Qwest Communications International reported its first quarter net income fell 35% as tax expenses jumped, an Associated Press report said.
More customers halting service amid the languishing economy and stiff competition also took a heavy toll on earnings, the report added.
The Denver-based company also took a €29 million (US$45 million) charge related to severance costs as 700 employees who primarily worked in support jobs for telephone service took voluntary redundancy.
Qwest's stock fell 6%, the report said.
Released before the market opened, the results came amid Qwest's drive to focus more on bundling internet, video and voice services to offset a decline in traditional phone service.
Qwest earned €101 million (US$157 million) in the three months that ended March 31, down from €154 million (US$240 million) in the year-ago quarter.
The report said overall revenue fell 1.5% to €2.1 billion (US$3.40 billion) from €2.2 billion (US$3.45 billion) in 2007, which the company said was due to increased competition in the long-distance business and to industry consolidation.
Tax expenses rose to €63.8 million (US$99 million) from €1.2 million (US$2 million) a year earlier as Qwest began recording income tax expense at normal effective rates.
Revenue for data, internet and video products increased 9% and represented nearly 40% of overall sales, CEO Ed Mueller said.
Total access lines fell 7.8% overall, which included a 9.2% drop in primary residential traditional phone lines. Broadband customers increased 17.2%.