Maturity Debt"), using as consideration cash or the Net Proceeds of Debt permitted by Section 5.12 and incurred within 181 days (or, after the Mandatory Reduction Period, 365 days) prior to the scheduled maturity of the applicable Inside Maturity Debt,

        (vi)  any payments from the Net Proceeds of issuances by the Company of common stock interests,

33

        (vii) refinancings, repurchases and redemptions of callable Subject Debt ("Callable Debt") of the Borrower, using as consideration the Net Proceeds of Debt permitted by Section 5.12 and incurred within 181 days (or, (x) in the case of a tender offer for the Borrower's Notes due 2014 made in connection with refinancing of the Borrower's Notes due 2010 and not financed with Revolver Borrowings, or (y) after the Mandatory Reduction Period, within 365 days) prior to the first scheduled call date for such Callable Debt, and

        (viii)   payments with respect to other subordinated Debt and redemptions of Mandatorily Redeemable Equity of the Borrower, provided that the aggregate amount of Permitted Payments declared or paid does not exceed the Payments Basket.

Neither the Company nor any of its Subsidiaries will consent to or solicit any amendment, supplement, or other modification of any agreement or instrument evidencing or governing any Subject Debt if the effect of such amendment, supplement or modification, together with all other amendments, supplements or modifications made, is to increase materially the obligations of the obligor thereunder or to confer any additional rights on the holders thereof which would be materially adverse to the Company or its Subsidiaries (it being understood that any such modification that further restricts the ability of any Subsidiaries of the Company to agree or be subject to the types of restrictions described in Section 5.11 or that has the effect of causing the terms of such Debt to no longer comply with the provisions of Section 5.12 on the basis of which such Subject Debt was incurred shall not be a permitted modification of such terms).

        Section 5.11. Limitations on Restrictions Affecting Subsidiaries. Neither the Company nor any of its Subsidiaries will enter into, or suffer to exist, any agreement with any Person (other than a written agreement with, or an agreement resulting from the application of a law, policy, rule or regulation by, a public utility commission or other governmental authority) which prohibits or limits the ability of any Subsidiary to (i) pay dividends or make other distributions or pay any Debt owed to the Company or any other Subsidiary, (ii) make loans or advances to the Company or any other Subsidiary, (iii) transfer any of its properties or assets to the Company or any other Subsidiary, (iv) create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, or on capital stock or equity interests issued by it, or (v) create, incur assume or suffer to exist any Debt; provided that the following shall be permitted: (1) agreements governing Debt as in effect on the Closing Date, and agreements which are no more restrictive in any material respect (or, in the case of any restriction on the incurrence of Debt or Liens, in any respect) than such agreements, (2) agreements granting Liens permitted under Section 5.07 containing restrictions on the ability to transfer or grant Liens on the assets subject to such Liens, (3) restrictions contained in agreements of any Person at the time such Person becomes a Subsidiary, which restrictions are applicable solely to such Person (including to Equity Interests in such Person), (4) customary restrictions contained in stock purchase agreements, asset sale agreements limiting the transfer of assets pending the closing of the sale and customary non-assignment provisions in leases and other contracts entered into in the ordinary course of business, and (5) restrictions contained in the Loan Documents.

        Section 5.12. Limitations on Debt. Neither the Company nor any Subsidiary will create, incur, assume or permit to exist any Debt, except:

        (a)   Debt created under the Loan Documents;

        (b)   Existing Debt;

34

        (c)   Debt of the Company or any of its Subsidiaries (other than Corp. and its Subsidiaries) so long as (i) the issuance thereof does not generate any cash proceeds, (ii) such Debt is issued to the holders thereof in exchange for, or as consideration for the repurchase or tender, of Existing Debt (or Subject Debt previously incurred in reliance on this subsection (c)) held by such holders, (iii) the maturity of such Debt is on or after the Outside Date in effect on the date of incurrence of such Debt, (iv) no payments with respect to such Debt (including without limitation required amortization payments and mandatory prepayments) are required to be made prior to the Outside Date in effect on the date of incurrence of such Debt (other than regularly scheduled interest payments with respect thereto) except to the same or lesser extent of required payments under the Subject Debt being exchanged, repurchased or tendered for, (v) the terms and conditions governing such Debt (including without limitation covenants and events of default) are no more restrictive in any material respect than the terms and conditions applicable to such Debt as of the Closing Date or such terms and conditions otherwise approved by the Administrative Agent, and (vi) any Debt of the Borrower incurred in reliance on this Section 5.12(c) is subordinated to the Loans in an insolvency proceeding to the prior payment in full of the Loans and is otherwise subordinated to the Loans on the same basis as the QSC Notes Issued 2002 are subordinated pursuant to the QSC Notes Indenture or pursuant to other subordination arrangements reasonably satisfactory to the Administrative Agent (Debt outstanding in reliance on this Section 5.12(c) being referred to as "Permitted Non-Corp. Exchange Debt");

        (d)   Debt of Corp. so long as (i) the maturity of such Debt is on or after the Outside Date in effect on the date of incurrence of such Debt and (ii) such Debt is issued to the holders thereof in exchange for, or as consideration for the repurchase or tender, of Existing Debt of Corp. (Debt outstanding in reliance on this Section 5.12(d) being referred to as "Permitted Corp. Exchange Debt");

        (e)   (i) Debt evidenced by the Wireless Note in an aggregate principal amount not to exceed $1,794,210,000 and (A) Debt owed by Wireless to the Borrower in an aggregate principal amount not to exceed at any time $400,000,000 (the "Wireless/Borrower Debt" and, together with the Wireless Note, the "Wireless Intercompany Debt"), so long as such Debt is evidenced by a promissory note that constitutes Collateral and ranks senior to the Wireless Note;

        (f)    (i) Debt of any Corp. Company owed to any other Corp. Company (other than Wireless), and (ii) Debt of any Subsidiary of the Company (other than a Corp. Company) to any other Subsidiary of the Company (other than a Corp. Company); provided that, in the case of any Debt owed to the Borrower, if such Debt is evidenced by an Instrument, the Instrument shall have been delivered to the Collateral Agent in accordance with the Security and Pledge Agreement, and in the case of any Debt owed by the Borrower, such Debt represents obligations of the Borrower arising in the ordinary course of business as a result of intra-day balances and/or pooling of cash in connection with the cash management program conducted by the Borrower on behalf of the Company and its Subsidiaries;

        (g)   Debt of the Borrower not otherwise permitted by the foregoing subsections, so long as (i) the aggregate principal and face amount of Debt outstanding from time to time in reliance on this subsection (g) shall not exceed $750,000,000, (ii) the proceeds of such Debt do not exceed the cash consideration paid to retire unconditional purchase obligations of QCC and the Company outstanding on the Closing Date (each such obligation, an "Outstanding UPO"), and (iii) such Debt shall be on Qualifying Terms (except that (A) such Debt may provide for scheduled principal payments with respect thereto in an amount not greater than the scheduled payments required to be made with respect to the Outstanding UPO that has been replaced by such Debt (as such Outstanding UPO was in effect on the Closing Date) and (B) the terms and conditions governing such Debt may be more restrictive than the Loans so long as they are no more restrictive in any material respect than the terms and conditions applicable to the Outstanding UPO being replaced by such Debt) (Debt outstanding in reliance on this Section 5.12(g) being referred to as "Permitted UPO Retirement Debt");

35

        (h)   (i) unsecured Debt issued by the Company (or any of its Subsidiaries other than the Borrower and its Subsidiaries) (Debt outstanding in reliance on this Section 5.12(h)(i) being referred to as "Permitted QCII/QCF Unsecured Debt") and (ii) unsecured Debt of the Borrower issued on Qualifying Terms (Debt outstanding in reliance on this Section 5.12(h)(ii) being referred to as "Permitted QSC Subordinated Unsecured Debt"), so long as the aggregate principal and face amount of all Debt outstanding in reliance on this subsection (h) at any time shall not exceed $4,000,000,000;

        (i)    Debt of the Borrower secured by Liens on the Collateral, so long as (i) the Debt incurred under this subsection (i) shall be on Qualifying Terms, (ii) the Liens on the Collateral securing such Debt shall be junior and subordinated to the Facility Liens as provided in the New QSC Security and Pledge Agreement (or on other terms and conditions reasonably approved by the Administrative Agent) and (iii) the aggregate principal and face amount of the Debt outstanding in reliance on this subsection (i) at any time shall not exceed $3,000,000,000 (Debt outstanding in reliance on this Section 5.12(i) being referred to as "Permitted QSC Junior Lien Debt") (it being understood that if and when any such junior liens initially securing any such Permitted QSC Junior Lien Debt are released, the subordination provisions relating to such debt may terminate and such debt may thereafter be deemed to be outstanding under clause (j) below as described in the last sentence of this Section 5.12);

        (j)    Debt of the Borrower, so long as (i) the Debt incurred under this subsection (j) shall (except as provided below) be on Unsubordinated Qualifying Terms, (ii) such Debt is not secured by Liens on the Corp. Equity Collateral and to the extent such Debt is secured by Liens on any other Collateral such Liens shall be junior and subordinated to the Facility Liens as provided in the New QSC Security and Pledge Agreement (or on other terms and conditions reasonably approved by the Administrative Agent) and (iii) the aggregate principal and face amount of the Debt outstanding in reliance on this subsection (j) at any time shall not exceed $3,700,000,000 (Debt outstanding in reliance on this Section 5.12(j) being referred to as "Permitted QSC Senior Unsecured Debt");

        (k)   secured Debt of the Borrower, so long as (i) the Debt incurred under this subsection (k) shall (except as provided below) be on Unsubordinated Qualifying Terms, (ii) any Liens on the Collateral securing such Debt shall rank equally and ratably with the Liens on such Collateral securing the Revolver Lender Obligations on terms and conditions reasonably approved by the Administrative Agent and (iii) the aggregate principal and face amount of the Debt outstanding in reliance on this subsection (k) at any time shall not exceed $1,000,000,000 plus the aggregate principal amount of Revolver Replacement Debt then outstanding and minus the aggregate principal amount of Term Loans then outstanding (Debt outstanding in reliance on this Section 5.12(k) being referred to as "Permitted QSC Senior Secured Debt");

        (l)    Debt of Corp. and its Subsidiaries and Debt of other Subsidiaries of the Borrower, so long as the aggregate principal and face amount of the Debt outstanding in reliance on this subsection (l) shall not exceed $3,000,000,000 (Debt outstanding in reliance on this Section 5.12(l) being referred to as "Permitted QSC Subsidiary Debt"); and

        (m)  Purchase Money Debt of QCC or any other Subsidiary of the Company other than the Borrower in an aggregate principal amount not in excess of $250,000,000 (Debt outstanding in reliance on this Section 5.12(m) being referred to as "Permitted Purchase Money Debt").

        Notwithstanding anything in this Section 5.12 to the contrary:

        (x)   on any day, an amount equal to the principal and face amount of Debt then permitted to be incurred pursuant to subsection (i) above may instead be incurred in the aggregate under subsections (h) and (j) above; an amount equal to the principal and face amount of Debt then permitted to be incurred under subsection (j) above may instead be incurred in the aggregate under subsections (h) and (i) above; an amount equal to the principal and face amount of Debt

36

then permitted to be incurred under subsection (k) above may instead be incurred or be outstanding in the aggregate under subsections (h), (i) and (j) above; and an amount equal to the principal and face amount of Debt then permitted to be incurred under subsection (l) above may instead be incurred or be outstanding in the aggregate under subsections (h), (i), (j) and (k) above (and, if so incurred or outstanding under subsection (j) and (k), need not be on Unsubordinated Qualifying Terms). Each incurrence of Debt under a subsection (or reallocation of outstanding Debt under a subsection) other than the one originally contemplated (the "Original Subsection") shall reduce the amount permitted to be outstanding under the Original Subsection by the principal and face amount of such Debt outstanding from time to time; and

        (y)   the aggregate outstanding principal and face amount of Debt of the Borrower (other than Permitted QSC Subordinated Unsecured Debt and Permitted UPO Retirement Debt) shall not at any time exceed (i) the sum of $10,700,000,000 plus Revolver Outstandings plus the aggregate outstanding principal amount of Revolver Replacement Debt minus (ii) the aggregate principal and face amount of Permitted QSC Subsidiary Debt.

        Section 5.13. Limitations on Investments; Loans, Advances, Guarantees and Acquisitions. Neither the Company nor any Subsidiary will purchase, hold or acquire (including pursuant to any merger with any Person that was not a wholly owned Subsidiary before such merger) any Equity Interest in or evidence of indebtedness or other security (including any option, warrant or other right to acquire any of the foregoing) of, make, hold or permit to exist any loan or advance to, Guarantee any obligation of, or make, hold or permit to exist any investment or other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit (any such transaction or event, an "investment"), except:

        (a)   Permitted Investments;

        (b)   investments existing on the Closing Date and listed in Schedule 5.13;

        (c)   investments by the Company and its Subsidiaries in Equity Interests in their respective Subsidiaries; provided that any such Equity Interest of Corp. or QwestDex shall be pledged pursuant to the Security and Pledge Agreement to the extent required thereunder;

        (d)   investments constituting Debt permitted by Section 5.12;

        (e)   investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;

        (f)    (i) interest rate swap agreements, interest rate cap agreements, interest rate collar agreements or other similar agreements or arrangements or (ii) foreign exchange contracts, currency swap agreements, futures contracts, option contracts, synthetic caps or other similar agreements or arrangements, in each case designed to hedge against fluctuations in interest rates or currency values, respectively;

        (g)   instruments or assets received as consideration for an Asset Sale as permitted by Section 5.08(c);

        (h)   (x) investments constituting Guarantees by the Borrower, any QwestDex Companies or any Corp. Companies of performance obligations of the Borrower, any QwestDex Companies or any Corp. Companies, and (y) investments constituting Guarantees by the Company or any of its Subsidiaries (other than the Borrower, any QwestDex Companies or any Corp. Companies) of performance obligations of the Company or any of its Subsidiaries;

        (i)    the acquisition of assets and associated revenue streams from Allegiance Company, Inc.;

        (j)    acquisition by Corp. of in-region wirelines as part of its capital expenditures program;

37

        (k)   investments in assets of any Person constituting a business unit or in Persons in an aggregate amount not to exceed $2,000,000,000, provided that investments in joint ventures and Persons which, as a result thereof, do not become wholly-owned Subsidiaries in reliance on this subsection (j) shall not exceed $500,000,000;

        (l)    any investment (or portion thereof) made with Equity Interests of the Company not constituting Mandatorily Redeemable Equity; and

        (m)  any investments not otherwise permitted by any of the foregoing clauses, provided that the aggregate amount of Permitted Payments declared or paid does not exceed the Equity/Income Basket during the Mandatory Reduction Period and the Payments Basket thereafter.

Nothing contained in the foregoing is intended to restrict the Company and its Subsidiaries from purchasing any assets other than those expressly prohibited above or from making any capital expenditures.

        Section 5.14. Further Assurances Regarding Collateral and Guaranty Requirement. Each Loan Party will execute and deliver any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements, fixture filings, mortgages, deeds of trust and other documents), that may be required under any applicable law, or that the Administrative Agent or the Required Lenders may reasonably request, to cause the Collateral and Guaranty Requirement to be and remain satisfied, all at the Borrower's expense. The Company and the Borrower will provide to the Administrative Agent, from time to time upon request, evidence reasonably satisfactory to the Administrative Agent as to the perfection and priority of the Liens created or intended to be created by the Collateral Documents.

        Section 5.15. Borrower A Holding Company. The Borrower shall not engage in any business activities other than those engaged in or substantially similar to those engaged in as of the Closing Date as an intermediate holding company of Subsidiaries, including, without limitation, treasury, accounting, financing, investment, cash management and overhead management for it and its Consolidated Subsidiaries, and activities reasonably related thereto or necessary or desirable to perform the obligations and agreements of the Borrower under the Loan Documents.

Article 6
Defaults

        Section 6.01. Events of Default. If one or more of the following events shall have occurred and be continuing:

        (a)   any principal of any Loan shall not be paid when due, or any interest, any fees or any other amount payable hereunder shall not be paid within five days of the due date thereof;

        (b)   any Loan Party shall fail to observe or perform any covenant contained in Section 5.01(d) or Sections 5.06 to 5.13, inclusive;

        (c)   any Loan Party shall fail to observe or perform any covenant or agreement contained in any Loan Document (other than those covered by clause (a) or (b) above) for 30 days after the earlier of a senior officer's knowledge of such failure or written notice thereof has been given to the Company by the Administrative Agent at the request of any Lender;

        (d)   any representation, warranty, certification or statement made by any Loan Party in any Loan Document or in any certificate, financial statement or other document delivered pursuant thereto shall prove to have been incorrect in any material respect when made (or deemed made);

38

        (e)   the Company or any Subsidiary shall fail to make any payment or payments, in the aggregate in excess of $100,000,000, in respect of any Material Debt when due or within any applicable grace period;

        (f)    any event or condition shall occur which results in the acceleration of the maturity of any Material Debt;

        (g)   the Company or any Loan Party or any Significant Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize or otherwise acquiesce in any of the foregoing;

        (h)   an involuntary case or other proceeding shall be commenced against the Company or any Loan Party or any Significant Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Company or any Loan Party or any Significant Subsidiary under the federal bankruptcy laws as now or hereafter in effect;

        (i)    any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $100,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition specified in Section 4042(a) of ERISA shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $100,000,000;

        (j)    a judgment or order for the payment of money in excess of $100,000,000 shall be rendered against the Company or any Subsidiary and such judgment or order shall be enforceable and shall continue unsatisfied, in effect and unstayed for a period of 60 days (or such longer period of time after which the judgment holder may cause the creation of Liens against or seizure of any property of the Company or such Subsidiary) (it being understood that in any event an administrative order of a public utility commission shall not constitute an "order" for purposes of this clause (j) so long as (x) no one is seeking to enforce such order in an action, suit or proceeding before a court and (y) reserves in the full amount of the cost of such order are maintained on the books of the Company and its Subsidiaries);

        (k)   the Guarantor shall repudiate in writing any of its obligations under Article 9 or any such obligation shall be unenforceable against the Guarantor in accordance with its terms, or the Company or any of its Subsidiaries shall so assert in writing; or

        (l)    any Lien purported to be created under any Collateral Document shall cease to be, or shall be asserted by the Company or any of its Subsidiaries not to be, a valid and perfected Lien on any Collateral, with the priority required by the applicable Collateral Document, except (i) as a result of a

39

sale or other disposition of the applicable Collateral in a transaction permitted under the Loan Documents, (ii) as a result of the Administrative Agent's failure to maintain possession of any stock certificates, promissory notes or other documents delivered to it under the Security and Pledge Agreement or (iii) as a result of the operation of Section 2(k) of the Security and Pledge Agreement, so long as the Borrower shall have complied with its obligations thereunder;

then, and in every such event, the Administrative Agent shall (i) if requested by Lenders having more than 50% in aggregate amount of the Aggregate Commitments, by notice to the Company terminate the Commitments and the Commitments and such obligations shall thereupon terminate, and/or (ii) if requested by Lenders holding more than 50% in aggregate principal amount of the Loans, by notice to the Company declare the Loans (together with accrued interest thereon) to be, and the Loans shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company and the Borrower; provided that in the case of any of the Events of Default specified in clause (g) or (h) above with respect to the Company or the Borrower, without any notice to the Company or the Borrower or any other act by the Administrative Agent or the Lenders, the Commitments shall thereupon automatically terminate and the Loans (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company and the Borrower.

        Section 6.02. Notice of Default. The Administrative Agent shall give notice to the Company under Section 6.01(c) promptly upon being requested to do so by any Lender and shall thereupon notify all the Lenders thereof.

ARTICLE 7
The Administrative Agent

        Section 7.01. Appointment and Authorization. Each Lender irrevocably appoints and authorizes the Administrative Agent to take such action (including without limitation entering into the Security and Pledge Agreement) as administrative agent on its behalf and to exercise such powers under the Loan Documents as are delegated to the Administrative Agent by the terms thereof, together with all such powers as are reasonably incidental thereto.

        Section 7.02. Administrative Agent and Affiliates. Bank of America, N.A., and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with each of the Company, the Borrower or any Subsidiary or Affiliate of the Company or the Borrower (each, a "Qwest Entity") as though Bank of America, N.A., were not the Administrative Agent hereunder and without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such activities, Bank of America, N.A., or its Affiliates may receive information regarding any Qwest Entity (including information that may be subject to confidentiality obligations in favor of such Qwest Entity) and acknowledge that the Administrative Agent shall be under no obligation to provide such information to them. With respect to its Loans, Bank of America, N.A., shall have the same rights and powers under this Agreement as any other Lender and may exercise such rights and powers as though it were not the Administrative Agent, and the terms "Lender" and "Lenders" include Bank of America, N.A. in its individual capacity.

        Section 7.03. Action by Administrative Agent. The obligations of the Administrative Agent under the Loan Documents are only those expressly set forth therein. Without limiting the generality of the foregoing, the Administrative Agent shall not be required to take any action with respect to any Default, except as expressly provided in the Loan Documents. The Administrative Agent shall not have or be deemed to have any fiduciary relationship with any Lender or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement

40

or otherwise exist against the Administrative Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" in any Loan Document with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.

        Section 7.04. Consultation with Experts. The Administrative Agent may consult with legal counsel (who may be counsel for the Company or the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts.

        Section 7.05. Delegation of Duties. The Administrative Agent may execute any of its duties under the Loan Documents by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct.

        Section 7.06. Liability of Administrative Agent. Neither the Administrative Agent nor any of its Affiliates nor any of their respective directors, officers, agents or employees shall be liable for any action taken or not taken by it in connection with any Loan Document (i) with the consent or at the request of the Required Lenders or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Administrative Agent nor any of its Affiliates nor any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with any Loan Document or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of any Loan Party; (iii) the satisfaction of any condition specified in Article 3, except receipt of items required to be delivered to the Administrative Agent; (iv) the existence or sufficiency of the Collateral; or (v) the validity, effectiveness or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith. None of the Administrative Agent, its Affiliates and their respective directors, officers, agents and employees shall be under any obligation to any Lender or participant to inspect the properties, books or records of any Qwest Entity. The Administrative Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex or similar writing) believed by it to be genuine or to be signed by the proper party or parties.

        Section 7.07. Indemnification. Each Lender shall, ratably in accordance with its Commitment, indemnify the Administrative Agent, its Affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Loan Parties) against any cost, expense (including reasonable counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with the Loan Documents or any action taken or omitted by such indemnitees thereunder. No action taken with the consent or at the request of the Required Lenders shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section.

        Section 7.08. Credit Decision; Disclosure of Information by Administrative Agent. Each Lender acknowledges that no Administrative Agent-Related Person has made any representation or warranty to it, and that no act by the Administrative Agent hereafter taken, including any consent to and acceptance of any assignment or review of the affairs of any Qwest Entity, shall be deemed to constitute any representation or warranty by the Administrative Agent or any other Person to any Lender as to any matter, including whether Administrative Agent-Related Persons have disclosed material information in their possession. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon any Administrative Agent-Related Person and based on

41

such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Qwest Entities, and all applicable bank or other regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit hereunder. Each Lender also represents that it will, independently and without reliance upon any Administrative Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Qwest Entities. Except for the notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent herein, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of any of the Qwest Entities which may come into the possession of any Administrative Agent-Related Person.

        Section 7.09. Successor Administrative Agent. The Administrative Agent may resign at any time by giving notice thereof to the Lenders and the Company. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Administrative Agent (with the consent of the Company, such consent not to be unreasonably withheld). If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent gives notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent (with the consent of the Company, such consent not to be unreasonably withheld), which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $400,000,000. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent. If no successor Administrative Agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall at its election nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided above. The Administrative Agent, if it so elects, may resign as administrative agent but not collateral agent or vice versa, and if it so elects, then the provisions of this Section and the rest of this Article shall apply separately to each of those separate capacities of the Administrative Agent.

        Section 7.10. Administrative Agent's Fee. The Company shall pay to the Administrative Agent for its own account fees in the amounts and at the times previously agreed upon between the Company and the Administrative Agent.

ARTICLE 8
Changes In Circumstances

        Section 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any Euro-Dollar Loan:

        (a)   the Administrative Agent determines (which determination will be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted London Interbank Offered Rate for such Interest Period, or

42

        (b)   in the case of Euro-Dollar Loans, Lenders having 50% or more of the aggregate amount of the Euro-Dollar Loans advise the Administrative Agent that the Adjusted London Interbank Offered Rate as determined by the Administrative Agent will not adequately and fairly reflect the cost to such Lenders of funding their Euro-Dollar Loans for such Interest Period,

the Administrative Agent shall forthwith give notice thereof to the Company and the Lenders, whereupon until the Administrative Agent notifies the Company that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Lenders to make Euro-Dollar Loans or to convert outstanding Loans into Euro-Dollar Loans shall be suspended and (ii) each outstanding Euro-Dollar Loan shall be converted into a Domestic Loan on the last day of the then current Interest Period applicable thereto. Unless the Borrower notifies the Administrative Agent at least two Domestic Business Days before the date of any Euro-Dollar Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, such Borrowing shall instead be made as a Domestic Borrowing.

        Section 8.02. Illegality. If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Lender (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Lender shall so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Lenders and the Company, whereupon until such Lender notifies the Company and the Administrative Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Lender to make Euro-Dollar Loans, or to convert outstanding Loans into Euro-Dollar Loans, shall be suspended. Before giving any notice to the Administrative Agent pursuant to this Section, such Lender shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Lender, be otherwise disadvantageous to such Lender. If such notice is given, each Euro-Dollar Loan of such Lender then outstanding shall be converted to a Domestic Loan either (a) on the last day of the then current Interest Period applicable to such Euro-Dollar Loan if such Lender may lawfully continue to maintain and fund such Loan to such day or (b) immediately if such Lender shall determine that it may not lawfully continue to maintain and fund such Loan to such day.

        Section 8.03. Increased Cost and Reduced Return. (a) If on or after the date hereof, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage), special deposit, insurance assessment or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (or its Applicable Lending Office) or shall impose on any Lender (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its Euro-Dollar Loans, its Note or its obligation to make Euro-Dollar Loans and the result of any of the foregoing is to increase the cost to such Lender (or its Applicable Lending Office) of making or maintaining any Euro-Dollar Loan, or to reduce the amount of any sum received or receivable by such Lender (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Lender to be material, then, within 15 days

43

after demand by such Lender (with a copy to the Administrative Agent), the Company shall pay to such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction.

        (b)   If any Lender shall have determined that, after the date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Lender (or its Parent) as a consequence of such Lender's obligations hereunder to a level below that which such Lender (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, within 15 days after demand by such Lender (with a copy to the Administrative Agent), the Company shall pay to such Lender such additional amount or amounts as will compensate such Lender (or its Parent) for such reduction.

        (c)   Each Lender will promptly notify the Company and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Lender to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Lender, be otherwise disadvantageous to such bank. A certificate of any Lender claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods.

        Section 8.04. Taxes. (a) Any and all payments by any Loan Party to or for the account of any Lender or the Administrative Agent under any Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, (x) in the case of each Lender and the Administrative Agent, taxes imposed on its income or profits, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Lender or the Administrative Agent (as the case may be) is organized or any political subdivision thereof, (y) in the case of each Lender, taxes imposed on its income or profits, and franchise or similar taxes imposed on it, by the jurisdiction of such Lender's Applicable Lending Office or any political subdivision thereof, taxes that are imposed by any jurisdiction by reason of such Lender doing or having done business in such jurisdiction other than solely as a result of the Loan Documents or any transaction contemplated thereby, and (z) in the case of each Lender and the Administrative Agent, any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which such Lender or the Administrative Agent is organized or in which its Applicable Lending Office is located or any political subdivision thereof (all such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If any Loan Party shall be required by law to deduct any Taxes from or in respect of any sum payable under any Loan Document to any Lender or the Administrative Agent, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 8.04) such Lender or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Person shall make such deductions, (iii) such Person shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law, and (iv) such Person shall furnish to the Administrative Agent, at its address referred to in Section 10.01, the original or a certified copy of a receipt evidencing payment thereof.

44

        (b)   In addition, each Loan Party agrees to pay any present or future stamp or documentary taxes and any other excise or property taxes, or charges or similar levies which arise from any payment made under any Loan Document or from the execution or delivery of, or otherwise with respect to, any Loan Document (hereinafter referred to as "Other Taxes").

        (c)   Each Loan Party agrees to indemnify each Lender and the Administrative Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.04) paid by such Lender or the Administrative Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto; provided that the indemnification obligation under this Section 8.04(c) shall be only with respect to Taxes, Other Taxes and liabilities related to payments made by a Loan Party under any Loan Document. This indemnification shall be made within 15 days from the date such Lender or the Administrative Agent (as the case may be) makes written demand therefor.

        (d)   Each Lender organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Lender listed on the signature pages hereof, on or prior to the date on which it becomes a Lender in the case of each other Lender, on or prior to the date on which any such Lender grants any participating interest pursuant to Section 10.06 or otherwise ceases to act for its own account with respect to any portion of any sums payable to it under this Agreement, and from time to time thereafter if requested in writing by the Company (but only so long as such Lender remains lawfully able to do so), shall provide the Company with Internal Revenue Service form W-8BEN, W-8ECI and/or W-8IMY, as appropriate, or any successor form prescribed by the Internal Revenue Service (together with any form, documentation or information such Lender is required or chooses to transmit with any such forms), certifying that such Lender is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States and/or certifying as provided on Form W-8IMY. If the form provided by a Lender at the time such Lender first becomes a party to this Agreement indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from "Taxes" as defined in Section 8.04(a) imposed by the United States.

        (e)   For any period with respect to which a Lender has failed to provide the Company with the appropriate form pursuant to Section 8.04(d) (unless such failure is due to a change in treaty, law or regulation occurring subsequent to the date on which a form originally was required to be provided), such Lender shall not be entitled to indemnification under Section 8.04(c) with respect to Taxes imposed by the United States; provided, however, that should a Lender, which is otherwise exempt from or subject to a reduced rate of withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, the Company shall take such steps as such Lender shall reasonably request to assist such Lender to recover such Taxes.

        (f)    If any Loan Party is required to pay additional amounts to or for the account of any Lender pursuant to this Section 8.04, then such Lender will change the jurisdiction of its Applicable Lending Office so as to eliminate or reduce any such additional payment which may thereafter accrue if such change, in the judgment of such Lender, is not otherwise disadvantageous to such Lender.

        Section 8.05. Domestic Loans Substituted for Affected Euro-Dollar Loans. If (i) the obligation of any Lender to make Euro-Dollar Loans to the Borrower has been suspended pursuant to Section 8.02 or (ii) any Lender has demanded compensation under Section 8.03 with respect to its Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Lender through the Administrative Agent, have elected that the provisions of this Section shall apply to such Lender,

45

then, unless and until such Lender notifies the Company that the circumstances giving rise to such suspension or demand for compensation no longer exist:

        (a)   all Loans which would otherwise be made by such Lender as (or continued as or converted into) Euro-Dollar Loans shall instead be Domestic Loans (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Lenders), and

        (b)   after each of its Euro-Dollar Loans has been repaid (or converted to a Domestic Loan), all payments of principal which would otherwise be applied to repay such Euro-Dollar Loans shall be applied to repay its Domestic Loans instead.

If such Lender notifies the Borrower that the circumstances giving rise to such notice no longer apply, the principal amount of each such Domestic Loan shall be converted into a Euro-Dollar Loan on the first day of the next succeeding Interest Period applicable to the related Euro-Dollar Loans of the other Lenders.

        Section 8.06. Substitution of Lender. If (i) the obligation of any Lender to make Euro-Dollar Loans has been suspended pursuant to Section 8.02, (ii) any Lender has demanded compensation under Section 8.03 or (iii) any Lender has not signed an amendment or waiver which must be signed by all the Lenders to become effective, and such amendment or waiver has been signed by the Super-Majority Lenders, the Company shall have the right, with the assistance of the Administrative Agent, to seek a mutually satisfactory substitute bank or banks (which may be one or more of the Lenders) to purchase the Loans (by paying to such Lender the principal amount of such Loans, together with accrued interest thereon and any other amounts payable to such Lender hereunder) and assume the Commitment of such Lender.

Article 9
Guaranty

        Section 9.01. The Guaranty. The Guarantor hereby unconditionally guarantees the full and punctual payment (whether at stated maturity, upon acceleration or otherwise) of the Guaranteed Obligations. Upon failure by the Borrower to pay or perform punctually any Guaranteed Obligation, the Guarantor shall forthwith on demand pay or perform such Guaranteed Obligation in the manner specified in the relevant Loan Document.

        Section 9.02. Guaranty Unconditional. The obligations of the Guarantor hereunder shall be unconditional, irrevocable and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by:

        (i)    any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of any other Loan Party under any Loan Document, by operation of law or otherwise;

        (ii)   any modification or amendment of or supplement to any Loan Document;

        (iii)  any release, impairment, non-perfection or invalidity of any direct or indirect security for any obligation of any other Loan Party under any Loan Document;

        (iv)  any change in the corporate existence, structure or ownership of any other Loan Party or any insolvency, bankruptcy, reorganization or other similar proceeding affecting any other Loan Party or any of its assets or any resulting release or discharge of any obligation of any other Loan Party contained in any Loan Document;

        (v)   the existence of any claim, set-off or other rights which the Guarantor may have at any time against any other Loan Party, the Administrative Agent, any Lender or any other Person, whether in connection herewith or any unrelated transactions, provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim;

46

        (vi)  any invalidity or unenforceability relating to or against any other Loan Party for any reason of any Loan Document, or any provision of applicable law or regulation purporting to prohibit the payment by any other Loan Party of the principal of or interest on any Loan or any other amount payable by it under the Loan Document; or

        (vii) any other act or omission to act or delay of any kind by any other Loan Party, the Administrative Agent, any Lender or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the Guarantor's obligations hereunder.

        Section 9.03. Discharge Only upon Payment in Full; Reinstatement in Certain Circumstances. The Guarantor's obligations hereunder shall remain in full force and effect until the Commitments shall have terminated and the principal of and interest on the Loans and all other amounts payable by the Borrower under the Loan Documents shall have been indefeasibly paid in full. If at any time any payment of the principal of or interest on any Loan or any other amount payable by the Borrower under the Loan Documents is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, the Guarantor's obligations hereunder with respect to such payment shall be reinstated at such time as though such payment had been due but not made at such time.

        Section 9.04. Waiver by the Guarantor. The Guarantor irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against any other Loan Party or any other Person.

        Section 9.05. Subrogation. The Guarantor irrevocably waives any and all rights to which it may be entitled, by operation of law or otherwise, upon making any payment hereunder to be subrogated to the rights of the payee against the Borrower with respect to such payment or against any direct or indirect security therefor, or otherwise to be reimbursed, indemnified or exonerated by or for the account of the Borrower in respect thereof until (i) the Commitments shall have terminated and (ii) all Loans and all other obligations under this Agreement and the other Loan Documents have been paid in full in cash.

        Section 9.06. Stay of Acceleration. In the event that acceleration of the time for payment of any amount payable by the Borrower under the Loan Documents is stayed upon insolvency, bankruptcy or reorganization of the Borrower, all such amounts otherwise subject to acceleration under the terms of this Agreement shall nonetheless be payable by the Guarantor hereunder forthwith on demand by the Administrative Agent made at the request of the Required Lenders.

ARTICLE 10
Miscellaneous

        Section 10.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of any Loan Party hereto or the Administrative Agent, at its address or facsimile number set forth on the signature pages hereof, (y) in the case of any Lender, at its address or facsimile number set forth in its Administrative Questionnaire or (z) in the case of any party, such other address or facsimile number as such party may hereafter specify for the purpose by notice to the Administrative Agent and the Company. Each such notice, request or other communication shall be effective (i) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, (ii) if given by facsimile transmission, when such facsimile is transmitted to the facsimile number specified pursuant to this Section 10.01 and telephonic confirmation of receipt thereof is received, or (iii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Administrative Agent under Article 2 or Article 8 shall not be effective until received.

47

        Section 10.02. No Waivers. No failure or delay by the Administrative Agent or any Lender in exercising any right, power or privilege under any Loan Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies provided in the Loan Document shall be cumulative and not exclusive of any rights or remedies provided by law.

        Section 10.03. Expenses; Indemnification. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses of the Administrative Agent, including reasonable fees and disbursements of special counsel for the Administrative Agent, in connection with the preparation and administration of the Loan Documents, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by the Administrative Agent and each Lender, including reasonable fees and disbursements of counsel, in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom.

        (b)   The Borrower agrees to indemnify each Administrative Agent-Related Person and each Lender, their respective Affiliates and the respective directors, officers, agents and employees of the foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) brought or threatened relating to or arising out of the Loan Documents or any actual or proposed use of proceeds of Loans hereunder; provided that (i) no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee's own gross negligence or willful misconduct as determined by a court of competent jurisdiction and (ii) the Company shall not be liable for any settlement entered into by an Indemnitee without its consent (which shall not be unreasonably withheld).

        (c)   Each Indemnitee agrees to give the Company prompt written notice after it receives any notice of the commencement of any action, suit or proceeding for which such Indemnitee may wish to claim indemnification pursuant to subsection (b). The Company shall have the right, exercisable by giving written notice within fifteen Domestic Business Days after the receipt of notice from such Indemnitee of such commencement, to assume, at the Company's expense, the defense of any such action, suit or proceeding; provided, that such Indemnitee shall have the right to employ separate counsel in any such action, suit or proceeding and to participate in the defense thereof, but the fees and expenses of such separate counsel shall be at such Indemnitee's expense unless (1) the Company shall have agreed to pay such fees and expenses; (2) the Company shall have failed to assume the defense of such action, suit or proceeding or shall have failed to employ counsel reasonably satisfactory to such Indemnitee in any such action, suit or proceeding; or (3) such Indemnitee shall have been advised by independent counsel in writing (with a copy to the Company) that there may be one or more defenses available to such Indemnitee which are in conflict with those available to the Company (in which case, if such Indemnitee notifies the Company in writing that it elects to employ separate counsel at the Company's expense, the Company shall be obligated to assume the expense, it being understood, however, that the Company shall not be liable for the fees or expenses of more than one separate firm of attorneys, which firm shall be designated in writing by such Indemnitee).

        Section 10.04. Sharing of Set-offs. Each Lender agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest due with respect to any Note held by it which is greater than the proportion received by any other Lender in respect of the aggregate amount of principal and interest due with respect to any Note held by such other Lender, the Lender receiving such proportionately greater payment shall purchase such participations in the Notes held by the other Lenders, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with

48

respect to the Notes held by the Lenders shall be shared by the Lenders pro rata; provided that nothing in this Section shall impair the right of any Lender to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness hereunder. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Note, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Borrower in the amount of such participation.

        Section 10.05. Amendments and Waivers. (a) Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Company, the Borrower and the Required Lenders (and, if the rights or duties of the Administrative Agent are affected thereby, by the Administrative Agent); provided that no such amendment or waiver shall, unless signed by each affected Lender, (i) increase or decrease the Commitment of any Lender (except for a ratable decrease in the Commitments of all Lenders) or subject any Lender to any additional obligation (it being understood that an increase or decrease pursuant to Section 8.06 or 10.06 shall not constitute an amendment or waiver for this purpose), (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or any fees hereunder or for any reduction or termination of any Commitment and (iv) amend or waive the provisions of Article 9; and provided further that

        (i)    no such amendment or waiver shall, unless signed by all the Lenders, change the percentage of the Commitments or of the Total Exposure, or the number of Lenders, which shall be required for the Lenders or any of them to take any action under this Section or any other provision of this Agreement;

        (ii)   no such amendment or waiver shall, unless signed by the Required Revolver Banks, alter any condition to a Revolver Borrowing set forth in Section 3.03;

        (iii)  subject to clause (i) of this proviso, any waiver, amendment or modification of this Agreement that by its terms expressly modifies the rights or duties under this Agreement of the Lenders of any tranche but not the Lenders of any other tranche may be effected by an agreement or agreements in writing entered into by the Borrower and the requisite percentage in interest of the Lenders of the affected tranche that would be required to consent thereto under this Section if the Lenders of such tranche were the only Lenders hereunder at the time; and

        (iv)  no such amendment or waiver shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document.

For avoidance of doubt, neither the increase of Commitments pursuant to Section 2.15(a) nor the addition of Term Loans pursuant to Section 2.15(b) shall require the consent or agreement of any Lender other than the financial institutions agreeing to provide such additional Commitments or Term Loans

        (b)   Any provision of any Collateral Document may be amended or waived if, but only if, such amendment or waiver is entered into in accordance with the terms thereof.

        Section 10.06. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that no Loan Party may assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Lenders.

49

        (b)   Any Lender may at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans. In the event of any such grant by a Lender of a participating interest to a Participant, such Lender shall remain responsible for the performance of its obligations hereunder, and the Loan Parties and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement pursuant to which any Lender may grant such a participating interest shall provide that such Lender shall retain the sole right and responsibility to enforce the obligations of the Loan Parties hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Lender will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of the first proviso to Section 10.05 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement and subject to subsection (e) below, be entitled to the benefits of Article 8 with respect to its participating interest. An assignment or other transfer which is not permitted by subsection (c) or (d) below but which is consented to in accordance with this subsection (b) shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b).

        (c)   Any Lender may at any time assign to one or more banks or other institutions (each an "Assignee") all or any portion of its rights and obligations under this Agreement and any Notes, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit E hereto executed by such Assignee and such transferor Lender, with (and subject to) the subscribed consent of the Company and the Administrative Agent, which consents shall not be unreasonably withheld or delayed (it being understood that it shall not be unreasonable for the Company to withhold its consent to an assignment of a Commitment or Revolver Loans to a hedge fund); provided that (i) if an Assignee is a Lender Affiliate or is another Lender, no such consent shall be required; (ii) any assignment of a Commitment or Revolver Loan shall be in a minimum amount of $5,000,000 (or shall be an assignment of all of the assignor's Commitment and Revolver Loans; (iii) any assignment of Term Loans shall be in a minimum amount of $1,000,000 (or shall be an assignment of all of the assignor's Term Loans); and (iv) any consent of the Company otherwise required under this subsection shall not be required if an Event of Default has occurred and is continuing. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Lender of an amount equal to the purchase price agreed between such transferor Lender and such Assignee, such Assignee shall be a Lender party to this Agreement and shall have all the rights and obligations of a Lender with a Commitment as set forth in such instrument of assumption, and the transferor Lender shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Lender, the Administrative Agent and the Borrower shall make appropriate arrangements so that, if required, a new Note is issued to the Assignee. In connection with any such assignment, the transferor Lender shall pay to the Administrative Agent an administrative fee for processing such assignment in the amount of $3,500. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Company and the Administrative Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 8.04.

        (d)   Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement and its Notes to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Lender; provided that no such pledge or assignment shall release the transferor Lender from its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. In the case of any Lender that is a fund that invests in bank loans, such Lender may, without the consent of the Borrower or the Administrative Agent, assign or pledge all or any portion of its rights under this Agreement, including the Loans and

50

Notes or any other instrument evidencing its rights as a Lender under this Agreement, to any holder of, trustee for, or any other representative of holders of, obligations owed or securities issued, by such fund, as security for such obligations or securities; provided that any foreclosure or similar action by such trustee or representative shall be subject to the provisions of this Section 10.06(d) concerning assignments.

        (e)   No Assignee, Participant or other transferee of any Lender's rights shall be entitled to receive any greater payment under Section 8.03 or 8.04 than such Lender would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Company's prior written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Lender to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist.

        (f)    Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Lender") may grant to a special purpose funding vehicle (an "SPC") of such Granting Lender, identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Company, the option to provide all or any part of any Loan that such Granting Lender would otherwise be obligated to make hereunder, provided that (i) nothing herein shall constitute a commitment to make any Loan by any SPC and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by the Granting Lender. Each party hereto agrees that no SPC shall be liable for any payment under this Agreement for which a Lender would otherwise be liable, for so long as, and to the extent, the related Granting Lender makes such payment. In furtherance of the foregoing, each party hereto hereby agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or similar proceedings under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary contained in this Section 10.06, any SPC may (i) with notice to, but without the prior written consent of, the Company or the Administrative Agent and without paying any processing fee therefor, assign all or portion of its interests in any Loans to its Granting Lender or to any financial institutions (if consented to by the Company and the Administrative Agent) providing liquidity and/or credit facilities to or for the account of such SPC to fund the Loans made by such SPC or to support the securities (if any) issued by such SPC to fund such Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of a surety, guarantee or credit or liquidity enhancement to such SPC.

        Section 10.07. Governing Law; Submission to Jurisdiction. This Agreement and each Note shall be governed by and construed in accordance with the laws of the State of New York. Each Loan Party party hereto hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to the Loan Documents or the transactions contemplated thereby, and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum.

        Section 10.08. Counterparts; Integration. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof.

51

        Section 10.09. WAIVER OF JURY TRIAL. EACH OF THE LOAN PARTIES PARTY HERETO, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.

        Section 10.10. Confidentiality. Each of the Administrative Agent and the Lenders agrees to use its reasonable best efforts to keep confidential any information delivered or made available by or on behalf of the Loan Parties to it (including without limitation any information obtained through any financial advisor); provided that nothing herein shall prevent the Administrative Agent or any Lender from disclosing such information (i) to the Administrative Agent or any other Lender in connection with the transactions contemplated hereby, (ii) to its officers, directors, employees, agents, attorneys and accountants who have a need to know such information in accordance with customary banking practices and who receive such information having been made aware of the restrictions set forth in this Section, (iii) upon the order of any court or administrative agency, (iv) upon the request or demand of any regulatory agency or authority having jurisdiction over such party, (v) which has been publicly disclosed (by a Person other than such Administrative Agent or Lender), (vi) which has been obtained from any Person other than the Company and its Subsidiaries, provided that such Person is not (x) known to it to be bound by a confidentiality agreement with the Company or its Subsidiaries or any other obligation not to disclose or (y) known to it to be otherwise prohibited from transmitting the information to it by a contractual, legal or fiduciary obligation, (vii) in connection with the exercise of any remedy under the Loan Documents, or (viii) to any actual or proposed participant or assignee of all or any of its rights hereunder, or to any actual or proposed counterparty to any swap, hedge or similar account relating to the Loans which, in each case, has agreed in writing to be bound by the provisions of this Section. No party to this Agreement intends to treat the Loans and related transactions as being a "reportable transaction" (within the meaning of Treasury Regulation section 1.6011-4).

        Section 10.11. No Reliance on Margin Stock. Each Lender represents to the Administrative Agent and each of the other Lenders that it in good faith is not relying upon any Margin Stock as collateral in the extension or maintenance of the credit provided for in this Agreement.

        Section 10.12. Co-Lead Arrangers, Joint Bookrunners, Co-Syndication Agents and Co-Documentation Agents. No Person identified on the cover page of this Agreement as a co-lead arranger, joint bookrunner, co-syndication agent or co-documentation agent shall have any right, power, obligation, liability, responsibility or duty under the Loan Documents in such capacity.

        Section 10.13. Payments Set Aside. To the extent that any payment by or on behalf of the Borrower is made to the Administrative Agent or any Lender, or the Administrative Agent or any Lender exercises its right of set-off, and such payment or the proceeds of such set-off or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any bankruptcy, insolvency or other similar law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect.

        Section 10.14. USA Patriot Act Notice. Each Lender and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the

52

USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the "Act"), it is required to obtain, verify and record information that identifies the Loan Parties, which information includes the name and address of each Loan Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify such Loan Party in accordance with the Act.

53

        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

QWEST SERVICES CORPORATION
By:	/s/  OREN SHAFFER Name: Oren Shaffer Title: Vice Chairman and Chief Financial Officer
1801 California Street Denver, CO 80202 Attn: Chief Financial Officer Fax: (303) 296-4920
with a copy to:
1801 California Street Denver, CO 80202 Attn: General Counsel Fax: (303) 296-5974
QWEST COMMUNICATIONS INTERNATIONAL INC.
By:	/s/  OREN SHAFFER Name: Oren Shaffer Title: Vice Chairman and Chief Financial Officer
1801 California Street Denver, CO 80202 Attn: Chief Financial Officer Fax: (303) 296-4920
with a copy to:
1801 California Street Denver, CO 80202 Attn: General Counsel Fax: (303) 296-5974
website: www.qwest.com

BANK OF AMERICA, N.A., as Administrative Agent
By:	/s/  MICKEY MCLEAN Name: Mickey McLean Title: Vice President
Bank of America, N.A. TX1-492-14-11 901 Main Street, 14th Floor Dallas, TX 75202-3714 Attn: Mickey McLean Fax: (214) 290-9508
BANK OF AMERICA, N.A.
By:	/s/  RICHARD PECK Name: Richard Peck Title: Principal
JPMORGAN CHASE BANK
By:	/s/  PETER B. THAUER Name: Peter B. Thauer Title: Vice President
WACHOVIA BANK, N.A.
By:	/s/  MICHAEL E. MCDUFFIE Name: Michael E. McDuffie Title: Vice President
CREDIT SUISSE FIRST BOSTON, Acting Through Its Cayman Islands Branch
By:	/s/  SOVONNA DAY-GOINS Name: Sovonna Day-Goins Title: Director
By:	/s/  CASSANDRA DROOGAN Name: Cassandra Droogan Title: Associate

LEHMAN COMMERCIAL PAPER INC.
By:	/s/  G. ROBERT BERZINS Name: G. Robert Berzins Title: Vice President
MERRILL LYNCH CAPITAL CORPORATION
By:	/s/  ANTHONY J. LAFAIRE Name: Anthony J. Lafaire Title: Director
UBS LOAN FINANCE LLC
By:	/s/  PATRICIA O'KICKI Name: Patricia O'Kicki Title: Director
By:	/s/  JOSELIN FERNANDES Name: Joselin Fernandes Title: Associate Director Banking Products Services, US
DEUTSCHE BANK TRUST COMPANY AMERICAS
By:	/s/  DAVID MAYHEW Name: David Mayhew Title: Director
GOLDMAN SACHS CREDIT PARTNERS L.P.
By:	/s/  STEPHEN KING Name: Stephen King Title: Authorized Signatory
MORGAN STANLEY SENIOR FUNDING, INC.
By:	/s/  JAAP L. TONCKENS Name: Jaap L. Tonckens Title: Vice President Morgan Stanley Senior Funding

QuickLinks

CREDIT AGREEMENT

EX-12

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 12

QWEST COMMUNICATIONS INTERNATIONAL INC.

CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES

(DOLLARS IN MILLIONS)

					Years Ended December 31,
														1999 (Unaudited)
		2003			2002			2001			2000
(Loss) income before income taxes, discontinued operations and cumulative effect of change in accounting principle		$	(1,832	)	$	(20,115	)	$	(7,362	)	$	(2,034	)	$	1,518
Interest expense (net of amounts capitalized)			1,757			1,789			1,437			1,043			736
Interest factor on rentals			160			168			232			176			90
	Earnings available for fixed charges		85			(18,158	)		(5,693	)		(815	)		2,344
Interest expense			1,776			1,830			1,624			1,148			763
Interest factor on rentals			160			168			232			176			90
	Fixed charges		1,936			1,998			1,856			1,324			853
Ratio of earnings to fixed charges (coverage deficiency)(1)		$	(1,851	)	$	(20,156	)	$	(7,549	)	$	(2,139	)		2.75

(1)

For the years ended December 31, 2003, 2002, 2001 and 2000 the ratio of earnings to fixed charges was calculated as a negative ratio. As a result, disclosed above is the calculation of the coverage deficiency.

QuickLinks

QWEST COMMUNICATIONS INTERNATIONAL INC. CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES (DOLLARS IN MILLIONS)

EX-21

Exhibit 21

Subsidiary of Qwest Communications International Inc.	Jurisdiction of Incorporation/Formation
Qwest Capital Funding, Inc.	Colorado
Qwest Communications Corporation	Delaware
Qwest Corporation	Colorado
Qwest Dex, Inc.	Colorado
Qwest Information Technologies, Inc.	Colorado
Qwest Services Corporation	Colorado
Qwest Wireless, LLC	Delaware

EX-23

QuickLinks -- Click here to rapidly navigate through this document

Independent Auditors' Consent

The Board of Directors and Stockholders
Qwest Communications International Inc.:

        We consent to the incorporation by reference in the registration statements (Nos. 333-30123, 333-40050, 333-50061, 333-56323, 333-61725, 333-65345, 333-74622, 333-84877, 333-87246, 333-91424, 333-111923, and 333-111924) on Form S-8 of Qwest Communications International Inc. of our reports dated March 2, 2004, with respect to the consolidated balance sheets of Qwest Communications International Inc. and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of operations, stockholders' (deficit) equity, and cash flows for each of the years in the three-year period ended December 31, 2003, and the related consolidated financial statement schedule, Schedule II—Valuation and Qualifying Accounts, which reports appear in the December 31, 2003 annual report on Form 10-K of Qwest Communications International Inc.

        Our reports refer to the Company's adoption of Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations, Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, and Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities.

/s/ KPMG LLP

Denver, Colorado
March 9, 2004

QuickLinks

Independent Auditors' Consent

EX-24

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 24

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Richard C. Notebaert, Oren G. Shaffer and Stephen E. Brilz, or any one of them, as his or her attorney-in-fact and agent, with full power of substitution, for him or her in any and all capacities, hereby giving and granting to said attorney-in-fact and agent full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as he might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorney-in-fact and agent may or shall lawfully do, or cause to be done, in connection with the proposed filing by Qwest Communications International Inc., a Delaware corporation, with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, of an annual report on Form 10-K for the fiscal year ended December 31, 2003, including but not limited to, such full power and authority to do the following: (i) execute and file such annual report; (ii) execute and file any amendment or amendments thereto; (iii) receive and respond to comments from the Securities and Exchange Commission related in any way to such annual report or any amendment or amendments thereto; and (iv) execute and deliver any and all certificates, instruments or other documents related to the matters enumerated above, as the attorney-in-fact in his sole discretion deems appropriate.

        This power of attorney has been duly executed below by the following persons in the capacities indicated on this 10th day of March, 2004.

QWEST COMMUNICATIONS INTERNATIONAL INC.
/s/  LINDA G. ALVARADO Linda G. Alvarado	Director
/s/  PHILIP F. ANSCHUTZ Philip F. Anschutz	Director
/s/  CRAIG R. BARRETT Craig R. Barrett	Director
/s/  THOMAS J. DONOHUE Thomas J. Donohue	Director
/s/  JORDAN L. HAINES Jordan L. Haines	Director
/s/  CANNON Y. HARVEY Cannon Y. Harvey	Director
/s/  PETER S. HELLMAN Peter S. Hellman	Director
/s/  VINOD KHOSLA Vinod Khosla	Director

/s/  FRANK P. POPOFF Frank P. Popoff	Director
/s/  CRAIG D. SLATER Craig D. Slater	Director
/s/  W. THOMAS STEPHENS W. Thomas Stephens	Director

2

QuickLinks

POWER OF ATTORNEY

EX-31.1

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Richard C. Notebaert, certify that:

1.

I have reviewed this annual report on Form 10-K of Qwest Communications International Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)

evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c)

disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 11, 2004

/s/  RICHARD C. NOTEBAERT Chairman and Chief Executive Officer

QuickLinks

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

EX-31.2

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Oren G. Shaffer, certify that:

1.

I have reviewed this annual report on Form 10-K of Qwest Communications International Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)

evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c)

disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 11, 2004

/s/  OREN G. SHAFFER Vice Chairman and Chief Financial Officer

QuickLinks

CERTIFICATION OF CHIEF FINANCIAL OFFICER

EX-32

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 32

CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER CERTIFICATION

        Each of the undersigned hereby certifies, for the purposes of section 1350 of chapter 63 of title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of Qwest Communications International Inc. ("Qwest"), that, to his knowledge, the Annual Report of Qwest on Form 10-K for the year ended December 31, 2003, fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operation of Qwest. This written statement is being furnished to the Securities and Exchange Commission as an exhibit to such Form 10-K. A signed original of this statement has been provided to Qwest and will be retained by Qwest and furnished to the Securities and Exchange Commission or its staff upon request.

Dated: March 11, 2004	By:	/s/  RICHARD C. NOTEBAERT Richard C. Notebaert Chairman and Chief Executive Officer
Dated: March 11, 2004	By:	/s/  OREN G. SHAFFER Oren G. Shaffer Vice Chairman and Chief Financial Officer

QuickLinks

CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER CERTIFICATION