Settling for Qwest?

Is Qwest (NYSE: Q) out of the woods? News agencies reported today that the troubled Baby Bell will pay $250 million in charges as it settles financial and fraud claims lodged by the Securities and Exchange Commission. However, excitement was subdued on the part of investors, and SEC and company spokespeople declined comment.

Investors may breathe a sigh of relief, considering Qwest recently took on $300 million in charges as it upped the amount of reserves it had set aside for settlement costs to $500 million, giving it a little breathing room if $250 million is the damage.

And, when it comes to ugly words like "fraud," we all know that the faster Qwest can attempt to wipe the slate clean and start over, the better (though many may never forget nor forgive hints of financial misconduct, for which I wouldn't blame them).

However, it's hard to wipe the slate entirely clean, and Fool contributor Ben McClure recently pointed out that while Baby Bell siblings SBC Communications (NYSE: SBC), Verizon (NYSE: VZ), and BellSouth (NYSE: BLS) may have their full share of challenges, Qwest is the weakest in the bunch.

Indeed, though the rumored news may speak of silver linings -- that sigh of relief when things aren't as bad as once thought, or when the onerous burden of the unknown is taken out of the equation -- the telecom sector continues to be a troubled one indeed, without factors such as dwindling cash and mounting debt like Qwest has.

Qwest shares did collect a 3% gain in recent trading, but surely investors know the risks at hand, even in one so many may misconstrue as "cheap," trading around $3.00 a pop. Given the level of competitive forces in telecom -- replete with price wars and disruptive technologies and even cable companies, for goodness' sake -- as well as its own issues, the long-term growth prospects for Qwest seem an open question.

What do you think? Sound off about Qwest's prospects on the Fool's Qwest discussion board. But first, take a look at our dueling Fools Baby Bells standoff, with Ben McClure on the pro side and Bill Mann on the con side.

Alyce Lomax does not own shares of any of the companies mentioned.