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

THE REGISTRANT, A WHOLLY OWNED SUBSIDIARY OF CENTURYLINK, INC., MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS I(1) (a) AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL INSTRUCTION I(2).

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 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 a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

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

On March 12, 2013, 1,000 shares of common stock were outstanding. None of Qwest Communications International Inc.'s common stock is held by non-affiliates.

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, references to "QCII" refer to Qwest Communications International Inc. on an unconsolidated, stand-alone basis, references to "CenturyLink" and "parent" refer to our direct parent company, CenturyLink, Inc. and its consolidated subsidiaries, and references to "QC" refer to Qwest Corporation, our principal subsidiary.

We are an integrated communications company engaged primarily in providing an array of communications services to our residential, business, governmental and wholesale customers. Our communications services include local and long-distance, network access, private line (including special access), broadband, data, managed hosting, wireless and video services. In certain local and regional markets, we also provide local access and fiber transport services to competitive local exchange carriers ("CLEC"). We strive to maintain our customer relationships by, among other things, bundling our service offerings to provide our customers with a complete offering of integrated communications services.

We generate the majority of our revenues from services provided in the 14-state region of Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming. We refer to this region as our local service area.

We were incorporated under the laws of the State of Delaware in 1997. Our principal executive offices are located at 100 CenturyLink Drive, Monroe, Louisiana 71203 and our telephone number is (318) 388-9000.

On April 1, 2011, we became a wholly owned subsidiary of CenturyLink, Inc. in a tax-free, stock-for-stock transaction. Although we continued as a surviving corporation and legal entity after the acquisition, the accompanying consolidated financial information is presented for two periods: predecessor and successor, which relate to the period preceding the acquisition and the period succeeding the acquisition, respectively. On the date of the acquisition, April 1, 2011, our assets and liabilities were recognized at their fair value. This revaluation has been reflected in our consolidated financial statements and, therefore, has resulted in a new basis of accounting for the "successor period". This new basis of accounting means that our consolidated financial statements for the successor periods are not comparable to our consolidated financial statements relating to periods prior to the acquisition, including the predecessor period consolidated financial statements in this report.

For certain products and services we provide and for a variety of internal communications functions, we use portions of CenturyLink's telecommunications network to transport data and voice traffic. Likewise, CenturyLink uses our telecommunications network to transport data and voice traffic in order to fulfill services to its customers and a variety of internal communications functions.

For a discussion of certain risks applicable to our business, financial condition and results of operations, see "Risk Factors" in Item 1A of this report. The summary financial information in this section should be read in conjunction with, and is qualified by reference to, the consolidated financial statements and notes thereto in Item 8 and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of this report.

We group our products and services among four major categories: strategic services, legacy services, data integration and affiliates and other services. See descriptions of these categories below in

the section "Products and Services". The following table provides a summary of our operating revenues by category:

Substantially all of our long-lived assets are located in the United States and substantially all of our revenues are from customers located in the United States.

Since the April 1, 2011 closing of CenturyLink's acquisition of us, our operations have been integrated into and reported as part of the segments of CenturyLink. CenturyLink's chief operating decision maker ("CODM") has become our CODM, but reviews our financial information on an aggregate basis only in connection with our quarterly and annual reports that we file with the Securities and Exchange Commission ("SEC"). Consequently, we do not provide our discrete financial information to the CODM on a regular basis. As such, we now have one reportable segment and we have reclassified our predecessor period results to conform to our current view.

Our products and services include a variety of voice, broadband, data, information technology ("IT"), video and other communications services. We offer our customers the ability to bundle together several products and services. For example, we offer integrated and unlimited local and long-distance services. Our customers can also bundle two or more services, such as broadband, video (including DIRECTV through our strategic partnership), voice and Verizon Wireless (through our strategic partnership) services. We believe our customers value the convenience of and price discounts associated with receiving multiple services through a single company.

Most of our products and services are provided using our telecommunications network, which consists of voice and data switches, copper cables, fiber-optic cables and other equipment. Our network serves approximately 8.1 million access lines in 14 states and forms a portion of the public switched telephone network, or PSTN.

Our customers use our strategic services to access the Internet, connect to private networks and transmit data. We also provide value-added services and integrated solutions that make communications more secure, reliable and efficient for our customers. We focus our marketing and sales efforts on these services:

Our legacy services represent our traditional voice, data and network services, which include the following:

Data integration involves our sale of telecommunications equipment to customers for use on their premises and related professional services. These services include network management, installation and maintenance of data equipment and building of proprietary fiber-optic networks for our governmental and other business customers.

We provide to our affiliates telecommunications services that we also provide to external customers. In addition, we provide to our affiliates: computer system development and support services, network support and technical services. We also generate other operating revenues from Universal Service Fund ("USF") revenues and surcharges and the leasing and subleasing of space in our office buildings, warehouses and other properties. The majority of our real estate properties are located in our local service area.

Either directly or through our affiliates, we have rights in various patents, trade names, trademarks, copyrights and other intellectual property necessary to conduct our business. Our services often use the intellectual property of others, including licensed software. We also occasionally license our intellectual property to others.

We maintain local offices in most of the larger population centers within our local service area. These offices provide sales and customer support services in the community. We also rely on our call center personnel to promote sales of services that meet the needs of our customers. Our strategy is to enhance our communications services by offering a comprehensive bundle of services and deploying new technologies to further enhance customer loyalty.

We conduct most of our operations under the brand name "CenturyLink." Our satellite television service is offered on a co-branded basis under the "DIRECTV" name. The wireless service that we offer under our agency agreement with Verizon Wireless is marketed under the "Verizon Wireless" brand name.

Our approach to our residential customers emphasizes customer-oriented sales, marketing and service with a local presence. We market our products and services primarily through direct sales representatives, inbound call centers, local retail stores, telemarketing and third parties. We support our

distribution with direct mail, bill inserts, newspaper advertising, website promotions, public relations activities and sponsorship of community events and sports venues.

Our approach to our business and government customers includes a commitment to deliver communications products and services that meet existing and future business needs through bundles of services and integrated service offerings. Our focus is to be a comprehensive communications solution for our small office, mid-sized and select enterprise business and government customers.

Our approach to our wholesale customers includes a commitment to deliver communications solutions that meet existing and future needs of national network telecommunications providers through bandwidth growth and quality of services.

Our data hosting operations utilize a solution-based selling approach. By working directly with potential and existing clients, we are able to understand our clients' IT infrastructure and long-term goals. We also market through indirect channels, including collaborations with existing clients and technology providers, telecommunications companies and system integrators.

Most of our products and services are provided using our telecommunications network, which consists of voice and data switches, copper cables, fiber-optic cables and other equipment. Our local exchange carrier networks also include central offices and remote sites, all with advanced digital switches and operating with licensed software. Our fiber-optic cable is the primary transport technology between our central offices and interconnection points with other incumbent carriers. As of December 31, 2012, we maintained over 431 thousand miles of copper plant and approximately 73 thousand miles of fiber optic plant in our local exchange networks. We also maintain separate networks in connection with providing fiber transport and CLEC services.

Most of our long-distance services are provided through reselling arrangements with other long-distance carriers, with the balance being provided directly through CenturyLink's own switches and network equipment. All of our satellite television and wireless voice service is provided by other carriers under agency agreements.

We continue to enhance and expand our network by deploying broadband-enabled technologies to provide additional capacity to our customers. Rapid and significant changes in technology are expected to continue in the telecommunications industry. Our future success will depend, in part, on our ability to anticipate and adapt to changes in customer demands and technology.

In particular, we anticipate that continued increases in broadband usage by our customers will require us to make significant capital expenditures to increase network capacity or to implement network management practices to alleviate network capacity shortages, either of which could adversely impact our results of operation and financial condition. For additional information, see "Risk Factors", generally, in Item 1A of this report, and, in particular, "Risk Factors—Risks Affecting Our Business—Increases in broadband usage may cause network capacity limitations, resulting in service disruptions, reduced capacity or slower transmission speeds for our customers."

In this section, we describe potentially significant regulatory changes that primarily impact QCII's major subsidiary, Qwest Corporation, an incumbent local exchange carrier ("ILEC"). Accordingly, references in this section to "we," "us", the "Company" and "our" generally refer to Qwest Corporation.

We are subject to significant regulation by the Federal Communications Commission ("FCC"), which regulates interstate communications, and state utility commissions, which regulate intrastate communications in our local service area. These agencies issue rules to protect consumers and promote competition; they set the rates that telecommunication companies charge each other for exchanging traffic; and they have established USF to support the provision of services to high-cost areas. In most states, local voice service, switched and special access services and interconnection services are subject to price regulation, although the extent of regulation varies by type of service and geographic region. In addition, we are required to maintain licenses with the FCC and with the utility commissions of most of the states in our local service area. Laws and regulations in many states restrict the manner in which a licensed entity can interact with affiliates, transfer assets, issue debt and engage in other business activities and many mergers and acquisitions require approval by the FCC and some state commissions.

Historically, ILECs operated as regulated monopolies having the exclusive right and responsibility to provide local telephone services in their franchised service territories. As we discuss in greater detail below, passage of the Telecommunications Act of 1996, coupled with state legislative and regulatory initiatives and technological change, fundamentally altered the telephone industry by generally reducing the regulation of ILECs and creating a substantial increase in the number of competitors. We are considered an ILEC. The following description discusses some of the major industry regulations that affect our traditional telephone operations, but numerous other regulations not discussed below could also impact us. Some legislation and regulations are currently the subject of judicial, legislative and administrative proceedings which could substantially change the manner in which the telecommunications industry operates and the amount of revenues we receive for our services. Neither the outcome of these proceedings, nor their potential impact on us, can be predicted at this time. For additional information, see Item 1A of this annual report below.

In recent years, most states have substantially reduced their regulation of ILECs. Nonetheless, state regulatory commissions generally continue to regulate local service rates, intrastate access charges, state universal service funds and in some cases service quality, as they continue to grant and revoke certifications authorizing companies to provide communications services. State commissions traditionally regulated pricing through "rate of return" regulation that focused on authorized levels of earnings by ILECs. Several states continue to regulate us in this manner. In most of our states, we are generally regulated under various forms of alternative regulation that typically limit our ability to increase rates for basic local voice service, but relieve us from the requirement to meet certain earnings tests. In a few states, we have recently gained pricing freedom for the majority of retail services except for the most basic of services, such as stand-alone basic residential voice service. In most of the states in which we operate, we have gained pricing flexibility for certain enhanced calling services, such as caller identification and for bundled services that also include local voice service. State commissions periodically conduct proceedings to review the rates that we charge other telecommunications providers for using our network or for reselling our service pursuant to the Telecommunications Act of 1996.

We are currently responding to carrier complaints, legislation or generic investigations regarding our intrastate switched access charge rates in several of our states. In particular, certain long-distance providers have disputed existing intercarrier compensation rates payable to us and other ILECs with respect to VoIP traffic or refused to pay access charges, based on the contention that tariffed switched access charges should not apply to VoIP traffic. On October 27, 2011, the FCC adopted an order comprehensively reforming federal intercarrier compensation and universal service policies and rules, as discussed further below under the heading "Federal Regulation." Among other things, this order preempted state regulatory commissions' jurisdiction over all terminating access charges, including intrastate access charges that have historically been subject to exclusive state jurisdiction. Furthermore,

the FCC decreed that on a prospective basis, intercarrier compensation rates for VoIP traffic will be established at interstate access rates in the event intrastate switched access rates exceed interstate rates.

The FCC order requires all terminating access rates including intrastate, interstate and reciprocal compensation rates to be reduced and unified over time. Excluding the rate implications contemplated on a prospective basis by the recent FCC order, we will continue to vigorously defend and seek to collect our intrastate switched access revenue subject to outstanding disputes. These historical disputes are primarily over access charge compensation for VoIP traffic terminating on the public switched telephone network. The outcomes of these disputes cannot be determined at this time. If we are required to reduce our intrastate switched access rates as a result of any of these disputes or state initiatives, we will seek to recover displaced switched access revenues from state universal service funds or other services. However, the amount of such recovery, particularly from residential customers, is not assured.

Under state law, our telephone operating subsidiaries are typically governed by laws and regulations that (i) regulate the purchase and sale of ILECs, (ii) prescribe certain reporting requirements, (iii) require ILECs to provide service under publicly-filed tariffs setting forth the terms, conditions and prices of regulated services, (iv) limit ILECs' ability to borrow and pledge their assets (v) regulate transactions between ILECs and their affiliates, and (vi) impose various other service standards.

Unlike many of our competitors, as an ILEC we generally face "carrier of last resort" obligations which include an ongoing requirement to provide service to all prospective and current customers in our service area who request service and are willing to pay rates prescribed in our tariffs. In competitively-bid situations, such as newly-constructed housing developments or multi-tenant dwellings, this may constitute a competitive disadvantage to us if competitors can choose to focus on low-risk profitable customers and withhold service from high-risk unprofitable customers. In addition, strict adherence to carrier of last resort requirements may force us to construct facilities with a low likelihood of positive economic return.

We operate in states where traditional cost recovery mechanisms, including rate structures, are under evaluation or have been modified. There can be no assurance that these states will continue to provide for cost recovery at current levels.

We are required to comply with the Communications Act of 1934, which requires us to offer services at just and reasonable rates and on non-discriminatory terms, as well as the Telecommunications Act of 1996, which amended the Communications Act of 1934 primarily to promote competition.

The FCC regulates interstate services provided by us, including the special access charges we bill for wholesale network transmission and the interstate access charges that we bill to long-distance companies and other communications companies in connection with the origination and termination of interstate voice and data transmissions. Additionally, the FCC regulates a number of aspects of our business related to privacy, homeland security and network infrastructure, including access to and use of local telephone numbers. The FCC has responsibility for maintaining and administering the federal USF, which provides substantial support for maintaining networks in high-cost areas, as well as supporting service to low-income households, schools and libraries, and rural health care providers. Like other communications network operators, ILECs must obtain FCC approval to use certain radio frequencies, or to transfer control of any such licenses. The FCC retains the right to revoke these licenses if a carrier materially violates relevant legal requirements.

We, like other large and mid-sized ILECs, operate under price-cap regulation of interstate access rates. Under price-cap regulation, limits imposed on a company's interstate rates are adjusted periodically to reflect inflation, productivity improvement and changes in certain non-controllable costs.

In recent years, our operations and those of other telecommunications carriers have been further impacted by legislation and regulation imposing additional obligations on us, particularly with regards to providing broadband service, bolstering homeland security, increasing disaster recovery requirements, minimizing environmental impacts and enhancing privacy. These laws include the Communications Assistance for Law Enforcement Act, and laws governing local telephone number portability and customer proprietary network information requirements. These laws and regulations may cause us to incur additional costs and could impact our ability to compete effectively.

In December 2012, the FCC initiated a special access proceeding and has requested data, information and documents to allow it to conduct a comprehensive evaluation of competition in the special access market. The ultimate impact of this proceeding on the Company is currently unknown. However, if the FCC were to adopt significant changes in regulations affecting special access services, it could adversely impact our operations or financial results.

For decades, the FCC has regularly considered various intercarrier compensation reforms, generally with a goal to create a uniform mechanism to be used by the entire telecommunications industry for payments between carriers originating, terminating, or carrying telecommunications traffic. In connection therewith, the FCC solicited public comments on a variety of topics related to access charges and intercarrier compensation.

The American Recovery and Reinvestment Act of 2009 (the "Recovery Act") includes certain broadband initiatives that are intended to accelerate broadband deployment across the United States. The Recovery Act approved $7.2 billion in funding for broadband stimulus projects across the United States to be administered by two governmental agencies. The programs provide grants and loans to applicants for construction of certain broadband infrastructure, provision of certain broadband services, and support of certain broadband adoption initiatives. This program has attracted a wide range of applicants including states, municipalities, start-up companies and consortiums. The participation of other parties in these programs has increased competition in selected areas, which may increase our marketing costs and decrease our revenues in those areas. This trend may intensify if program participation increases.

On October 27, 2011, the FCC adopted the Connect America and Intercarrier Compensation Reform order ("CAF order") intended to reform the existing regulatory regime to recognize ongoing shifts to new technologies, including VoIP, and gradually re-direct universal service funding to foster nationwide broadband coverage. This initial ruling provides for a multi-year transition over the next decade as terminating intercarrier compensation charges are reduced, universal service funding is explicitly targeted to broadband deployment, and line charges paid by end user customers are gradually increased. We anticipate that these changes will substantially increase the pace of reductions in the amount of switched access revenues in our wholesale business, while creating opportunities for increases in federal USF and retail revenue streams.

On December 29, 2011, the CAF order went into effect. At the same time, numerous parties filed a petition for reconsideration with the FCC seeking numerous revisions to the order. In January 2012, CenturyLink joined more than two dozen parties in challenging certain aspects of the order by filing a separate appeal that is expected to be heard by the United States Tenth Circuit Court of Appeals in late 2013. Future judicial challenges to the CAF order are possible, which could alter or delay the FCC's proposed changes. In addition, based on the outcome of the FCC proceedings, various state commissions may consider changes to their universal service funds or intrastate access rates. Moreover,

rulemaking designed to implement the order is not complete, and several FCC proceedings relating to the order remain pending. For these and other reasons, we cannot predict the ultimate impact of these proceedings on us at this time.

On January 31, 2012, the FCC adopted an order modernizing the program that provides assistance to qualifying low-income individuals for local voice service. These changes also affect state-specific programs that provide assistance to qualifying individuals. The impact of these changes on us and our low-income customers cannot be quantified at this time, but we may face increased administrative costs, additional audit requirements and potential customer disconnections as a result of this FCC order and its implementation.

We received approximately $145 million, $142 million and $148 million of revenue from federal and state universal service programs for the successor year ended December 31, 2012, the combined year ended December 31, 2011 and the predecessor year ended December 31, 2010, respectively. Such amounts represented approximately 1.3% of each of the respective aforementioned periods' total operating revenues.

We compete in a rapidly evolving and highly competitive market and we expect intense competition to continue. Technological advances, regulatory and legislative changes have increased opportunities for alternative communications service providers, which in turn have increased competitive pressures on our business. These alternate providers often face fewer regulations and have lower cost structures than we do.

As both consumers and business customers increasingly demand high-speed connections for entertainment, communications and productivity, we expect the demands on our network will continue to increase over the next several years. To succeed, we and other network-based providers must ensure that our networks can deliver services that meet these increasing bandwidth requirements. We plan to continue to invest in our network to be able to meet this future demand. In addition, network reliability and security are increasingly important competitive factors in the enterprise business.

Although our status as an ILEC continues to provide us some advantages in providing local services in our local service area, as noted above we increasingly face significant competition as an increasing number of consumers are willing to substitute cable, wireless and electronic communications for traditional voice telecommunications services. This has led to an increase in the number and type of competitors within our industry and a decrease in our market share. As a result of this product substitution, we face greater competition in providing local and long-distance services from wireless providers, resellers and sales agents (including ourselves), social media hosts and broadband service providers, including cable companies. We also continue to compete with traditional telecommunications providers, such as national carriers, smaller regional providers, CLECs and independent telephone companies.

Some of our competitors are subject to fewer regulations than we are which affords them competitive advantages against us. Under federal regulations, telecommunication providers are able to interconnect their networks with ours, resell our services or lease separate parts of our network in order to provide competitive services. Generally, we have been required to provide these functions and services at wholesale rates to our competitors, which allow our competitors to sell their services at lower prices. However, these rules have been and continue to be reviewed by state and federal regulators. In addition, wireless and broadband service providers generally are subject to fewer regulations, which may allow them to operate with lower costs than we are able to operate. For additional discussion of regulations affecting our business, see "Regulation" above.

As discussed below, competition for many of our services is based in part on bundled offerings. We believe our customers value the convenience of and price discounts associated with, receiving multiple services through a single company. As such, we continue to focus on expanding and improving our bundled offerings.

With respect to our strategic services, competition is based on price, bandwidth, service, promotions and bundled offerings. Wireless carriers' fourth generation, or 4G, services are allowing them to more directly compete with our strategic services. Private line and MPLS services also compete on network reach and reliability, while hosting, broadband and VoIP services compete on bandwidth and quality of service.

In providing broadband services, we compete primarily with cable companies, wireless providers and other broadband service providers. Competition within our broadband services is based on price, bandwidth and service. In reselling DIRECTV video services, we compete primarily with cable and other satellite companies as well as other sales agents and resellers. Competition here is based on price, content and quality.

The market for wireless services is highly competitive. We market and sell wireless services to customers who are buying these services as part of a bundle with one or more of our other services. In reselling Verizon Wireless services, we compete with national and regional carriers as well as other sales agents and resellers. Competition for our wireless services is based on the coverage area, price, services offered, features, handsets, technical quality and customer service.

In providing private line services we compete primarily with national telecommunications providers, such as AT&T Inc. and Verizon Communications Inc. Additionally we are experiencing increased competition for private line services from cable companies. Competition for private line services is based primarily on price, as well as network reach, bandwidth, quality, reliability and customer service.

Although we are experiencing intense competition in these markets, we believe we are favorably positioned due to our strong presence in our local service area. Many of our competitors for these strategic services are not subject to the same regulatory requirements as we are and therefore they are able to avoid significant regulatory costs and obligations. Throughout each of our competitive services, we continue to focus on expanding and improving our bundled offerings.

Our competitors for hosting, colocation and other IT services range from telecommunications companies, hardware manufacturers and system integrators that support the in-house IT operations for a business or offer outsourcing solutions. Due to the size and capacity of some of these companies, they may be able to offer more inexpensive solutions to our customers. To compete, we focus on providing complex, secure and performance-driven services to our business customers through our global infrastructure. Our services can be purchased individually or as part of a total outsourcing arrangement. Our keys to growth include targeting the right clients, offering targeted business solutions to solve specific client needs and delivering compelling and comprehensive technical capabilities.

The market for legacy services is highly competitive and is based primarily on pricing, packaging of services and features, quality of service and meeting customer care needs. We believe these customers value the convenience of and price discounts associated with, receiving multiple services through a single company. Within the telecommunications industry, these services may include telephone, wireless, video and Internet access. Accordingly, we and our competitors continue to develop and deploy more innovative product bundling, enhanced features and combined billing options in an effort to retain and gain customers. While we rely on reseller or sales agency arrangements to provide some of our bundled

services, some of our competitors are able to provide all of their bundled services directly, which may provide them a competitive advantage.

In providing long-distance services to our customers, we compete primarily with national telecommunications and VoIP providers. Competition in the long-distance market is based primarily on price; however customer service, quality and reliability can also be influencing factors. Our resale and UNE customers are experiencing the same competition with CLECs, for local services customers as we are, as discussed above. We also compete with some of our own customers that are deploying their own networks to provide customers with local services. By doing so, these competitors take traffic off of our network.

Significant competitive factors in the local telephone industry include pricing, packaging of services and features, quality and convenience of service and meeting customer needs such as simplified billing and timely response to services calls.

We provide access services to other telecommunications providers to connect their customers and their networks to our network so that they can provide long-distance, transport, data, wireless and Internet services. We face significant competition for access services from CLECs, cable companies, resellers and wireless service providers. Our access service customers face competitive pressures in their businesses that are similar to those we face with respect to strategic and legacy services. To the extent that these competitive pressures result in decreased demand for their services, demand for our access services also declines.

Wireless telephone services increasingly constitute a significant source of competition with ILEC services, especially since wireless carriers have begun to compete effectively on the basis of price with more traditional telephone services. As a result, some customers have chosen to completely forego use of traditional wireline phone service and instead rely solely on wireless service for voice services. This trend is more pronounced among residential customers, which comprise 61% of our access line customers. We anticipate this trend will continue, particularly if wireless service providers continue to expand their coverage areas, reduce their rates, improve the quality of their services and offer enhanced new services. Substantially all of our access line customers are currently capable of receiving wireless services from at least one competitive service provider. Technological and regulatory developments in wireless services, personal communications services, digital microwave, satellite, coaxial cable, fiber optics, local multipoint distribution services, WiFi and other wired and wireless technologies are expected to further permit the development of alternatives to traditional landline services. Moreover, the growing prevalence of electronic mail, text messaging, social networking and similar digital communications continues to reduce the demand for traditional landline voice services.

Improvements in the quality of VoIP service have led several cable, Internet, data and other communications companies, as well as start-up companies, to substantially increase their offerings of VoIP service to business and residential customers. VoIP providers frequently offer features that cannot readily be provided by traditional ILECs and may price their services at or below those prices currently charged for traditional local and long-distance telephone services for several reasons, including lower operating costs and regulatory advantages. Although over the past several years the FCC has increasingly subjected portions of VoIP operations to federal regulation, VoIP services currently operate under fewer regulatory constraints than LEC services. For all these reasons, we cannot assure that VoIP providers will not successfully compete for our customers.

In providing other legacy services, such as traditional services and ISDN, we compete primarily with national telecommunications providers and cable companies. Competition for these other legacy services is based primarily on price and bundled offerings.

In providing data integration to our customers, we compete primarily with large integrators, equipment providers and national telecommunication providers. Competition is based on package offerings and as such we focus on providing these customers individualized and customizable packages. Our strategy is to provide our data integration through packages that include other strategic and legacy services. As such, in providing data integration we often face many of the same competitive pressures as we face in providing strategic and legacy services, as discussed above.

From time to time we may incur environmental compliance and remediation expenses, mainly resulting from the operation of vehicle fleets or power supplies for our communications equipment. Although we cannot assess with certainty the impact of any future compliance and remediation obligations or provide you with any assurances regarding the ultimate impact thereof, we do not believe that future environmental compliance and remediation expenditures will have a material adverse effect on our financial condition or results of operations.

Overall, our business is not significantly impacted by seasonality. From time to time weather related problems have resulted in increased costs to repair our network and respond to service calls in some of our markets. The amount and timing of these costs are subject to the weather patterns of any given year.

Over the past several years, we have reduced our workforce primarily due to (i) integration efforts from CenturyLink's recent acquisition of us; (ii) increased competitive pressures; and (iii) the loss of access lines over the last several years.

Our website is the same as that of our parent company, CenturyLink, which is www.centurylink.com. The information contained on, or that may be accessed through, our website is not part of this annual report. 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 in the "Investor Relations" section of our website (ir.centurylink.com) under the heading "SEC Filings." These reports are available on our website as soon as reasonably practicable after we electronically file them with the Securities and Exchange Commission, or SEC.

We have adopted CenturyLink's written codes of conduct that serve as the code of ethics applicable to our directors, officers and employees, including our principal executive officer and senior financial officers, in accordance with applicable laws and rules promulgated by the SEC and the New York Stock Exchange. In the event that CenturyLink makes any changes (other than by a technical,

administrative or non-substantive amendment) to, or provide any waivers from, the provisions of its code of conduct applicable to our directors or executive officers, CenturyLink intends to disclose these events on our website or in a report on Form 8-K filed with the SEC. These codes of conduct, as well as copies of CenturyLink's guidelines on significant governance issues and the charters of their audit committee, compensation committee, nominating and corporate governance committee and risk evaluation committee, are also available in the "Corporate Governance" section of our website at www.centurylink.com/Pages/AboutUs/Governance/ or in print to any shareholder who requests them by sending a written request to our Corporate Secretary at CenturyLink, Inc., 100 CenturyLink Drive, Monroe, Louisiana, 71203.

Investors may also read and copy any materials filed with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. For information on the operation of the Public Reference Room, you are encouraged to call the SEC at 1-800-SEC-0330. For all of our electronic filings, the SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

In connection with filing this annual report, our chief executive officer and chief financial officer made the certifications regarding our financial disclosures required under the Sarbanes-Oxley Act of 2002, and the Act's related regulations. In addition, during 2012, our chief executive officer certified to the New York Stock Exchange that he was unaware of any violations by us of the New York Stock Exchange's corporate governance listing standards.

This report and other documents filed by us under the federal securities law include, and future oral or written statements or press releases by us and our management may include, forward-looking statements about our financial condition, operating results and business. These statements include, among others:

These forward-looking statements are based upon our judgment and assumptions as of the date such statements are made concerning future developments and events, many of which are beyond our control. These forward-looking statements, and the assumptions upon which they are based, are inherently speculative and are subject to a number of risks and uncertainties. Actual events and results may differ materially from those anticipated, estimated, projected or implied by us in those statements if one or more of these risks or uncertainties materialize, or if our underlying assumptions prove incorrect. Factors that could affect actual results include but are not limited to:

These and other uncertainties related to our business and our recent acquisitions are described in greater detail in Item 1A of this report, which is subject to updating and supplementing by our subsequent SEC reports.

These risk factors should be considered in connection with any written or oral forward-looking statements that we or persons acting on our behalf may issue. Anticipated events may not occur and our actual results or performance may differ materially from those anticipated, estimated or projected if one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect. Additional risks that we currently deem immaterial or that are not presently known to us could also cause our actual results to differ materially from our expected results. Given these uncertainties, we caution investors not to unduly rely on our forward-looking statements. We undertake no obligation to update or revise any forward-looking statements for any reason, whether as a result of new information, future events or developments, changed circumstances, or otherwise. Further, the information about our intentions contained in this document is a statement of our intentions as of the date of this document 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.

Investors should also be aware that while we do, at various times, communicate with securities analysts, it is against our policy to disclose to them selectively any material non-public information or other confidential information. Accordingly, investors should not assume that we agree with any statement or report issued by an analyst irrespective of the content of the statement or report. To the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not our responsibility.

Unless otherwise indicated, information contained in this report and other documents filed by us under the federal securities laws concerning our views and expectations regarding the communications industry are based on estimates made by us using data from industry sources, and on assumptions made by us based on our management's knowledge and experience in the markets in which we operate and the communications industry generally. You should be aware that we have not independently verified data from industry or other third-party sources and cannot guarantee its accuracy or completeness. Our estimates and assumptions involve risks and uncertainties and are subject to change based on various factors, including those discussed below in Item 1A of this report.

Any of the following risks could materially and adversely affect our business, financial condition, results of operations, liquidity or prospects. The risks described below are not the only risks facing us. Please be aware that additional risks and uncertainties not currently known to us or that we currently deem to be immaterial could also materially and adversely affect our business operations.

Increasing competition, including product substitution, continues to cause access line losses, which has adversely affected and could continue to adversely affect our operating results and financial condition.

We compete in a rapidly evolving and highly competitive market, and we expect competition to continue to intensify. In addition to competition from larger national telecommunications providers, we are facing increasing competition from a variety of other sources, including cable and satellite companies, wireless providers, broadband companies, resellers, sales agents and facilities-based providers using their own networks as well as those leasing parts of our network. In addition, regulatory developments over the past several years have generally increased competitive pressures on our business. Due to some of these and other factors, we continue to lose access lines.

Some of our current and potential competitors (i) offer a more comprehensive range of communications products and services, (ii) have market presence, engineering and technical capabilities, and financial and other resources greater than ours, (iii) own larger or more diverse networks with greater transmission capacity or other advantages, (iv) conduct operations or raise capital at a lower cost than us, (v) are subject to less regulation, (vi) offer greater online content or (vii) have substantially stronger brand names. Consequently, these competitors may be better equipped to provide more attractive offerings, to charge lower prices for their products and services, to develop and expand their communications and network infrastructures more quickly, to adapt more swiftly to new or emerging technologies and changes in customer requirements, and to devote greater resources to the marketing and sale of their products and services.

Competition could adversely impact us in several ways, including (i) the loss of customers and market share, (ii) the possibility of customers reducing their usage of our services or shifting to less profitable services, (iii) reduced traffic on our networks, (iv) our need to expend substantial time or

money on new capital improvement projects, (v) our need to lower prices or increase marketing expenses to remain competitive and (vi) our inability to diversify by successfully offering new products or services.

We are continually taking steps to respond to these competitive pressures, but these efforts may not be successful. Our operating results and financial condition would be adversely affected if these initiatives are unsuccessful or insufficient and if we otherwise are unable to sufficiently stem or offset our continuing access line losses and our revenue declines significantly without corresponding cost reductions. If this occurred, our ability to service debt and pay other obligations would also be adversely affected.

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 and adversely affect our operating results and financial condition.

The communications industry is experiencing significant technological changes, many of which are reducing demand for our traditional voice services or are enabling our current customers to reduce or bypass use of our networks. Similarly, the information technology services industry is experiencing rapid changes in technologies. Further technological change could require us to expend capital or other resources in excess of currently contemplated levels or to forgo the development or provision of products or services that others can provide more efficiently. If we are not able to develop new products and services to keep pace with technological advances, or if those products and services are not widely accepted by customers, our ability to compete could be adversely affected and our market share could decline. Any inability to effectively respond to changes in technology and markets could also adversely affect our operating results and financial condition, as well as our ability to service debt and pay other obligations.

For additional information on the risks of increased expenditures, see "Risk Factors—Risks Affecting our Liquidity and Capital Resources—Our business requires us to incur substantial capital and operating expenses, which reduces our available free cash flow."

Our legacy services continue to experience declining revenues, and our efforts to offset these declines may not be successful.

The telephone industry has experienced a decline in access lines and network access revenues, which, coupled with the other changes resulting from competitive, technological and regulatory developments, continue to place downward pressure on the revenues we generate from our legacy services.

However, some of these strategic services generate lower profit margins than our traditional services, and some can be expected to experience slowing growth as increasing numbers of our existing or potential customers subscribe to these newer products. Moreover, we cannot assure you that the revenues generated from our new offerings will offset revenue losses associated from reduced sales of our legacy products. Similarly, we cannot assure you that our new service offerings will be as successful

as anticipated. In addition, our reliance on third parties to provide certain of these strategic services could constrain our flexibility, as described further below.

If we fail to extend or renegotiate our collective bargaining agreements 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.

As of December 31, 2012, we had approximately 24,800 employees, of which approximately 12,000, or 48%, are members of various bargaining units represented by the International Brotherhood of Electrical Workers or the Communications Workers of America and are subject to collective bargaining agreements that expired October 6, 2012. We are currently negotiating the terms of new agreements. In the meantime, the predecessor agreements have been extended and the applicable unions have agreed to provide us with at least twenty-four hour advance notice before terminating those predecessor agreements.

We may be unable to reach new agreements, and union employees may engage in strikes, work slowdowns or other labor actions, which could materially disrupt our ability to provide services and result in increased cost to us. In addition, new labor agreements may impose significant new costs on us, which could impair our financial condition or results of operations in the future. To the extent they contain benefit provisions, these agreements may also limit our flexibility to change benefits in response to industry or competitive changes. In particular, the post-employment benefits provided under these agreements could cause us to incur costs not faced by many of our competitors, which could ultimately hinder our competitive position.

Our future results will suffer if we do not effectively adjust to changes in our business.

The above-described changes in our industry have placed a higher premium on marketing, technological, engineering and provisioning skills. Our future success depends, in part, on our ability to retrain our staff to acquire or strengthen skills necessary to address these changes, and, where necessary, to attract and retain new personnel that possess these skills.

Unfavorable general economic conditions could negatively impact our operating results and financial condition.

Unfavorable general economic conditions, including the unstable economy and credit market, could negatively affect our business. Worldwide economic growth has been sluggish since 2008, and many experts believe that a confluence of factors in the United States, Europe, Asia and developing countries may result in a prolonged period of economic downturn, slow growth or economic uncertainty. While it is difficult to predict the ultimate impact of these general economic conditions, they could adversely affect the affordability of and consumer demand for some of our products and services and could cause customers to shift to lower priced products and services or to delay or forgo purchases of our products and services. These conditions impact, in particular, our ability to sell discretionary products or services to business customers that are under pressure to reduce costs or to governmental customers that have suffered recent budget cuts. Any one or more of these circumstances could cause our revenues to continue declining. Also, our customers may encounter financial hardships or may not be able to obtain adequate access to credit, which could negatively impact their ability to make timely payments to us. In addition, as discussed further below, unstable economic and credit markets may preclude us from refinancing maturing debt at terms that are as favorable as those from which we previously benefited, at terms that are acceptable to us or at all. For these reasons, among others, if the current economic conditions persist or decline, this could adversely affect our operating results and financial condition, as well as our ability to raise capital.

We could be harmed by security breaches, damages or other significant disruptions or failures of our networks, IT infrastructure or related systems, or of those we operate for certain of our customers.

To be successful, we will need to continue providing our customers with a high-capacity, reliable and secure network. We face the risk, as does any company, of a security breach or significant disruption of our IT infrastructure and related systems (including our billing systems). As a communications and IT company, we face an added risk that a security breach or other significant disruption of our public networks or IT infrastructure and related systems that we develop, install, operate and maintain for certain of our business and governmental customers could lead to material interruptions or curtailments of service. Moreover, due to the nature of our customers and services, we face a heightened risk that a security breach or disruption could result in unauthorized access to our customers' proprietary or classified information on our public networks or internal systems or the systems that we operate and maintain for certain of our customers.

We make significant efforts to maintain the security and integrity of these types of information and systems and maintain contingency plans in the event of security breaches or other system disruptions. Nonetheless, we cannot assure you that our security efforts and measures will prevent unauthorized access to our systems, loss or destruction of data (including confidential client information), account takeovers, unavailability of service, computer viruses, malware, or other forms of cyber attacks or similar events. These threats may derive from human error, fraud, malice or sabotage on the part of employees, third parties or other nations, or could result from accidental technological failure. Similar to other large telecommunications companies, we have been subject to a variety of security breaches and cyber attacks, although to date none of these have resulted in a material adverse effect on our operating results or financial condition. We cannot assure you, however, that future security breaches or disruptions would not be successful or damaging, especially in light of the growing frequency and sophistication of cyber attacks and intrusions. We may be unable to anticipate all potential types of attacks or intrusions or to implement adequate security barriers or other preventative measures, and any resulting damages could be material.

Network disruptions, security breaches and other significant failures of the above-described systems could:

Likewise, our ability to expand and update our information technology infrastructure in response to our growth and changing needs is important to the continued implementation of our new service offering initiatives. Our inability to expand or upgrade our technology infrastructure could have adverse consequences, which could include the delayed implementation of new service offerings, increased acquisition integration costs, service or billing interruptions, and the diversion of development resources.

Any or all of the foregoing developments could have a negative impact on our results of operations, financial condition and cash flows.

Increases in broadband usage may cause network capacity limitations, resulting in service disruptions, reduced capacity or slower transmission speeds for our customers.

Video streaming services and peer-to-peer file sharing applications use significantly more bandwidth than traditional Internet activity such as web browsing and email. As utilization rates and availability of these services continue to grow, our high-speed Internet customers may use much more bandwidth than in the past. If this occurs, we could be required to make significant capital expenditures to increase network capacity in order to avoid service disruptions, reduced capacity or slower transmission speeds for our customers. Alternatively, we could choose to implement network management practices to reduce the network capacity available to bandwidth-intensive activities during certain times in market areas experiencing congestion, which could negatively affect our ability to retain and attract customers in affected markets. While we believe demand for these services may drive high-speed Internet customers to pay for faster broadband speeds, we may not be able to recover the costs of the necessary network investments. This could result in an adverse impact to our operating margins, results of operations and financial condition.

We may need to defend ourselves against claims that we infringe upon others' intellectual property rights, or we may need to seek third-party licenses to expand our product offerings.

From time to time, we receive notices from third parties or are named in lawsuits filed by third parties claiming we have infringed or are infringing upon their intellectual property rights. We may receive similar notices or be involved in similar lawsuits in the future. Responding to these claims may require us to expend significant time and money defending our use of affected technology, may require us to enter into licensing agreements requiring royalty payments that we would not otherwise have to pay or may require us to pay damages. If we are required to take one or more of these actions, our profit margins may decline. In addition, in responding to these claims, we may be required to stop selling or redesign one or more of our products or services, which could significantly and adversely affect the way we conduct business.

Similarly, from time to time, we may need to obtain the right to use certain patents or other intellectual property from third parties to be able to offer new products and services. If we cannot license or otherwise obtain rights to use any required technology from a third party on reasonable terms, our ability to offer new products and services may be restricted, made more costly or delayed.

Our reseller and sales agency arrangements expose us to a number of risks, one or more of which may adversely affect our business and operating results.

We rely on reseller and sales agency arrangements with other companies to provide some of the services that we sell to our customers, including video services and wireless products and services. If we fail to extend or renegotiate these arrangements as they expire from time to time or if these other companies fail to fulfill their contractual obligations to us or our customers, we may have difficulty finding alternative arrangements and our customers may experience disruptions to their services. In addition, as a reseller or sales agent, we do not control the availability, retail price, design, function, quality, reliability, customer service or branding of these products and services, nor do we directly control all of the marketing and promotion of these products and services. To the extent that these other companies make decisions that negatively impact our ability to market and sell their products and services, our business plans and goals and our reputation could be negatively impacted. If these reseller and sales agency arrangements are unsuccessful due to one or more of these risks, our business and operating results may be adversely affected.

Consolidation among other participants in the telecommunications industry may allow our competitors to compete more effectively against us, which could adversely affect our operating results and financial condition.

The telecommunications industry has experienced substantial consolidation over the last couple of decades, and some of our competitors have combined with other telecommunications providers, resulting in larger competitors that have greater financial and business resources and broader service offerings. Further consolidation could increase competitive pressures, and could adversely affect our operating results and financial condition, as well as our ability to service debt and pay other obligations.

We have a significant amount of goodwill and other intangible assets on our balance sheet. If our goodwill or other intangible assets become impaired, we may be required to record a significant charge to earnings and reduce our stockholders' equity.

Under generally accepted accounting principles, intangible assets are tested for impairment on an annual basis or more frequently whenever events or circumstances indicate that its carrying value may not be recoverable. If our intangible assets are determined to be impaired in the future, we may be required to record a significant, non-cash charge to earnings during the period in which the impairment is determined.

We rely on a limited number of key suppliers, vendors, landlords and other third parties to operate our business.

We depend on a limited number of suppliers and vendors for equipment and services relating to our network infrastructure. Our local exchange carrier networks consist of central office and remote sites, all with advanced digital switches. If any of these suppliers experience interruptions or other problems delivering or servicing these network components on a timely basis, our operations could suffer significantly. To the extent that proprietary technology of a supplier is an integral component of our network, we may have limited flexibility to purchase key network components from alternative suppliers. Similarly, our data center operations are materially reliant on leasing significant amounts of space from landlords and substantial amounts of power from utility companies, and being able to renew these arrangements from time to time on favorable terms. In addition, we rely on a limited number of software vendors to support our business management systems. In the event it becomes necessary to seek alternative suppliers and vendors, we may be unable to obtain satisfactory replacement supplies, services, space or utilities on economically attractive terms, on a timely basis, or at all, which could increase costs or cause disruptions in our services.

Portions of our property, plant and equipment are located on property owned by third parties.

Over the past few years, certain utilities, cooperatives and municipalities in certain of the states in which we operate have requested significant rate increases for attaching our plant to their facilities. To the extent that these entities are successful in increasing the amount we pay for these attachments, our future operating costs will increase.

In addition, we rely on rights-of-way, colocation agreements and other authorizations granted by governmental bodies and other third parties to locate our cable, conduit and other network equipment on their respective properties. If any of these authorizations terminate or lapse, our operations could be adversely affected.

Our success depends largely on the skills, experience and performance of a limited number of senior officers. Competition for senior management in our industry is intense and we may have difficulty retaining our current senior officers or attracting new ones in the event of terminations or resignations. For a discussion of similar retention concerns relating to our recent mergers, please see the risks described below under the heading "Risks Relating to our Recent Acquisition."

As a holding company, we rely on payments from our operating companies to meet our obligations.

As a holding company, substantially all of our income and operating cash flow is dependent upon the earnings of our subsidiaries and their distribution of those earnings to us in the form of dividends, loans or other payments. As a result, we rely upon our subsidiaries to generate the funds necessary to meet our obligations, including the payment of amounts owed under our long-term debt. Our subsidiaries are separate and distinct legal entities and have no obligation to pay any amounts owed by us or, subject to limited exceptions for tax-sharing, to make any funds available to us to repay our obligations, whether by dividends, loans or other payments. All of our subsidiaries are subject to state law restrictions that limit the amount of dividends they can pay us. In addition, certain of our subsidiaries may be restricted under loan agreements or regulatory orders from transferring funds to us, including certain restrictions on the amount of dividends that may be paid to us. Moreover, our rights to receive assets of any subsidiary upon its liquidation or reorganization will be effectively subordinated to the claims of creditors of that subsidiary, including trade creditors. See "Management's Discussion and Analysis of Financial Conditions and Results of Operation—Liquidity and Capital Resources" in Item 7 of this report for further discussion on these matters.

We may be unable to integrate successfully into CenturyLink its recently-acquired operations and realize the anticipated benefits of the recent acquisition.

CenturyLink's acquisition of us involved the combination of two companies which previously operated as independent public companies. We have devoted, and will continue to devote, significant management attention and resources to integrating the business practices and operations of CenturyLink and Qwest. We may encounter difficulties in the integration process, including the following:

For all these reasons, you should be aware that it is possible that the integration process could result in the distraction of our management, the disruption of our ongoing business or inconsistencies in our products, services, standards, controls, procedures and policies, any of which could adversely affect our ability to maintain relationships with customers, vendors and employees or to achieve the anticipated benefits of the acquisition, or could otherwise adversely affect our business and financial results.

CenturyLink cannot assure you whether, when or in what amounts they will be able to use our net operating losses.

At December 31, 2012, we had approximately $5.3 billion of federal net operating losses, or NOLs. These NOLs can be used to offset our future federal taxable income.

CenturyLink's acquisition of us caused an "ownership change" under federal tax laws relating to the use of NOLs. As a result, these laws could limit CenturyLink's ability to use our NOLs and certain other deferred tax attributes to reduce future federal taxable income. CenturyLink currently expects to use substantially all of these NOLs and certain other deferred tax attributes. However, if CenturyLink is unable to realize these benefits, its future income tax payments would be higher than expected, which would adversely affect its financial results and liquidity. As a wholly owned subsidiary of CenturyLink, our financial results and liquidity could be similarly affected.

Any adverse outcome of the KPNQwest litigation, or other material litigation of CenturyLink could have a material adverse impact on our financial condition and operating results, on the trading price of our debt securities and on our ability to access the capital markets.

As described in Note 16—Commitments and Contingencies to the consolidated financial statements in Item 8 of this report and of CenturyLink's Annual Report on Form 10-K, CenturyLink and we are involved in several legal proceedings that, if resolved against them or us, could have a material adverse effect on their, as well as our, business and financial condition. These matters include certain KPNQwest matters, which present material and significant risks to us. In the aggregate, the plaintiffs in the KPNQwest matters seek billions of dollars in damages. We continue to defend against these matters vigorously and are currently unable to provide any estimate as to the timing of their resolution.

We can give no assurance as to the impacts on our financial results or financial condition that may ultimately result from these matters. The ultimate outcomes of these matters are still uncertain, and substantial settlements or judgments in these matters could have a significant impact on us. The magnitude of such settlements or judgments resulting from these matters could materially and adversely

affect our financial condition and ability to meet our debt obligations, potentially impacting our credit ratings, our ability to access capital markets and our compliance with debt covenants. In addition, the magnitude of any such settlements or judgments may cause us to draw down significantly on our cash balances, which might force us to obtain additional financing or explore other methods to generate cash. Such methods could include issuing additional debt securities or selling assets.

There are other material proceedings pending against CenturyLink and us, as described in the above-referenced Note 16. Depending on their outcome, any of these matters could have a material adverse effect on our financial position or operating results. We can give you no assurances as to the impact of these matters on our operating results or financial condition.

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.

General. We are subject to significant regulation by the Federal Communications Commission ("FCC"), which regulates interstate communications, and state utility commissions, which regulate intrastate communications. Generally, we must obtain and maintain certificates of authority from the FCC and regulatory bodies in most states where we offer regulated services, and we are subject to numerous, and often quite detailed, requirements and interpretations under federal, state and local laws, rules and regulations. Accordingly, we cannot ensure that we are always considered to be in compliance with all these requirements at any single point in time. The agencies responsible for the enforcement of these laws, rules and regulations may initiate inquiries or actions based on customer complaints or on their own initiative.

Regulation of the telecommunications industry continues to change rapidly, and the regulatory environment varies substantially from jurisdiction to jurisdiction. Notwithstanding a recent movement towards alternative regulation, a substantial portion of our local voice services revenue remains subject to FCC and state utility commission pricing regulation, which periodically exposes us to pricing or earnings disputes and could expose us to unanticipated price declines. Interexchange carriers have filed complaints in various forums requesting reductions in our access rates. In addition, several long-distance providers are disputing amounts owed to us for carrying Voice over Internet Protocol ("VoIP") traffic, or traffic they claim to be VoIP traffic, and are refusing to pay such amounts. There can be no assurance that future regulatory, judicial or legislative activities will not have a material adverse effect on our operations, or that regulators or third parties will not raise material issues with regard to our compliance or noncompliance with applicable regulations.

Risks associated with recent changes in federal regulation. On October 27, 2011, the FCC adopted the Connect America and Intercarrier Compensation Reform order ("CAF order") intended to reform the existing regulatory regime to recognize ongoing shifts to new technologies, including VoIP, and gradually re-direct universal service funding to foster nationwide broadband coverage. This initial ruling provides for a multi-year transition over the next decade as intercarrier compensation charges are reduced, universal service funding is explicitly targeted to broadband deployment, and subscriber line charges paid by end user customers are gradually increased. We expect these changes will substantially increase the pace of reductions in the amount of switched access revenues we receive in our wholesale business, while creating opportunities for increases in federal USF and retail revenue streams. Several judicial challenges to the CAF order are pending and additional future challenges are possible, any of which could alter or delay the FCC's proposed changes. In addition, based on the outcome of the FCC proceedings, various state commissions may consider changes to their universal service funds or intrastate access rates. Moreover, rulemaking designed to implement the order is not complete, and several FCC proceedings relating to the order remain pending. For these and other reasons, we cannot predict the ultimate impact of these proceedings at this time.

In addition, during the last few years Congress or the FCC has initiated various other changes, including (i) broadband stimulus projects, support funds and similar plans and (ii) new "network neutrality" rules. The FCC is also considering changes in the regulation of special access services. Any of these recent or pending initiatives could adversely affect our operations or financial results.

Risks posed by costs of regulatory compliance. Regulations continue to create significant compliance costs for us. Challenges to our tariffs by regulators or third parties or delays in obtaining certifications and regulatory approvals could cause us to incur substantial legal and administrative expenses, and, if successful, such challenges could adversely affect the rates that we are able to charge our customers. Our business also may be impacted by legislation and regulation imposing new or greater obligations related to regulations or laws related to broadband deployment, bolstering homeland security, increasing disaster recovery requirements, minimizing environmental impacts, enhancing privacy, or addressing other issues that impact our business, including the Communications Assistance for Law Enforcement Act (which requires communications carriers to ensure that their equipment, facilities, and services are able to facilitate authorized electronic surveillance), and laws governing local number portability and customer proprietary network information requirements. We expect our compliance costs to increase if future laws or regulations continue to increase our obligations to assist other governmental agencies.

Risks posed by other regulations. All of our operations are also subject to a variety of environmental, safety, health and other governmental regulations. We monitor our compliance with federal, state and local regulations governing the management, discharge and disposal of hazardous and environmentally sensitive materials. Although we believe that we are in compliance with these regulations, our management, discharge or disposal of hazardous and environmentally sensitive materials might expose us to claims or actions that could have a material adverse effect on our business, financial condition and operating results.

Regulatory changes in the communications industry could adversely affect our business by facilitating greater competition against us.

For over 15 years, Congress and the FCC have taken several steps that have resulted in increased competition among communications service providers. Many of the FCC's regulations remain subject to judicial review and additional rulemakings, thus making it difficult to determine the ultimate impact of these changes on us and our competitors.

"Net neutrality" legislation or regulation could limit our ability to operate our high-speed data business profitably and to manage our broadband facilities efficiently.

In order to continue to provide quality high-speed data service at attractive prices, we believe we need the continued flexibility to respond to changing consumer demands, to manage bandwidth usage efficiently and to invest in our networks. The FCC's "net neutrality" regulations could adversely impact our ability to operate our high-speed data network profitably and to undertake the upgrades and implement network management practices that may be needed to continue to provide high quality high-speed data services, and could therefore negatively impact our ability to compete effectively.

We may be liable for the material that content providers distribute over our network.

The law relating to the liability of private network operators for information carried on, stored or disseminated through their networks is still unsettled. As such, we could be exposed to legal claims relating to content disseminated on our networks. Claims could challenge the accuracy of materials on our network, or could involve matters such as defamation, invasion of privacy or copyright infringement. If we need to take costly measures to reduce our exposure to these risks, or are required to defend ourselves against such claims, our financial results could be negatively affected.

As a diversified full service incumbent local exchange carrier in most of our key markets, we have traditionally been subject to significant regulation that does not apply to many of our competitors. This

regulation imposes substantial compliance costs on us and restricts our ability to change rates, to compete and to respond rapidly to changing industry conditions. As our business becomes increasingly competitive, regulatory disparities between us and our competitors could impede our ability to compete.

We are subject to franchising requirements that could impede our expansion opportunities.

We may be required to obtain from municipal authorities operating franchises to install or expand facilities. Some of these franchises may require us to pay franchise fees. These franchising requirements generally apply to our fiber transport and competitive local exchange carrier operations, and to our facilities-based video services. These requirements could delay us in expanding our operations or increase the costs of providing these services.

We are exposed to risks arising out of recent legislation affecting U.S. public companies.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, and related regulations implemented thereunder, are increasing legal and financial compliance costs and making some activities more time consuming. Any failure to successfully or timely complete annual assessments of our internal controls required by Section 404 of the Sarbanes-Oxley Act could subject us to sanctions or investigation by regulatory authorities. Any such action could adversely affect our financial results or investors' confidence in us.

For a more thorough discussion of the regulatory issues that may affect our business, see "Regulation" in Item 1 of this report.

CenturyLink's and our high debt levels pose risks to our viability and may make us more vulnerable to adverse economic and competitive conditions, as well as other adverse developments.

Our parent, CenturyLink, and we continue to carry significant debt. As of December 31, 2012, our consolidated debt was approximately $9.6 billion, which was included in CenturyLink's consolidated debt of approximately $20.6 billion as of that date. Approximately $2.1 billion of CenturyLink's debt securities, which includes approximately $1.4 billion of our debt securities, come due over the next thirty-six months. While we currently believe that CenturyLink and we will have the financial resources to meet or refinance our obligations when they come due, we cannot fully anticipate our future financial condition or the condition of CenturyLink, the credit markets or the economy. We may incur unexpected expenses or liabilities, and we may have limited access to financing.

Our significant levels of debt can adversely affect us in several other respects, including (i) limiting our ability to access the capital markets, (ii) exposing us to the risk of credit rating downgrades, which would raise our borrowing costs and could further limit our access to capital, (iii) hindering our flexibility to plan for or react to changing market, industry or economic conditions, (iv) limiting the amount of cash flow available for future operations, acquisitions, dividends, or other uses, (v) making us more vulnerable to economic or industry downturns, including interest rate increases, and (vi) placing us at a competitive disadvantage compared to less leveraged competitors.

The effects of each of these factors could be intensified if we increase our borrowings. We expect to periodically require financing to meet our debt obligations as they come due. Due to the unstable economy and credit market, we may not be able to refinance maturing debt at terms that are as favorable as those from which we previously benefited, at terms that are acceptable to us or at all. We may also need to obtain additional financing or investigate other methods to generate cash (such as further cost reductions or the sale of assets) under a variety of circumstances, including if revenues and cash provided by operations decline, if economic conditions weaken, if competitive pressures increase, if

regulatory requirements change, if we are required to contribute a material amount of cash to our pension plans, if we are required to begin to pay other post-retirement benefits significantly earlier than is anticipated, if CenturyLink or we become subject to significant judgments or settlements in one or more of the matters discussed in Note 16—Commitments and Contingencies to the consolidated financial statements in Items 8 of this report or in CenturyLink's Annual Report on Form 10-K. We can give no assurance that this additional financing will be available on terms that are acceptable to us or at all. If we are able to obtain additional financing, our credit ratings could be adversely affected, which could further raise our borrowing costs and further limit our future access to capital and our ability to satisfy our debt obligations.

Certain of our debt instruments have cross payment default or cross acceleration provisions. When present, these provisions could have a wider impact on liquidity than might otherwise arise from a default or acceleration of a single debt instrument. Any such event could adversely affect our ability to conduct business or access the capital markets and could adversely impact our credit ratings. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" in Item 7 of this report for additional information about CenturyLink's credit facility.

Our debt agreements and the debt agreements of CenturyLink and its other subsidiaries allow us to incur significantly more debt, which could exacerbate the other risks described in this report.

The terms of our debt instruments and the debt instruments of CenturyLink and its other subsidiaries permit additional indebtedness. Additional debt may be necessary for many reasons, including those discussed immediately above. Incremental borrowings on terms that impose additional financial risks could exacerbate the other risks described in this report.

Our business requires us to incur substantial capital and operating expenses, which reduce our available free cash flow.

Our business is capital intensive, and we anticipate that our capital requirements will continue to be significant in the coming years. As discussed further under "Risk Factors—Risks Affecting Our Business—Increases in broadband usage may cause network capacity limitations, resulting in service disruptions, reduced capacity or slower transmission speeds for our customers," increased bandwidth consumption by consumers and businesses have placed increased demands on the transmission capacity of our networks. If we determine that our networks must be expanded to handle these increased demands, we may be required to make substantial capital expenditures, even though there is no assurance that the return on our investment will be satisfactory. In addition, many of our growth initiatives are capital intensive and changes in technology could require further spending. In addition to investing in expanded networks, new products or new technologies, we must from time to time replace some of the equipment that supports our traditional services as that equipment ages, even though the revenue base from those services is not growing. While we believe that our planned level of capital expenditures will meet both our maintenance and core growth requirements, this may not be the case if demands on our network continue to accelerate or other circumstances underlying our expectations change. Increased spending could, among other things, adversely affect our operating margins, cash flows, results of operations and financial position.

Similarly, we continue to anticipate incurring substantial operating expenses to support our incumbent services and growth initiatives. Although we have successfully reduced our operating expenses over the past few years, we may be unable to further reduce these costs, even if revenues in some of our lines of business are decreasing. If so, our operating margins will be adversely impacted.

Adverse changes in the value of assets or obligations associated with our qualified pension plan could negatively impact our liquidity.

The funded status of our qualified pension plan is the difference between the value of plan assets and the benefit obligation. The accounting unfunded status of our qualified pension plan was $948 million as of December 31, 2012. Adverse changes in interest rates or market conditions, among other assumptions and factors, could cause a significant increase in our benefit obligation or a significant decrease in the value of plan assets. These adverse changes could require us to contribute a material amount of cash to our pension plan or could accelerate the timing of required cash payments. Based on current laws and circumstances, (i) we were not required to make a cash contribution to this plan in 2012 and (ii) we do not expect we will be required to make a contribution in 2013. The actual amount of required contributions to our plan in 2014 and beyond will depend on a variety of factors, including earnings on plan investments, prevailing interest and discount rates, demographic experience, changes in plan benefits and changes in funding laws and regulations. Any future material cash contributions could have a negative impact on our liquidity by reducing our cash flows.

CenturyLink and QC plan to access the public debt markets, and we cannot assure you that these markets will remain free of disruptions.

CenturyLink has a significant amount of indebtedness that it intends to refinance over the next several years, principally it expects through the issuance of debt securities of CenturyLink, QC or both. CenturyLink's ability to arrange additional financing will depend on, among other factors, the financial position, performance, and credit ratings of CenturyLink and QC, as well as prevailing market conditions and other factors beyond its control. Prevailing market conditions could be adversely affected by the ongoing disruptions in the European sovereign debt markets, the failure of the United States to reduce its deficit in amounts deemed to be sufficient, possible further downgrades in the credit ratings of the U.S. debt, contractions or limited growth in the economy or other similar adverse economic developments in the U.S. or abroad. Instability in the global financial markets has from time to time resulted in periodic volatility in the capital markets. This volatility could limit CenturyLink's access to the credit markets, leading to higher borrowing costs or, in some cases, the inability to obtain financing on terms that are acceptable to CenturyLink, or at all. Any such failure to obtain additional financing could jeopardize its and our ability to repay, refinance or reduce debt obligations.

We regularly transfer our cash to CenturyLink, which exposes us to certain risks.

Under our cash management arrangement with CenturyLink, we regularly transfer our cash to CenturyLink, which we recognize on our balance sheet as advances to affiliates. Although CenturyLink periodically repays these advances to fund our cash requirements throughout the year, at any given point in time CenturyLink may owe us a substantial sum under this arrangement. Accordingly, developments that adversely impact CenturyLink could adversely impact our ability to collect these advances.

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

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles 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 "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates" in Item 7 of this

report, describe those significant accounting policies and methods used in the preparation of our consolidated financial statements that are considered "critical" because they require judgments, assumptions and estimates that materially impact our consolidated financial statements and related disclosures. As a result, if future events or assumptions differ significantly from the judgments, assumptions and estimates in our critical accounting policies, these events or assumptions could have a material impact on our consolidated financial statements and related disclosures.

For periods after the April 1, 2011 closing of CenturyLink's acquisition of us, we are included in the consolidated federal income tax return of CenturyLink. As such, we could be severally liable for tax examinations and adjustments attributable to other members of the CenturyLink affiliated group. Significant taxpayers (such as QCII for periods prior to the CenturyLink acquisition and CenturyLink for periods after the CenturyLink acquisition) are subject to frequent and regular audits by the Internal Revenue Service as well as state and local tax authorities. These audits could subject us to tax liabilities if adverse positions are taken by these tax authorities.

Tax sharing agreements have been executed between us and previous affiliates, and we believe the liabilities, if any, arising from adjustments to previously filed returns would be borne by the affiliated group member determined to have a deficiency under the terms and conditions of such agreements and applicable tax law. We have not generally provided for liabilities attributable to former affiliated companies or for claims they have asserted or may assert against us.

We believe that we have adequately provided for tax contingencies. However, our tax audits and examinations may result in tax liabilities that differ materially from those that we have recognized in our consolidated financial statements. Because the ultimate outcomes of all of these matters are uncertain, we can give no assurance as to whether an adverse result from one or more of them will have a material effect on our financial results.

Our property, plant and equipment consists principally of telephone lines, central office equipment, land and buildings related to our telephone operations. Our gross property, plant and equipment consisted of the following components as of the following dates:

We own substantially all of our telecommunications equipment required for our business. However, we lease certain facilities, plant, equipment and software under various capital lease arrangements when the leasing arrangements are more favorable to us than purchasing the assets.

We also own and lease administrative offices in major metropolitan locations both in the United States and internationally. Substantially all of our network electronics equipment is located in buildings or on land that we own or lease within our local service area. Outside of our local service area, our assets are generally located on 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 these agreements, due to their termination or their expiration.

Several putative class actions have been filed against us disputing our use of certain rights-of-way as described in "Legal Proceedings—Other Matters" in Item 3 of this report. If we lose any of these rights-of-way or are unable to renew them, we may find it necessary to move or replace the affected portions of our network. However, we do not expect any material adverse impacts as a result of the loss of any of these rights.

On April 1, 2011, we became a wholly owned subsidiary of CenturyLink. On the date of the acquisition, our assets and liabilities were recognized at fair value. This revaluation has been reflected in our consolidated financial statements and, therefore, has resulted in a new basis of accounting for the successor period beginning on April 1, 2011. As of the successor dates of December 31, 2012 and December 31, 2011, our total net property, plant and equipment was approximately $9.1 billion and approximately $9.5 billion, respectively. For additional information, see Note 2—Acquisition by CenturyLink and Note 6—Property, Plant and Equipment to the consolidated financial statements in Item 8 of this report.

During 2012, we reclassified certain amounts reported in prior periods of inventory held for construction to conform to the current period presentation. This reclassification increased construction in progress at December 31, 2011 by $55 million with an offsetting decrease to fiber, conduit and other

outside plant and central office and other network electronics by $8 million and $47 million, respectively.

CenturyLink is involved in several legal proceedings to which we are not a party that, if resolved against CenturyLink, could have a material adverse effect on its business and financial condition. As a wholly owned subsidiary of CenturyLink, our business and financial condition could be similarly affected. You can find descriptions of these legal proceedings in CenturyLink's quarterly and annual reports filed with the SEC. Because we are not a party to any of these matters, we have not accrued any liabilities for these matters.

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

We have established accrued liabilities for the matters described below where losses are deemed probable and reasonably estimable.

We are vigorously defending the company against all of the matters described below. As a matter of course, we are prepared both to litigate the matters to judgment, as well as to evaluate and consider all settlement opportunities.

The terms and conditions of applicable bylaws, certificates or articles of incorporation, agreements or applicable law may obligate us to indemnify our former directors, officers or employees with respect to certain of the matters described below and we have been advancing legal fees and costs to certain former directors, officers or employees in connection with certain matters described below.

On September 29, 2010, the trustees in the Dutch bankruptcy proceeding for KPNQwest, N.V. (of which we were a major shareholder) filed a lawsuit in the District Court of Haarlem, the Netherlands, alleging tort and mismanagement claims under Dutch law. We and Koninklijke KPN N.V. ("KPN") are defendants in this lawsuit along with a number of former KPNQwest supervisory board members and a former officer of KPNQwest, some of whom were formerly affiliated with us. Plaintiffs allege, among other things, that defendants' actions were a cause of the bankruptcy of KPNQwest, and they seek damages for the bankruptcy deficit of KPNQwest, which is claimed to be approximately €4.2 billion (or approximately $5.6 billion based on the exchange rate on December 31, 2012), plus statutory interest. Two lawsuits asserting similar claims were previously filed against Qwest and others in federal courts in New Jersey in 2004 and Colorado in 2009; those courts dismissed the lawsuits without prejudice on the grounds that the claims should not be litigated in the United States.

On September 13, 2006, Cargill Financial Markets, Plc and Citibank, N.A. filed a lawsuit in the District Court of Amsterdam, the Netherlands, against us, KPN, KPN Telecom B.V., and other former officers, employees or supervisory board members of KPNQwest, some of whom were formerly affiliated with us. The lawsuit alleges that defendants misrepresented KPNQwest's financial and business condition in connection with the origination of a credit facility and wrongfully allowed KPNQwest to borrow funds under that facility. Plaintiffs allege damages of approximately €219 million (or approximately $289 million based on the exchange rate on December 31, 2012). On April 25, 2012, the court issued its judgment denying the claims asserted by Cargill and Citibank in their lawsuit. Cargill and Citibank are appealing that decision.

We have not accrued a liability for the above matters. Regarding the 2010 proceeding, we believe it is premature to determine whether an accrual is warranted and, if so, a reasonable estimate of our

probable liability. Regarding the 2006 suit, we do not believe that liability is probable. We will continue to defend against both KPNQwest litigation matters vigorously.

Several putative class actions relating to the installation of fiber optic cable in certain rights-of-way were filed against Qwest on behalf of landowners on various dates and in courts located in 34 states in which Qwest has such cable (Alabama, Arizona, California, Colorado, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, and Wisconsin.) For the most part, the complaints challenge our right to install our fiber optic cable in railroad rights-of-way. The complaints allege that the railroads own the right-of-way as an easement that did not include the right to permit us to install our cable in the right-of-way without the Plaintiffs' consent. Most of the currently pending actions purport to be brought on behalf of state-wide classes in the named Plaintiffs' respective states, although one action pending before the Illinois Court of Appeals purports to be brought on behalf of landowners in Illinois, Iowa, Kentucky, Michigan, Minnesota, Nebraska, Ohio and Wisconsin. In general, the complaints seek damages on theories of trespass and unjust enrichment, as well as punitive damages. After previous attempts to enter into a single nationwide settlement in a single court proved unsuccessful, the parties proceeded to seek court approval of settlements on a state-by-state basis. To date, the parties have received final approval of such settlements in 22 states (Alabama, Colorado, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Maryland, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Jersey, New York, North Carolina, Oklahoma, Tennessee, Virginia and Wisconsin), have received preliminary approval of the settlements in eight states (California, Kentucky, Nevada, Ohio, Oregon, Pennsylvania, South Carolina and Utah), and have not yet received either preliminary or final approval in four states (Arizona, Massachusetts, New Mexico and Texas). We have accrued an amount that we believe is probable for these matters; however, the amount is not material to our consolidated financial statements.

From time to time, we are involved in other proceedings incidental to our business, including patent infringement allegations, administrative hearings of state public utility commissions relating primarily to rate making, actions relating to employee claims, various tax issues, environmental law issues, grievance hearings before labor regulatory agencies and miscellaneous third party tort actions. The outcome of these other proceedings is not predictable. However, we do not believe that the ultimate resolution of these other proceedings, after considering available insurance coverage, will have a material adverse effect on our financial position, results of operations or cash flows.

The information contained in Note 16—Commitments and Contingencies—to the consolidated financial statements included in Item 8 of this report is incorporated herein by reference.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The following table of 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 Operations" in Item 7 of this report.

The comparability of the following selected financial data below is significantly impacted by CenturyLink's April 1, 2011 acquisition of us and the resulting revaluation of our assets and liabilities. As a result of the acquisition, the following table presents certain selected consolidated financial data for two periods: predecessor and successor, which relate to the periods preceding the acquisition and the period succeeding the acquisition, respectively. These historical results are not necessarily indicative of results that you can expect for any future period.

Selected financial information from the consolidated statements of operations data is as follows:

Selected financial information from the consolidated balance sheets is as follows:

Selected financial information from the consolidated statements of cash flows is as follows:

The following table presents certain selected consolidated operating data as of the following dates:

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

All references to "Notes" in this Item 7 refer to the Notes to Consolidated Financial Statements included in Item 8 of this report.

Certain statements in this report constitute forward-looking statements. See "Special Note Regarding Forward-Looking Statements" in Item 1 of this report for factors relating to these statements and "Risk Factors" in Item 1A of this report for a discussion of certain risk factors applicable to our business, financial condition and results of operations.

We are an integrated communications company engaged primarily in providing an array of communications services to our residential, business, governmental and wholesale customers. Our communications services include local and long-distance, network access, private line (including special access), broadband, data, managed hosting, wireless and video services. In certain local and regional markets, we also provide local access and fiber transport services to competitive local exchange carriers. We strive to maintain our customer relationships by, among other things, bundling our service offerings to provide our customers with a complete offering of integrated communications services.

As discussed in Note 2—Acquisition by CenturyLink—to the consolidated financial statements in Item 8 of this report, on April 1, 2011, we became a wholly owned subsidiary of CenturyLink. Each outstanding share of our common stock was converted into 0.1664 shares of CenturyLink common stock, with cash paid in lieu of fractional shares. The estimated aggregate consideration was approximately $12.273 billion.

Since April 1, 2011, our consolidated results of operations have been included in the consolidated results of operations of CenturyLink. CenturyLink has accounted for its acquisition of us under the acquisition method of accounting, which resulted in the assignment of the purchase price to the assets acquired and liabilities assumed based on estimates of their acquisition date fair values. The aggregate consideration exceeded the aggregate estimated fair value of the assets acquired and liabilities assumed by $10.123 billion, which we have recognized as goodwill. This goodwill is attributable to strategic benefits, including enhanced financial and operational scale, market diversification and leveraged combined networks that we expect CenturyLink and its consolidated subsidiaries, including us, to realize. None of the goodwill associated with this acquisition is deductible for income tax purposes. The recognition of assets and liabilities at fair value is reflected in our consolidated financial statements and therefore has resulted in a new basis of accounting for the "successor period" beginning on April 1, 2011. This new basis of accounting means that our consolidated financial statements for the successor periods will not be comparable to our previously reported consolidated financial statements, including the predecessor period consolidated financial statements in this report.

We have incurred operating expenses related to CenturyLink's acquisition of us, which consist primarily of integration and severance expenses. The table below summarizes our acquisition-related expenses:

The total amounts of these expenses are recognized in our cost of services and products and selling, general and administrative expenses.

CenturyLink has cash management arrangements between certain of its subsidiaries that include lines of credit, affiliate obligations, capital contributions and dividends. As part of these cash management arrangements, affiliates provide lines of credit to certain other affiliates. Amounts outstanding under these lines of credit and intercompany obligations vary from time to time. Under these arrangements, the majority of our cash balance is advanced on a daily basis to CenturyLink. From time to time we may declare and pay dividends to CenturyLink, using cash repaid to us under these advances, which has the net effect of reducing the amount of these advances. We report the balance of these transfers on our consolidated balance sheet as advances to affiliates.

We currently categorize our products, services and revenues among the following four categories:

During the first quarter of 2012, we reclassified certain prior period revenues between the aforementioned four categories to conform to the current period presentation.

As of the successor date of December 31, 2012, we operated approximately 8.1 million access lines, which are telephone lines reaching from the customers' premises to a connection with the public switched telephone network. We count access lines when we install the service. Our methodology includes only those access lines that we use to provide services to external customers and excludes lines used solely by us and our affiliates. It also excludes unbundled loops and includes stand-alone broadband subscribers. Our methodology for counting our access lines may not be comparable to those of other companies. As of the successor date of December 31, 2012, we also served approximately 3.3 million broadband subscribers. As described below, we have updated our methodology for counting broadband subscribers to include residential, business and wholesale subscribers instead of only residential and small business subscribers.

Our analysis presented below is organized to provide the information we believe will be useful for understanding the relevant trends affecting our business. The discussion in "Management's Discussion and Analysis of Financial Condition and Results of Operations" is presented on a combined basis for the successor periods in 2011. We believe that the discussion on a combined basis is more meaningful as it allows the results of operations to be analyzed to the annual period in 2012. This discussion should be read in conjunction with our consolidated financial statements and the notes thereto in Item 8 of this report.

Our financial results were impacted by several significant trends, which are described below. We expect that these trends will continue to affect our results of operations, cash flows or financial position.

While these trends are important to understanding and evaluating our financial results, the other transactions, additional events, uncertainties and trends discussed in "Risk Factors" in Item 1A of this report may also materially impact our business operations and financial results.

During the second quarter of 2012, we updated our methodology for counting broadband subscribers to better align with the methodology used by our parent company, CenturyLink. We have restated our previously reported amounts to reflect this change. For additional information on our counting methodologies, see "Overview" above.

Growth in our strategic services revenues in both of the comparative periods was due principally to increases in the number of broadband subscribers as well as volume increases in our Ethernet and MPLS services. These increases were partially offset by declines in our private line services revenues.

Legacy services revenues decreased in both of the comparative periods as a result of lower local and long-distance services revenues due to access line loss and reduced access services usage related to competitive pressures and product substitution. Legacy services revenues also decreased in both comparative periods due to lower revenues from our traditional WAN services, caused by customer migration, product substitution and increased competition. Part of the decrease in legacy services revenues for the successor year ended December 31, 2012, as compared to the combined year ended December 31, 2011, is attributable to lower amortization of deferred revenue due to predecessor deferred installation and activation revenue being assigned no value at the acquisition date.

Revenues from data integration increased for the successor year ended December 31, 2012 compared to the combined year ended December 31, 2011 primarily due to increased equipment sales and professional services, including network management, security and integration of customer premises equipment. Conversely, these revenues decreased during the combined year ended December 31, 2011 compared to the predecessor year ended December 31, 2010 for the same reasons.

Affiliates and other services revenues increased for the successor year ended December 31, 2012 compared to the combined year ended December 31, 2011 primarily due to a change in methodology effective January 1, 2012 that resulted in both higher affiliate revenues and expenses for us. See Note 1—Basis of Presentation to the consolidated financial statements in Item 8 of this report. A portion of the increase in affiliates and other services revenues for the successor year ended December 31, 2012 compared to the combined year ended December 31, 2011 is attributable to telecommunications services we provided to affiliates since CenturyLink's April 1, 2011 acquisition of us. The remainder of this increase is attributable to increased USF revenues. The increase in affiliates and other services revenues for the combined year ended December 31, 2011 compared to the predecessor year ended December 31, 2010 was primarily due to telecommunications services we provided to affiliates, which were partially offset by a decrease in USF revenues.

Effective January 1, 2012, we changed our rates of capitalized labor as we transitioned certain legacy systems to the historical systems of our parent, CenturyLink. This transition resulted in an estimated $40 million to $55 million increase in the amount of labor capitalized as an asset compared to the amount that would have been capitalized if we had continued to use our legacy systems and a corresponding estimated $40 million to $55 million decrease in operating expenses for the successor year ended December 31, 2012. The reduction in expenses described above, net of tax, increased net income approximately $25 million to $34 million for the successor year ended December 31, 2012.

Cost of services and products (exclusive of depreciation and amortization) are expenses incurred in providing products and services to our customers. These expenses include: employee-related expenses directly attributable to operating and maintaining our network (such as salaries, wages, benefits and professional fees); facilities expenses (which are third-party telecommunications expenses we incur for using other carriers' networks to provide services to our customers); rents and utilities expenses; equipment sales expenses (such as data integration and modem expenses); costs for USF (which are federal and state funds that are established to promote the availability of telecommunications services to all consumers at reasonable and affordable rates, among other things and to which we are often required to contribute); and other expenses directly related to our network and hosting operations.

For the successor year ended December 31, 2012, cost of services and products (exclusive of depreciation and amortization) increased primarily due to increases in customer premise equipment and maintenance costs, USF contribution rates, network expenses and professional and credit card fees, as compared to the combined year ended December 31, 2011. These expenses were partially offset by decreases in employee-related expenses due to changes in the salaries and wages allocation, lower headcount reductions and PTO usage.

Cost of services and products for the combined year ended December 31, 2011 compared to the predecessor year ended December 31, 2010 decreased due to decreased equipment sales and lower professional services, including network management, security and integration of customer premises

equipment. Lower facilities expenses as a result of both lower rates and lower volumes for long-distance service and cost optimization also contributed to the lower expenses in cost of services and products. Cost of services and products also decreased due to lower salaries and wages related to employee reductions in our network operations as we continue to manage our workforce to our workload. The amortization of certain deferred expenses is lower due to assigning no value to these predecessor assets at the acquisition date.

Selling, general and administrative expenses are expenses incurred in selling products and services to our customers, corporate overhead and other operating expenses. These expenses include: employee-related expenses (such as salaries, wages, internal commissions, benefits and professional fees) directly attributable to selling products or services and employee-related expenses for administrative functions; marketing and advertising; taxes (such as property and other taxes) and fees; external commissions; bad debt expense; and other selling, general and administrative expenses.

Selling, general and administrative expenses decreased for the successor year ended December 31, 2012 compared to the combined year ended December 31, 2011 primarily due to decreases in salaries and wages and employee benefits related to employee headcount reductions and decreases in marketing and advertising expenses and acquisition-related integration costs. Higher insurance premiums and fees and external commissions partially offset these decreases.

Selling, general and administrative expenses decreased for the combined year ended December 31, 2011 compared to the predecessor year ended December 31, 2010 primarily due to decreased pension expense, professional fees and marketing and advertising expense. This decrease was partially offset by an increase in severance related to employee reductions, a majority of which was due to CenturyLink's acquisition of us.

Effective January 1, 2012, in connection with post-acquisition systems integration activities, we adopted the affiliate expense allocation methodology used by our parent. This methodology results in certain overhead costs incurred by us and by our parent that were previously assessed to us on a net basis now being assessed on a gross basis both to and from our parent, resulting in both higher affiliate revenues and expenses for us. We believe this change, resulting from systems integration activities, did not have a significant impact to our net income for the successor year ended December 31, 2012.

Since CenturyLink's acquisition of us, we have incurred affiliates expenses related to our use of telecommunication services, marketing and employee related support services provided by CenturyLink and its subsidiaries. Increases in operating expenses—affiliates for the successor year ended December 31, 2012 compared to the combined year ended December 31, 2011 are primarily due to increased affiliate transactions attributable to incurring intercompany expenses for 2012 in its entirety compared to only the last nine months of 2011.

The following table provides detail regarding depreciation and amortization expense:

As of April 1, 2011, our property, plant and equipment was recorded at fair value and as a result net property, plant and equipment decreased $2.136 billion due to CenturyLink's acquisition of us. The decrease in asset value resulted in $88 million lower depreciation expense for the successor year ended December 31, 2012, as compared to the combined year ended December 31, 2011 and $225 million for the combined year ended December 31, 2011, as compared to the predecessor year ended December 31, 2010. Effective January 1, 2012, we changed our estimates of the remaining useful lives of certain telecommunications equipment. These changes resulted in an additional decrease to depreciation expense of approximately $93 million, and net of tax, had the effect of increasing net income by approximately $57 million for the successor year ended December 31, 2012. Excluding the effects of CenturyLink's acquisition of us, depreciation expense also decreased for both comparative periods reflected in the table above due to annual updates of our depreciation rates for capitalized assets, which were partially offset by net growth in capital assets.

The accounting for CenturyLink's acquisition of us also resulted in an additional $7.558 billion in amortizable intangible customer relationship assets, which resulted in an additional $244 million of amortizable expense for the successor year ended December 31, 2012, as compared to the combined year ended December 31, 2011, and $770 million for the combined year ended December 31, 2011, as compared to the predecessor year ended December 31, 2010. In addition, at the acquisition date our capitalized software was also recorded at fair value of $1.702 billion, an increase of $815 million, which increased amortization expense by $59 million and $176 million for the successor year ended December 31, 2012 and the combined year ended December 31, 2011, respectively, as compared to the previous periods. The fair value adjustments for the remaining intangible assets increased amortization expense by $17 million for the successor year ended December 31, 2012, as compared to the combined year ended December 31, 2011 and $61 million for the combined year ended December 31, 2011, as compared to the predecessor year ended December 31, 2010. Excluding the effects of CenturyLink's acquisition of us, amortization expense also increased for both comparative periods reflected in the table above due to net growth in amortizable intangible assets, partially offset by annual updates of our amortization rates for capitalized software.

The following table summarizes our total other income (expense) and income tax expense:



	Successor						Predecessor			Combined			Predecessor			% Change
	Year Ended December 31, 2012			Nine Months Ended December 31, 2011			Three Months Ended March 31, 2011			Year Ended December 31, 2011			Year Ended December 31, 2010			Successor 2012 v Combined 2011		Combined 2011 v Predecessor 2010
	(Dollars in millions)
Interest expense	$	(611	)		(486	)		(227	)		(713	)		(1,039	)		(14)%		(31)%
Interest expense—affiliates		(144	)		—			—			—			—			nm		—
Loss on embedded option in convertible debt		—			—			—			—			(475	)		—		nm
Net loss on early retirement of debt		(23	)		(8	)		—			(8	)		(45	)		188%		(82)%
Other (expense) income		4			2			5			7			8			(43)%		(13)%

Total other income (expense)	$	(774	)		(492	)		(222	)		(714	)		(1,551	)		8%		(54)%

Income tax expense	$	196			32			146			178			505			10%		(65)%

Interest expense decreased for the successor year ended December 31, 2012 as compared to the combined year ended December 31, 2011, primarily due to the early retirement of debt, partially offset by interest incurred on new debt issued and a substantial reduction in the amount of net premium amortization recorded at acquisition primarily due to the retirement of several issuances of debt during the affected periods. The decrease in interest expense for the combined year ended December 31, 2011 as compared to the predecessor year ended December 31, 2010, was primarily due to the amortization of those same net premiums. The decrease is also due to the early retirement and maturity of debt since the acquisition date, offset by interest incurred on new debt issued.

Affiliate interest expense increased for the successor year ended December 31, 2012 as compared to the combined year ended December 31, 2011, primarily due to increased affiliate loan balances, which QCII used to retire several debt securities. The increased affiliate loan balances are due to CenturyLink's cash management arrangement between certain of its subsidiaries, including us, under which the majority of our cash balance is transferred on a daily basis to CenturyLink. We report the balance of these transfers on our balance sheet as advances to affiliates.

In November and December 2010, we redeemed all of the then-outstanding $1.118 billion aggregate principal amount of our 3.50% Convertible Senior Notes due 2025 at par in addition to the remaining embedded option for $616 million. This, and a partial repurchase of these notes in August 2010, resulted in no gain or loss on the notes and a total loss of $475 million on the embedded conversion option for the year ended predecessor December 31, 2010.

During the fourth quarter of 2012, QCII redeemed $550 million of its 8.00% Notes due 2015, which resulted in a gain of $15 million.

During the third quarter of 2012, QC redeemed $484 million of its 7.50% Notes due 2023, which resulted in an immaterial loss.

During the second quarter of 2012, QCII redeemed $500 million of its 7.50% Notes due 2014, which resulted in an immaterial gain. During the second quarter of 2012, Qwest Corporation ("QC") completed a premium-priced cash tender offer to purchase a portion of its $811 million of 8.375% Notes due 2016 and its $400 million of 7.625% Notes due 2015. With respect to its 8.375% Notes due 2016, QC received and accepted tenders of approximately $575 million aggregate principal amount of these notes, or 71%, for $722 million including a premium, fees and accrued interest. With respect to its 7.625% Notes due 2015, QC received and accepted tenders of approximately $308 million aggregate principal amount of these notes, or 77%, for $369 million including a premium, fees and accrued interest. The completion of this tender offer resulted in a loss of $46 million.

In the first quarter of 2012, QCII redeemed $800 million of its 7.50% Notes due 2014, which resulted in a gain of $8 million.

In the fourth quarter of 2011, QC redeemed $1.5 billion of its 8.875% Notes due 2012, which resulted in a loss of $6 million.

In the second quarter of 2011, QC used the net proceeds of $642 million from the June 8, 2011 debt issuance, together with available cash, to redeem $825 million aggregate principal amount of its 7.875% Notes due 2011 and to pay related fees and expenses, which resulted in an immaterial loss.

In the first quarter of 2010, we redeemed $525 million aggregate principal amount of our Senior Notes due 2011. We also completed cash tender offers for the purchase of certain of our outstanding debt securities. From theses offers, we received and accepted tenders of approximately $1.107 billion aggregate principal amount of notes for $1.169 billion. We recognized a total loss of $45 million from the redemption and tender offers.

Income tax expense for the successor year ended December 31, 2012, was $196 million, or an effective tax rate of 38.9%, compared to $178 million, or an effective tax rate of 43.6%, for the combined year ended December 31, 2011. The effective tax rate was higher in 2011 primarily due to lower income before income tax generated in the period after the CenturyLink merger, which caused non-deductible items to have a greater impact on the effective rate. Income tax expense for the year ended December 31, 2012 increased $18 million as compared to the combined year ended December 31, 2011, primarily due to an increase in book income before tax and offset by a decrease in 2012 related to state NOL valuation allowance reduction and due to the 2011 impact of a valuation allowance increase. Income tax expense for the combined year ended December 31, 2011, as compared to the predecessor year ended December 31, 2010, decreased by $327 million largely as a result of the March 2010 enactments of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010. Income tax expense also decreased due to the 2010 tax treatments of (i) the premium paid on our convertible debt, (ii) the expenses incurred when we accelerated the vesting of certain stock-based compensation, and (iii) certain expenses associated with CenturyLink's acquisition of us.

As described above, in 2010 we recorded $475 million of expenses associated with extinguishing our convertible notes with cash. These expenses are not deductible for income tax purposes and, as

such, they increased our effective tax rate for the year ended December 31, 2010 by 40.8 percentage points.

On December 21, 2010, we accelerated the vesting of certain restricted stock and performance share awards issued under our Equity Incentive Plan in order to preserve certain economic benefits to our stockholders of $120 million that otherwise would have been lost in connection with CenturyLink's acquisition of us. However, certain of the expenses we recorded for this acceleration are not deductible for income tax purposes and as such they increased our effective tax rate for the year ended December 31, 2010 by 4.8 percentage points.

During the year ended December 31, 2010 we incurred approximately $39 million of expenses associated with CenturyLink's acquisition of us. Certain of these expenses are not deductible for income tax purposes and, as such, they increased our effective tax rate for the year ended December 31, 2010 by 1.9 percentage points.

For additional information on income taxes, see Note 12—Income Taxes to the consolidated financial statements in Item 8 of this report.

At December 31, 2012, we had approximately 24,800 employees, of which approximately 12,000 are members of either the International Brotherhood of Electrical Workers or the Communications Workers of America. These employees are subject to collective bargaining agreements that expired October 6, 2012. Our parent company, CenturyLink, is currently negotiating the terms of new agreements. In the meantime, the predecessor agreements have been extended, and the applicable unions have agreed to provide at least a twenty-four hour advance notice before terminating those predecessor agreements. If we fail to extend or renegotiate our collective bargaining agreements 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. See the discussion of risks relating to our labor relations in "Risk Factors—Risks Affecting Our Business" in Item 1A of this report. To help mitigate this potential risk, we have established contingency plans in which we would assign trained, non-represented employees to cover jobs for represented employees in the event of a work stoppage to provide continuity for our customers.

Our consolidated financial statements are prepared in accordance with accounting principles that are generally accepted in the United States. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. We have identified certain policies and estimates as critical to our business operations and the understanding of our past or present results of operations related to (i) business combinations; (ii) goodwill, customer relationships and other intangible assets; (iii) property, plant and equipment; (iv) pension and post-retirement benefits; (v) loss contingencies and litigation reserves; (vi) affiliates transactions; and (vii) income taxes. These policies and estimates are considered critical because they had a material impact, or they have the potential to have a material impact, on our consolidated financial statements and because they require significant judgments, assumptions or estimates. We believe that the estimates, judgments and assumptions made when accounting for the items described below are reasonable, based on information available at the time they are made. However, there can be no assurance that actual results will not differ from those estimates.

We have accounted for CenturyLink's acquisition of us under the acquisition method of accounting, whereby the tangible and separately identifiable intangible assets acquired and liabilities assumed are recognized at their estimated fair values at the acquisition date. The portion of the purchase price in excess of the estimated fair value of the net tangible and separately identifiable intangible assets acquired represents goodwill. The estimates of fair value and resulting allocation of the purchase price related to CenturyLink's acquisition of us involved significant estimates and judgments by our management. In arriving at the fair values of assets acquired and liabilities assumed, we considered the following generally accepted valuation approaches: the cost approach, income approach and market approach. Our estimates also included assumptions about projected growth rates, cost of capital, effective tax rates, tax amortization periods, technology life cycles, the regulatory and legal environment and industry and economic trends. In the first quarter of 2012, we completed our valuation of the assets acquired and liabilities assumed, along with the related allocations to goodwill and intangible assets.

Our acquisition resulted in the assignment of the aggregate consideration to the assets acquired and liabilities assumed based on estimates of their acquisition date fair values. The fair value of the aggregate consideration transferred exceeded the acquisition date fair value of the recorded tangible and intangible assets and assumed liabilities by an estimated $10.123 billion, which has been recognized as goodwill. This goodwill is attributable to strategic benefits, including enhanced financial and operational scale, market diversification and leveraged combined networks that we expect to realize. None of the goodwill associated with this acquisition is deductible for income tax purposes. The aggregate consideration allocation is based on our final analysis of enterprise value of $24.948 billion.

We amortize customer relationships primarily over estimated lives of 10 years, using either the sum-of-the-years-digits or straight-line methods, depending on the type of customer. We amortize capitalized software using the straight-line method over estimated lives ranging up to seven years and amortize trade names and patent assets predominantly using the sum-of-the-years digits method over an estimated life of four years.

We are required to test goodwill recorded in business combinations for impairment at least annually, or more frequently if events or a change in circumstances indicate that an impairment may have occurred. We are required to write-down the value of goodwill only in periods in which the recorded amount of goodwill exceeds the fair value. Our annual measurement date for testing goodwill impairment is September 30. The impairment testing is done at the reporting unit level; in reviewing the criteria for reporting units when allocating the goodwill resulting from CenturyLink's acquisition of us, we determined that we are one reporting unit.

In the third quarter of 2011, we adopted the provisions of ASU 2011-08, Testing Goodwill for Impairment, which permits us to make a qualitative assessment of whether it is more likely than not that a reporting unit's estimated fair value is less than its carrying amount before applying the two step goodwill impairment test which requires us (i) in step one, to identify potential impairments by comparing the estimated fair value of a reporting unit against its carrying value and (ii) in step two, to quantify any impairment identified in step one. At September 30, 2012, as a result of changes in our estimate of future cash flows we did not perform a qualitative assessment. We estimated the fair value of Qwest using an equal weighting based on a market approach and a discounted cash flow method. The market approach includes the use of comparable multiples of publicly traded companies whose services are comparable to ours. The discounted cash flow method is based on the present value of projected cash flows and a terminal value, which represents the expected normalized cash flows of Qwest beyond the cash flows from the discrete nine-year projection period. We discounted the

estimated cash flows using a rate that represents a market participant's weighted average cost of capital, which we determined to be approximately 6.0% as of the measurement date (which was comprised of an after-tax cost of debt of 3.2% and a cost of equity of 8.4%).

During the fourth quarter of 2012, we completed our annual impairment testing and concluded that our goodwill was not impaired and the estimated fair value of our equity exceeded our carrying value of equity by 37%.

We may be required to assess our goodwill for impairment before our next required testing date of September 30, 2013 under certain circumstances, including any failure of our future operating results to meet forecasted expectations or any significant increases in our weighted average cost of capital. In addition, we cannot assure that adverse conditions will not trigger future goodwill impairment testing or an impairment charge. A number of factors, many of which we have no ability to control, could affect our financial condition, operating results and business prospects and could cause our actual results to differ from the estimates and assumptions we employed in our goodwill impairment testing. These factors include, but are not limited to, (i) further weakening in the overall economy; (ii) a significant decline in our parent's, CenturyLink, stock price and resulting market capitalization; (iii) changes in the discount rate; (iv) successful efforts by our competitors to gain market share in our markets; (v) adverse changes as a result of regulatory actions; (vi) a significant adverse change in legal factors or in the overall business climate; and (vii) recognition of a goodwill impairment loss in the financial statements of a subsidiary that is a component of our reporting unit. For additional information, see "Risk Factors" in Item 1A of this report. We will continue to monitor certain events that impact our operations to determine if an interim assessment of goodwill impairment should be performed prior to the next required testing date of September 30, 2013.

As a result of our acquisition by CenturyLink, property, plant and equipment was recorded based on its estimated fair value as of the acquisition date. Property, plant and equipment purchased subsequent to our acquisition is recorded at cost. Substantially all other property, plant and equipment is recorded at cost less depreciation. Renewals and betterments of plant and equipment are capitalized while repairs, as well as renewals of minor items, are charged to operating expense. Depreciation of property, plant and equipment is provided on the straight-line method using class or overall group rates. The group method provides for the recognition of the remaining net investment, less anticipated net salvage value, over the remaining useful life of the assets. This method requires the periodic revision of depreciation rates.

Normal retirements of property, plant and equipment are charged against accumulated depreciation, with no gain or loss recognized. Other types of property, plant and equipment are stated at cost and, when sold or retired, a gain or loss is recognized. We depreciate such property on the straight line method over estimated service lives ranging from 3 to 45 years.

We perform annual internal reviews to evaluate the reasonableness of the depreciable lives for our property, plant and equipment. Our reviews utilize models that take into account actual usage, physical wear and tear, replacement history and assumptions about technology evolution and, in certain instances, actuarially determined probabilities to estimate the remaining life of our asset base.

Due to rapid changes in technology and the competitive environment, selecting the estimated economic life of telecommunications plant, equipment and software requires a significant amount of judgment. We regularly review data on utilization of equipment, asset retirements and salvage values to determine adjustments to our depreciation rates. The effect of a hypothetical one year increase or decrease in the estimated remaining useful lives of our property, plant and equipment would have decreased depreciation by approximately $230 million or increased depreciation by approximately $330 million, respectively.

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. For measurement purposes, long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities, absent a material change in operations. An impairment loss is recognized only if the carrying amount of the asset group is not recoverable and exceeds its fair value. Recoverability of the asset group to be held and used is measured by comparing the carrying amount of the asset group to the estimated undiscounted future net cash flows expected to be generated by the asset group. If the asset group's carrying value is not recoverable, an impairment charge is recognized for the amount by which the carrying amount of the asset group exceeds its fair value. We determine fair values by using a combination of comparable market values and discounted cash flows, as appropriate. During 2012, we did not incur changes in events or circumstances that would indicate that the carrying amounts of our long-lived assets, other than goodwill and other intangible assets with indefinite lives, may not be recoverable. As a result, no impairment charge was recorded in 2012.

We sponsor a noncontributory defined benefit pension plan (referred to as our pension plan) for a substantial portion of our employees. In addition to this tax qualified pension plan, we also maintain a non-qualified pension plan for certain eligible highly compensated employees. We also maintain post-retirement benefit plans that provide health care and life insurance benefits for certain eligible retirees.

Pension and post-retirement health care and life insurance benefits attributed to eligible employees' service during the year, as well as interest on benefit obligations, are accrued currently. Prior service costs and actuarial gains and losses are generally recognized as a component of net periodic expense over one of the following periods: (i) the average remaining service period of the employees expected to receive benefits of approximately eight years; (ii) the average remaining life of the employees expected to receive benefits of approximately 20 years; or (iii) the term of the collective bargaining agreements, as applicable. Pension and post-retirement benefit expenses 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 health care and life insurance benefits expenses and obligations, the most significant assumptions we make include discount rate, expected rate of return on plan assets, health care trend rates and our evaluation of the legal basis for plan amendments. The plan benefits covered by collective bargaining agreements as negotiated with our employees' unions can also significantly impact the amount of expense, benefit obligations and pension assets that we record.

The discount rate is the rate at which we believe we could effectively settle the benefit obligations as of the end of the year. We selected the discount rate based on a cash-flow matching analysis using hypothetical yield curves developed by an actuarial firm from U.S. corporate bonds rated high quality and projections of the future benefit payments that constitute the projected benefit obligation for the plans. This process establishes the uniform discount rate that produces the same present value of the estimated future benefit payments as is generated by discounting each year's benefit payments by a spot rate applicable to that year. The spot rates used in this process are derived from a yield curve created from yields on the 60th to 90th percentile of U.S. high quality bonds. In selecting the discount rate, we also review applicable provisions of generally accepted accounting principles and federal law.

The expected rate of return on plan assets is the long-term rate of return we expect to earn on the plans' assets in the future. The rate of return is determined by the strategic allocation of plan assets and the long-term risk and return forecast for each asset class. The forecasts for each asset class are generated primarily from an analysis of the long-term expectations of various third party investment

management organizations. The expected rate of return on plan assets is reviewed annually and revised, as necessary, to reflect changes in the financial markets and our investment strategy.

To compute the expected return on pension and post-retirement benefit plan assets, we apply an expected rate of return to the fair value of the pension plan assets and to the fair value of the post-retirement benefit plan assets adjusted for contribution timing and for projected benefit payments to be made from the plan assets. Annual market volatility for these assets is reflected in subsequent years' net periodic combined benefits expense.

Changes in any of the above factors could significantly impact operating expenses in the consolidated statements of operations and other comprehensive (loss) income in the consolidated statements of comprehensive (loss) income as well as the value of the liability and accumulated other comprehensive income (loss) of stockholder's equity on our consolidated balance sheets. The expected return on plan assets is reflected as a reduction to our pension and post-retirement benefit expense. If our assumed expected rates of return for 2012 were 100 basis points lower, our qualified pension and post-retirement benefit expenses would have increased by $82 million. If our assumed discount rates for 2012 were 100 basis points lower, our qualified pension and post-retirement benefit expenses would have increased by $24 million and our projected benefit obligation would have increased by approximately $1 billion. An increase of 100 basis points in the initial healthcare cost trend rate would have increased our post-retirement benefit expense by $3 million and increased our projected post-retirement benefit obligation by $74 million.

The trusts for the pension and post-retirement benefits plans hold investments in equities, fixed income, real estate and other assets such as private equity assets. The assets held by these trusts are reflected at estimated fair value as of December 31, 2012. For additional information on our trust investments, see Note 8—Employee Benefits to the consolidated financial statements in Item 8 of this report.

We are involved in several material legal proceedings, as described in more detail in "Legal Proceedings" in Item 3 of this report. We assess potential losses in relation to these and other pending or threatened tax and legal matters. For matters not related to income taxes, if a loss is considered probable and the amount can be reasonably estimated, we recognize an expense for the estimated loss. To the extent these estimates are more or less than the actual liability resulting from the resolution of these matters, our earnings will be increased or decreased accordingly. If the differences are material, our consolidated financial statements could be materially impacted. If a loss is considered reasonably possible, we disclose the estimate of the potential loss if material but we do not recognize any expense for the potential loss.

For matters related to income taxes, if we determine that the impact of an uncertain tax position is more likely than not to be sustained upon audit by the relevant taxing authority, then we recognize a benefit for the largest amount that is more likely than not to be sustained. No portion of an uncertain tax position will be recognized if the position has less than a 50% likelihood of being sustained. Though the validity of any tax position is a matter of tax law, the body of statutory, regulatory and interpretive guidance on the application of the law is complex and often ambiguous. Because of this, whether a tax position will ultimately be sustained may be uncertain. The overall tax liability recorded for uncertain tax positions as of the successor date of December 31, 2012 and the successor date of December 31, 2011, considers the anticipated utilization of any applicable tax credits and net operating losses ("NOLs").

To the extent we have recorded tax liabilities that are more or less than the actual liability that ultimately results from the resolution of an uncertain tax position, our earnings will be increased or decreased accordingly. Also, as we become aware of new interpretations of relevant tax laws and as we

discuss our interpretations with taxing authorities, we may in the future change our assessments of the sustainability of an uncertain tax position or of the amounts that may be sustained upon audit. We believe that the estimates, judgments and assumptions made in accounting for these matters are reasonable, based on information currently available. However, as our assessments change and as uncertain tax positions are resolved, the impact to our consolidated financial statements could be material.

We record intercompany charges at the amounts billed to us by our affiliates. Regulatory rules require certain expenses to be recorded at market price or fully distributed cost. Our compliance with regulations is subject to review by regulators. Adjustments to intercompany charges that result from these reviews are recorded in the period they become known.

Because of the significance of the services we provide to our affiliates and our other affiliates transactions, the results of operations, financial position and cash flows presented herein are not necessarily indicative of the results of operations, financial position and cash flows we would have achieved had we operated as a stand-alone entity during the periods presented.

We provide to our affiliates telecommunications services that we also provide to external customers. In addition, we provide to our affiliates computer system development and support services. We also purchase services from our affiliates including telecommunications services and marketing and employee-related support services. In the normal course of business, we transfer assets and liabilities to and from CenturyLink and its affiliates based on carrying value. We have recorded $38 million of non-cash dividends associated with asset transfers to CenturyLink during the successor year ended December 31, 2012.

Since CenturyLink's acquisition of us on April 1, 2011, we are included in the consolidated federal income tax return of CenturyLink. Under CenturyLink's tax allocation policy, CenturyLink treats our consolidated results as if we were a separate taxpayer. The policy requires us to settle our tax liabilities through a change in our general intercompany obligation based upon our separate return taxable income, after the utilization of our NOL carryforward. We are also included in the combined state tax returns filed by CenturyLink and the same payment and allocation policy applies. Our reported deferred tax assets and liabilities are primarily determined as a result of the application of the separate return allocation method and therefore the settlement of these amounts is dependent upon our parent, CenturyLink, rather than tax authorities. CenturyLink can and has utilized some of our NOLs in excess of the amount that we have been able to utilize on a separate return basis. As a result, the NOL carryforward of CenturyLink is less than the NOL carryforward included in our financial statements. CenturyLink does have the right to change their policy regarding settlement of these assets and liabilities at any time.

Our provision for income taxes includes amounts for tax consequences deferred to future periods. We record deferred income tax assets and liabilities reflecting future tax consequences attributable to tax NOLs, tax credit carryforwards and differences between the financial statement carrying value of assets and liabilities and the tax bases of those assets and liabilities. Deferred taxes are computed 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 earnings in the period that includes the enactment date.

The measurement of deferred taxes often involves the exercise of considerable judgment related to the realization of tax basis. Our deferred tax assets and liabilities reflect our assessment that tax positions taken and the resulting tax basis are more likely than not to be sustained if they are audited

by taxing authorities. Also, assessing tax rates that we expect to apply and determining the years when the temporary differences are expected to affect taxable income requires judgment about the future apportionment of our income among the states in which we operate. Any changes in our practices or judgments involved in the measurement of deferred tax assets and liabilities could materially impact our financial condition or results of operations.

We record deferred income tax assets and liabilities as described above. Valuation allowances are established when necessary to reduce deferred income tax assets to amounts that we believe are more likely than not to be recovered. We evaluate our deferred tax assets quarterly to determine whether adjustments to our valuation allowance are appropriate. In making this evaluation, we rely on our recent history of pre-tax earnings, estimated timing of future deductions and benefits represented by the deferred tax assets and our forecasts of future earnings, the latter two of which involve the exercise of significant judgment. As of the successor date of December 31, 2012, we established a valuation allowance of $260 million, primarily related to state NOLs and state credits, as it is more likely than not that this amount will not be utilized prior to expiration. If forecasts of future earnings and the nature and estimated timing of future deductions and benefits change in the future, we may determine that a valuation allowance for certain deferred tax assets is appropriate, which could materially impact our financial condition or results of operations. See Note 12—Income Taxes for additional information.

We are a wholly owned subsidiary of CenturyLink. As such, factors relating to, or affecting, CenturyLink's liquidity and capital resources could have material impacts on us, including impacts on our credit ratings, our access to capital markets and changes in the financial market's perception of us.

CenturyLink has cash management arrangements between certain of its subsidiaries that include lines of credit, affiliate obligations, capital contributions and dividends. As part of these cash management arrangements, affiliates provide lines of credit to certain other affiliates. Amounts outstanding under these lines of credit and intercompany obligations vary from time to time. Under these arrangements, the majority of our cash balance is advanced on a daily basis to CenturyLink. From time to time we may declare and pay dividends to CenturyLink, using cash repaid to us under these advances, which has the net effect of reducing the amount of these advances. Given our upgrade to an investment grade rating on April 1, 2011 by one of the rating agencies, our debt covenants do not currently limit the amount of dividends we can pay to CenturyLink. Given our cash management arrangement with CenturyLink and the resulting amounts due to us from CenturyLink, a significant component of our liquidity is dependent upon CenturyLink's ability to repay its obligation to us.

As of the successor date of December 31, 2012, we had a working capital deficit of $2.3 billion, reflecting current liabilities of $4.9 billion and current assets of $2.6 billion, compared to a working capital deficit of $280 million as of the successor date of December 31, 2011. The change in our working capital position is primarily due to the establishment of a demand notes payable—affiliate upon the redemption of certain of our bonds during 2012. The $2 billion increase in notes payable—affiliate and the $739 million increase in current maturities of long-term debt, partially offset reductions in the amounts owed to us by our affiliates and our accounts payable and dividends payable balances.

During 2012, we entered into a revolving promissory note with an affiliate of CenturyLink that provides us with a funding commitment with an aggregate principle amount available to $3.0 billion through June 30, 2022, of which $2.0 billion was outstanding as of the successor date of December 31, 2012. The revolving promissory note is due on demand and ranked equally to our Senior Notes. Interest is accrued on the outstanding balance using a weighted average per annum interest rate of

CenturyLink's outstanding borrowings for the interest period. As of the successor date of December 31, 2012, the weighted average interest rate was 6.706%. This revolving promissory note is reflected on our consolidated balance sheets under "Notes payable—affiliate".

CenturyLink has a revolving credit facility (the "Credit Facility") maturing April 2017 that allows CenturyLink to borrow up to $2 billion including $400 million of letter of credit capacity, for the general corporate purposes of itself and its subsidiaries. CenturyLink also maintains a separate letter of credit arrangement with a financial institution amounting to $160 million to which we have access. As of the successor date of December 31, 2012, CenturyLink had approximately $1.2 billion and $40 million available for future use under the Credit Facility and the separate letter of credit arrangement, respectively. QCII and our wholly-owned subsidiary, Qwest Services Corporation ("QSC"), are guarantors of the Credit Facility.

As of the successor date of December 31, 2012, our long-term debt (including current maturities and excluding notes payable to affiliate discussed in "Revolving Promissory Note") totaled $9.628 billion, as compared to $12.296 billion outstanding for the successor date of December 31, 2011. The decrease in our long-term debt of $2.7 billion was primarily due to the repayment of outstanding debt of $3.3 billion, offset by new borrowings of $896 million, less underwriting costs and other related debt retirement costs. A substantial portion of the debt repayments were funded by our revolving promissory note.

Approximately $750 million of QC floating rate senior notes will mature on June 15, 2013, which we expect to refinance.

Subject to market conditions, we expect to continue to issue debt securities from time to time through our QC subsidiary to refinance its maturing debt. The availability, interest rate and other terms of any new borrowings will depend on the ratings assigned QC by the three major credit rating agencies, among other factors.

We determined we were in compliance with all provisions and covenants of our debt agreements as of the successor date of December 31, 2012. See Note 4—Long-Term Debt to the consolidated financial statements in Item 8 of this report for additional information about our long-term debt.

Following CenturyLink's announcement on February 13, 2013 of changes in their capital allocation plans, one credit agency downgraded CenturyLink's and QC's debt credit ratings and another indicated that it has placed CenturyLink's, QCII's and QC's debt credit ratings under review for a downgrade. As of the date of this report, the credit ratings for the senior unsecured debt of QCII and QC were as follows:

Additional downgrades of CenturyLink's senior unsecured debt ratings could under certain circumstances incrementally increase the cost of CenturyLink's borrowing under the Credit Facility, which could indirectly impact us. In addition, the recent actions of the credit agencies, and any additional downgrades in the future, could impact CenturyLink's, QCII's and QC's access to debt capital or further raise CenturyLink's, QCII's and QC's borrowing costs. See "Risk Factors—Risks Affecting our Liquidity and Capital Resources" in Item 1A of this report.

The following table summarizes our estimated future contractual obligations as of the successor date of December 31, 2012:

	2013

	(Dollars in millions)
Long-term debt, including current maturities and capital lease obligations	$	856	687	134	243	503	7,002	9,425
Interest on long-term debt and capital leases⁽¹⁾		624	596	557	539	513	8,501	11,330
Note payable—affiliate		2,023	—	—	—	—	—	2,023
Interest on note payable—affiliate		136	—	—	—	—	—	136
Operating leases		177	149	124	102	94	575	1,221
Purchase commitments⁽²⁾		66	52	47	41	40	94	340
Post-retirement benefit obligation		74	73	72	70	68	1,100	1,457
Non-qualified pension obligations		2	2	2	2	2	7	17
Other		3	1	2	2	4	97	109

Total future contractual obligations⁽³⁾	$	3,961	1,560	938	999	1,224	17,376	26,058

(1)

Actual interest paid in all years may differ due to future refinancing of debt. Interest on our floating rate debt was calculated for all years using the rates effective at December 31, 2012.

(2)

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 also have service related commitments with various vendors for data processing, technical and software support services. Future payments under certain service 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 receive.

(3)

The table is limited to contractual obligations only and does not include:

•: contingent liabilities;
•: our open purchase orders as of the successor date of December 31, 2012. These purchase orders are generally recorded at fair value, and are generally cancelable without penalty;
•: other long-term liabilities, such as accruals for legal matters and other taxes that are not contractual obligations by nature. We cannot determine with any degree of reliability the years in which these liabilities might ultimately settle;
•: cash funding requirements for qualified pension benefits payable to certain eligible current and future retirees. Benefits paid by our qualified pension plans are paid through trusts. Cash funding requirements for these trusts are not included in this table as we are not able to reliably estimate required contributions to the trusts. Our funding projections are discussed further below;
•: certain post-retirement benefits payable to certain eligible current and future retirees. Not all of our post-retirement benefit obligation amount is a contractual obligation and only the portion that we believe is a contractual obligation is reported in the table. See additional information on our benefits plans in Note 8—Employee Benefits to the consolidated financial statements in Item 8 of this report;
•: contract termination fees. These fees are non-recurring payments, the timing and payment of which, if any, is uncertain. In the ordinary course of business and to optimize our cost structure, we enter into contracts with terms greater than one year to use the network facilities of other carriers and to purchase other goods and services. Our contracts to use other carriers' network facilities generally have no minimum volume requirements and are based on an interrelationship of volumes and discounted rates. Assuming we terminate these contracts in 2013, the contract termination fees would be approximately $495 million. Under the same assumption, termination fees for these contracts to purchase goods and services would be $24 million. In the normal course of business, we do not believe payment of these fees is likely; and

We incur capital expenditures on an ongoing basis in order to enhance and modernize our networks, compete effectively in our markets and expand our service offerings. We evaluate capital expenditure projects based on a variety of factors, including expected strategic impacts (such as forecasted revenue growth, operating, productivity, expense or service impacts) and our expected return on investment. The amount of capital investment is influenced by, among other things, demand for our services and products, cash flow generated by operating activities, cash required for other purposes and regulatory considerations.

Our capital expenditures continue to be focused on our strategic services primarily our broadband services. . In particular, we expect to continue to focus on expanding our fiber infrastructure, including installations of "fiber to the tower," which is a type of telecommunications network consisting of fiber-optic cables that run from a wireless carrier's mobile telephone switching office to cellular towers to enable the delivery of higher bandwidth services supporting mobile technologies than would otherwise generally be available through a more traditional copper-based telecommunications network. For more information on capital spending, see Items 1 and 1A of this report.

CenturyLink has agreed to accept approximately $35 million of the $90 million available to it from Phase 1 of the Federal Communications Commission's ("FCC") Connect America Fund ("CAF") established by Congress to help telecommunications carriers defray the cost of providing broadband access to remote customers. Of the $35 million, QC will receive approximately $30 million and intends to use the funds to deploy broadband service for up to 39,000 homes in unserved rural areas principally in Colorado, Minnesota, New Mexico and Washington. CenturyLink has determined that restrictions on the use of these funds have made acceptance of additional CAF funds uneconomical. CenturyLink has, however, filed with the FCC a waiver application, which, if granted, would allow QC to deploy broadband services with CAF funds to approximately 56,000 more homes in high-cost unserved areas in its markets. We received approximately $27.5 million in CAF funds during 2012 and received approximately $2.5 million in January 2013.

We are subject to material obligations under our existing defined benefit pension and other post-retirement benefit plans. When we became a wholly owned subsidiary of CenturyLink on April 1, 2011, we remeasured our plans and recognized liabilities for the accounting unfunded status of pension and other post-retirement benefit obligations of $490 million and $2.5 billion, respectively. See Note 8—Employee Benefits to the consolidated financial statements in Item 8 of this report for additional information about our pension and other post-retirement benefit arrangements.

Benefits paid by our qualified pension plan are paid through a trust that holds all plan assets. We did not make any cash contributions to our qualified pension plans during the successor year ended December 31, 2012 and we currently do not expect to make a plan contribution in 2013 and 2014. However, the actual amount of required plan contributions in 2014 and beyond will depend on earnings on investments, discount rates, demographic experience, changes in plan benefits and changes in funding laws and regulations.

Certain of our post-retirement health care and life insurance benefits plans are unfunded. A trust holds assets that are used to help cover the health care costs of certain retirees. As of the successor date of December 31, 2012, the fair value of the trust assets was $572 million; however, a portion of these assets is comprised of investments with restricted liquidity. We estimate that the more liquid

assets in the trust will be adequate to provide continuing reimbursements for covered post-retirement health care costs for approximately four years. Thereafter, covered benefits will be paid either directly by us or from the trust as the remaining assets become liquid. This projected four year period could be substantially shorter or longer depending on changes in projected health care costs, returns on plan assets, the timing of maturities of illiquid plan assets and future changes in benefits.

Our estimated annual long-term rate of return on the pension and post-retirement plans trust assets is 7.5% based on the assets currently held; however, actual returns could vary widely in any given year.

Net cash provided by operating activities decreased by $123 million in the successor year ended December 31, 2012 as compared to the combined year ended December 31, 2011 primarily due to reductions in accounts payable and accounts payable—affiliate offset by an increase in cash payments received from customers. Net cash provided by operating activities decreased by $438 million in the combined year ended December 31, 2011 as compared to the predecessor year ended December 31, 2010 primarily due to a decrease in cash payments received from customers as a result of decreased revenues, which is directly related to the decline in sales for the same period. For additional information about our operating results, see "Results of Operations" above.

Net cash used in investing activities decreased by $1.1 billion in the successor year ended December 31, 2012 as compared to the combined year ended December 31, 2011 primarily due to a reduction in affiliate loans. Net cash used in investing activities increased by $788 million in the combined year ended December 31, 2011 as compared to the predecessor year ended December 31, 2010 primarily due to increases in short-term affiliate loans resulting from the majority of our cash balance being transferred on a daily basis to CenturyLink and a reduction in property, plant and equipment purchases.

Net cash used in financing activities increased by $576 million in the successor year ended December 31, 2012 as compared to the combined year ended December 31, 2011 primarily due to an increase in net debt paydowns and an increase in dividends paid partially offset by the establishment of notes payable affiliates. Net cash used in financing activities decreased by $2.9 billion in the combined year ended December 31, 2011 as compared to the predecessor year ended December 31, 2010 primarily due to a decrease in net debt paydowns of $2.1 billion, and a $640 million settlement of embedded option in convertible debt in 2010.

On October 26, 2012, QCII redeemed all $550 million of its 8.00% Notes due 2015 using funds borrowed under CenturyLink's Credit Facility. This redemption resulted in a gain of $15 million.

On July 20, 2012, QC redeemed all $484 million of its 7.50% Notes due 2023, which resulted in an immaterial loss.

On June 25, 2012, QC issued $400 million aggregate principal amount of 7.00% Notes due 2052 in exchange for net proceeds, after deducting underwriting discounts and expenses, of $387 million. The Notes are unsecured obligations and may be redeemed, in whole or in part, on or after July 1, 2017 at a redemption price equal to 100% of the principal amount redeemed plus accrued interest.

On May 17, 2012, QCII redeemed $500 million of its 7.50% Notes due 2014, which resulted in an immaterial gain.

On April 18, 2012, QC completed a cash tender offer to purchase a portion of its $811 million of 8.375% Notes due 2016 and its $400 million of 7.625% Notes due 2015. With respect to its 8.375% Notes due 2016, QC received and accepted tenders of approximately $575 million aggregate principal amount of these notes, or 71%, for $722 million including a premium, fees and accrued interest. With respect to its 7.625% Notes due 2015, QC received and accepted tenders of approximately $308 million aggregate principal amount of these notes, or 77%, for $369 million including a premium, fees and accrued interest. The completion of these tender offers resulted in a loss of $46 million. In connection with consummating these tender offers, QC borrowed from a CenturyLink affiliate approximately $580 million under a revolving promissory note, payable upon demand. The promissory note is unsecured and is ranked equally to QC's senior notes.

On April 2, 2012, QC issued $525 million aggregate principal amount of 7.00% Notes due 2052 in exchange for net proceeds, after deducting underwriting discounts and expenses, of $508 million. The Notes are unsecured obligations and may be redeemed, in whole or in part, on or after April 1, 2017 at a redemption price equal to 100% of the principal amount redeemed plus accrued interest.

On March 1, 2012, QCII redeemed $800 million of its 7.50% Notes due 2014, which resulted in an immaterial gain.

Effective after CenturyLink's acquisition of us, we are included in the consolidated federal income tax return of CenturyLink. CenturyLink is in the process of developing a post-acquisition intercompany agreement for allocation of consolidated income tax liabilities. We will continue to account for income tax expense on a stand-alone basis. We are also included in certain combined state tax returns filed by CenturyLink and the same accounting will apply.

Through the successor date of December 31, 2012, we have paid certain costs that were associated with CenturyLink's acquisition of us. These costs include compensation costs comprised of retention bonuses and severance. The final amounts and timing of the compensation costs to be paid is partially dependent upon personnel decisions that continue to be made as part of the continuing integration. These amounts may be material.

In accounting for the CenturyLink's acquisition of us, we recorded our debt securities at their estimated fair values, which totaled $12.292 billion as of April 1, 2011. Our acquisition date fair value estimates were based primarily on quoted market prices in active markets and other observable inputs where quoted market prices were not available. The fair value of our debt securities exceeded their stated principal balances on the acquisition date by $693 million, which we recorded as a premium.

The table below summarizes the portions of this premium recognized as a reduction to interest expense or extinguished during the periods indicated:

The remaining premium of $218 million as of the successor date of December 31, 2012 will reduce interest expense in future periods, unless otherwise extinguished.

We also are involved in various legal proceedings that could have a material adverse effect on our financial position. See Note 16—Commitment and Contingencies for the current status of such legal proceedings.

We are exposed to market risk from changes in interest rates on our variable rate long-term debt obligations. We seek to maintain a favorable mix of fixed and variable rate debt in an effort to limit interest costs and cash flow volatility resulting from changes in rates.

From time to time, we have used derivative instruments to (i) lock-in or swap our exposure to changing or variable interest rates for fixed interest rates or (ii) to swap obligations to pay fixed interest rates for variable interest rates. As of the successor date of December 31, 2012, we had no such instruments outstanding. We have established policies and procedures for risk assessment and the approval, reporting and monitoring of derivative instrument activities. We do not hold or issue derivative financial instruments for trading or speculative purposes. Management periodically reviews our exposure to interest rate fluctuations and implements strategies to manage the exposure.

As of the successor date of December 31, 2012, we have approximately $9.37 billion (excluding capital lease and other obligations) of long-term debt outstanding, 92% of which bears interest at fixed rates and is therefore not exposed to interest rate risk. We also held $750 million of floating rate debt exposed to changes in LIBOR. A hypothetical increase of 100 basis points in LIBOR relative to this debt would decrease our annual pre-tax earnings by $8 million.

Certain shortcomings are inherent in the method of analysis presented in the computation of exposures to market risks. Actual values may differ materially from those presented above if market conditions vary from the assumptions used in the analyses performed. These analyses only incorporate the risk exposures that existed as of the successor date of December 31, 2012.

We have no special purpose or limited purpose entities that provide off-balance sheet financing, liquidity, or market or credit risk support and we do not engage in leasing, hedging or other similar

activities that expose us to any significant liabilities that are not (i) reflected on the face of the consolidated financial statements, (ii) disclosed in Note 16—Commitments and Contingencies to the consolidated financial statements in Item 8 of this report, or in the Future Contractual Obligations table included in this Item 7 above or (iii) discussed under the heading "Market Risk" above.

The information in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Market Risk" in Item 7 of this report is incorporated herein by reference.

The Board of Directors and Stockholder
Qwest Communications International, Inc.:

We have audited the accompanying consolidated balance sheets of Qwest Communications International, Inc. and subsidiaries (the Company) as of December 31, 2012 and 2011 (Successor dates), and the related consolidated statements of operations, comprehensive (loss) income, cash flows, and stockholder's equity (deficit) for the year ended December 31, 2012, the period from April 1, 2011 to December 31, 2011 (Successor periods), and the period from January 1, 2011 to March 31, 2011 and the year ended December 31, 2010 (Predecessor periods). 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 the standards of the Public Company Accounting Oversight Board (United States). 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 the Company as of December 31, 2012 and 2011 (Successor dates), and the results of their operations and their cash flows for the year ended December 31, 2012, the period from April 1, 2011 to December 31, 2011 (Successor periods), and the period from January 1, 2011 to March 31, 2011 and the year ended December 31, 2010 (Predecessor periods), in conformity with U.S. generally accepted accounting principles.

As discussed in note 2 to the consolidated financial statements, effective April 1, 2011, CenturyLink, Inc. acquired all of the outstanding stock of Qwest Communications International Inc. in a business combination accounted for as a purchase. As a result of the acquisition, the consolidated financial information for the periods after the acquisition is presented on a different cost basis than that for the periods before the acquisition and, therefore, is not comparable.

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS



	Successor						Predecessor
	Year Ended December 31, 2012			Nine Months Ended December 31, 2011			Three Months Ended March 31, 2011			Year Ended December 31, 2010
	(Dollars in millions)
OPERATING REVENUES
Operating revenues	$	10,889			8,276			2,846			11,730
Operating revenues—affiliates		467			51			—			—

Total operating revenues		11,356			8,327			2,846			11,730

OPERATING EXPENSES
Cost of services and products (exclusive of depreciation and amortization)		4,814			3,523			1,178			5,011
Selling, general and administrative		1,717			1,741			556			2,518
Operating expenses—affiliates		599			126			—			—
Depreciation and amortization		2,948			2,394			533			2,200

Total operating expenses		10,078			7,784			2,267			9,729

OPERATING INCOME		1,278			543			579			2,001
OTHER INCOME (EXPENSE)
Interest expense		(611	)		(486	)		(227	)		(1,039	)
Interest expense—affiliates		(144	)		—			—			—
Loss on embedded option in convertible debt		—			—			—			(475	)
Net loss on early retirement of debt		(23	)		(8	)		—			(45	)
Other (expense) income		4			2			5			8

Total other income (expense)		(774	)		(492	)		(222	)		(1,551	)

INCOME BEFORE INCOME TAX EXPENSE		504			51			357			450
Income tax expense		196			32			146			505

NET INCOME (LOSS)	$	308			19			211			(55	)

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME



	Successor						Predecessor
	Year Ended December 31, 2012			Nine Months Ended December 31, 2011			Three Months Ended March 31, 2011		Year Ended December 31, 2010
	(Dollars in millions)
NET INCOME (LOSS)	$	308			19			211		(55	)

OTHER COMPREHENSIVE (LOSS) INCOME:
Defined benefit pension and post-retirement plans, net of $233, $278, $(4) and $121 tax		(372	)		(446	)		7		115
Loss on interest rate cash flow hedges, net of reclassifications to net income, net of $—, $—, $—and $1 tax		—			—			—		(1	)
Auction rate securities marked to market, net of $—, $—, $—and $1 tax		—			—			—		(1	)

Other comprehensive (loss) income		(372	)		(446	)		7		113

COMPREHENSIVE (LOSS) INCOME	$	(64	)		(427	)		218		58

	Successor

	December 31, 2012			December 31, 2011
	(Dollars in millions and shares in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	87			48
Accounts receivable, less allowance of $76 and $62		1,177			1,201
Advances to affiliates		500			742
Deferred income taxes, net		473			559
Other		320			265

Total current assets		2,557			2,815
NET PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment		11,765			10,679
Accumulated depreciation		(2,638	)		(1,218	)

Net property, plant and equipment		9,127			9,461
GOODWILL AND OTHER ASSETS
Goodwill		10,123			10,123
Customer relationships, net		5,822			6,788
Other intangible assets, net		1,277			1,587
Other		340			381

Total goodwill and other assets		17,562			18,879

TOTAL ASSETS	$	29,246			31,155

LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt	$	856			117
Accounts payable		687			973
Accounts payable—affiliates, net		—			394
Notes payable—affiliate		2,023			—
Dividends payable—CenturyLink, Inc.		—			200
Accrued expenses and other liabilities
Salaries and benefits		450			469
Income and other taxes		260			263
Interest		128			175
Other		86			104
Advance billings and customer deposits		452			400

Total current liabilities		4,942			3,095

LONG-TERM DEBT		8,772			12,179

DEFERRED CREDITS AND OTHER LIABILITIES
Deferred revenue		192			110
Benefit plan obligations, net		3,699			3,198
Deferred income taxes, net		494			630
Other		523			667

Total deferred credits and other liabilities		4,908			4,605

COMMITMENTS AND CONTINGENCIES (Note 16)
STOCKHOLDER'S EQUITY
Common stock—$0.01 par value, 1 shares authorized; 1 shares issued, owned by CenturyLink		—			—
Additional paid-in capital		12,273			12,273
Accumulated other comprehensive loss		(818	)		(446	)
Accumulated deficit		(831	)		(551	)

Total stockholder's equity		10,624			11,276

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY	$	29,246			31,155

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS



	Successor						Predecessor
	Year Ended December 31, 2012			Nine Months Ended December 31, 2011			Three Months Ended March 31, 2011			Year Ended December 31, 2010
	(Dollars in millions)
OPERATING ACTIVITIES
Net income (loss)	$	308			19			211			(55	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,948			2,394			533			2,200
Deferred income taxes		174			27			145			508
Provision for uncollectible accounts		94			62			19			86
Long-term debt (premium) discount amortization		(84	)		(150	)		6			71
Loss on embedded option in convertible debt		—			—			—			475
Net loss on early retirement of debt		23			8			—			45
Stock-based compensation		—			—			4			93
Changes in current assets and liabilities:
Accounts receivable		(52	)		(85	)		61			(35	)
Accounts payable		(112	)		(99	)		(71	)		44
Accounts receivable and payable—affiliates, net		(307	)		51			—			—
Accrued income and other taxes		(12	)		(44	)		31			(6	)
Other current assets and other current liabilities, net		(85	)		(3	)		(117	)		(12	)
Changes in other noncurrent assets—affiliates		(4	)		—			—			—
Changes in other noncurrent assets and liabilities		(90	)		(42	)		(53	)		(68	)
Other, net		5			14			8			21

Net cash provided by operating activities		2,806			2,152			777			3,367

INVESTING ACTIVITIES
Payments for property, plant and equipment and capitalized software		(1,589	)		(1,207	)		(410	)		(1,488	)
Changes in advances to affiliates		242			(663	)		—			—
Proceeds from sale of property or maturities of investment securities		133			—			—			943
Purchases of investment securities		—			—			—			(944	)
Other, net		—			2			2			1

Net cash used in investing activities		(1,214	)		(1,868	)		(408	)		(1,488	)

FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt		896			2,126			—			775
Payments of long-term debt		(3,335	)		(2,402	)		(203	)		(3,379	)
Early retirement of debt costs		(200	)		(66	)		—			(41	)
Dividends paid		—			—			(141	)		(555	)
Dividends paid to CenturyLink, Inc.		(750	)		(300	)		—			—
Changes in notes payable—affiliate		2,023			—			—			—
Changes in accounts payable—affiliates		(187	)		—			—			—
Net proceeds from issuance of common stock		—			—			14			67
Purchases of treasury stock		—			—			—			(136	)
Settlement of embedded option in convertible debt		—			—			—			(640	)
Other, net		—			(18	)		13			(4	)

Net cash used in financing activities		(1,553	)		(660	)		(317	)		(3,913	)

Net (decrease) increase in cash and cash equivalents		39			(376	)		52			(2,034	)
Cash and cash equivalents at beginning of period		48			424			372			2,406

Cash and cash equivalents at end of period	$	87			48			424			372

Supplemental cash flow information:
Income taxes (paid) refunded, net	$	(2	)		13			1			(25	)
Interest (paid) (net of capitalized interest of $26, $12, $5 and $18)		(836	)		(659	)		(236	)		(989	)

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)

	Successor						Predecessor

	Successor						Predecessor
	Year Ended December 31, 2012			Nine Months Ended December 31, 2011			Three Months Ended March 31, 2011			Year Ended December 31, 2010
	(Dollars in millions)
COMMON STOCK
Balance at beginning of period	$	—			—			18			17

Balance at end of period		—			—			18			18

ADDITIONAL PAID-IN CAPITAL
Balance at beginning of period		12,273			12,273			42,285			42,268
Share-based compensation and other, net		—			—			18			182
Embedded option in convertible debt		—			—			—			(165	)

Balance at end of period		12,273			12,273			42,303			42,285

TREASURY STOCK
Balance at beginning of period		—			—			(157	)		(22	)
Purchase of treasury stock		—			—			—			(136	)
Other		—			—			—			1

Balance at end of period		—			—			(157	)		(157	)

ACCUMULATED OTHER COMPREHENSIVE LOSS
Balance at beginning of period		(446	)		—			(376	)		(489	)
Other comprehensive income (loss)		(372	)		(446	)		7			113

Balance at end of period		(818	)		(446	)		(369	)		(376	)

ACCUMULATED DEFICIT
Balance at beginning of period		(551	)		—			(43,425	)		(42,953	)
Net income (loss)		308			19			211			(55	)
Dividends declared		—			—			(141	)		(417	)
Dividends declared to CenturyLink, Inc.		(588	)		(570	)		—			—

Balance at end of period		(831	)		(551	)		(43,355	)		(43,425	)

TOTAL STOCKHOLDER'S EQUITY (DEFICIT)	$	10,624			11,276			(1,560	)		(1,655	)

QWEST COMMUNICATIONS INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On April 1, 2011, we became a wholly owned subsidiary of CenturyLink, Inc. in a tax-free, stock-for-stock transaction. Although we have continued as a surviving corporation and legal entity since the acquisition, the accompanying consolidated statements of operations, comprehensive income, cash flows and stockholder's equity (deficit) are presented for two periods: predecessor and successor, which relate to the period preceding the acquisition and the period succeeding the acquisition, respectively. On the date of the acquisition, April 1, 2011, our assets and liabilities were recognized at their fair value. This revaluation has been reflected in our consolidated financial statements and, therefore, has resulted in a new basis of accounting for the "successor period". This new basis of accounting means that our consolidated financial statements for the successor periods are not comparable to our consolidated financial statements relating to periods prior to the acquisition, including the predecessor period consolidated financial statements in this report.

The accompanying consolidated financial statements include our accounts and the accounts of our subsidiaries over which we exercise control. All intercompany amounts and transactions with our consolidated subsidiaries have been eliminated.

We provide to our affiliates telecommunications services that we also provide to external customers. In addition, we provide to our affiliates computer system development and support services. We also purchase services from our affiliates including telecommunications services, marketing and employee-related support services. In the normal course of business, we transfer assets and liabilities to and from CenturyLink and its affiliates based on their respective carrying values. Dividends declared are reflected on our consolidated statements of stockholder's equity.

Effective January 1, 2012, in connection with post-acquisition systems integration activities, we adopted the affiliate expense allocation methodology used by our parent. This methodology results in certain overhead costs incurred by us and by our parent that were previously assessed to us on a net basis now being assessed on a gross basis both to and from our parent, resulting in both higher affiliate revenues and expenses for us. This change resulting from systems integration activities, did not have a significant impact to our consolidated net income for the successor year ended December 31, 2012.

During the first quarter of 2012, in connection with post-acquisition systems integration activities, CenturyLink changed certain cash management processes applicable to us. Therefore, we now present

the balances related to these cash management transactions on a net basis with our other affiliate transactions.

Effective January 1, 2012, we changed our rates of capitalized labor as we transitioned certain legacy systems to the historical systems of our ultimate parent, CenturyLink. This transition resulted in an estimated $40 million to $55 million increase in the amount of labor capitalized as an asset compared to the amount that would have been capitalized if we had continued to use our legacy systems and a corresponding estimated $40 million to $55 million decrease in operating expenses for the successor year ended December 31, 2012. The reduction in expenses described above, net of tax, increased net income approximately $25 million to $34 million for the successor year ended December 31, 2012.

Effective January 1, 2012, we changed our estimates of the remaining useful lives of certain telecommunications equipment. These changes resulted in a decrease to depreciation expense of approximately $93 million for the successor year ended December 31, 2012. This decrease in depreciation expense, net of tax, had the effect of increasing net income by approximately $57 million for the successor year ended December 31, 2012.

On April 2, 2012, our subsidiary, Qwest Corporation ("QC"), sold an office building for net proceeds of $133 million. As part of the transaction, QC agreed to lease a portion of the building from the new owner. As a result, the $16 million gain from the sale was deferred and will be recognized as a reduction to rent expense over the 10 year lease term.

We also have reclassified certain other prior period amounts to conform to the current period presentation. These changes had no impact on total operating expenses or net income for any period.

Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions we made when accounting for items and matters such as, but not limited to, long-term contracts, customer retention patterns, allowance for doubtful accounts, depreciation, amortization, asset valuations, internal labor capitalization rates, recoverability of assets (including deferred tax assets), impairment assessments, pension, post-retirement and other post-employment benefits, taxes, certain liabilities and other provisions and contingencies are reasonable, based on information available at the time they were made. Our accounting for CenturyLink's acquisition of us required extensive use of estimates in determining the acquisition date fair values of our assets and liabilities. These estimates, judgments and assumptions can affect the reported amounts of assets, liabilities and components of stockholder's equity or deficit as of the dates of the consolidated balance sheets, as well as the reported amounts of revenue, expenses and components of cash flows during the periods presented in our consolidated statements of operations, our consolidated statements of comprehensive (loss) income and our consolidated statements of cash flows. We also make estimates in our assessments of potential losses in relation to threatened or pending tax and legal matters. See Note 12—Income Taxes and Note 16—Commitments and Contingencies for additional information.

For matters not related to income taxes, if a loss is considered probable and the amount can be reasonably estimated, we recognize an expense for the estimated loss. If we have the potential to recover a portion of the estimated loss from a third party, we make a separate assessment of recoverability and reduce the estimated loss if recovery is also deemed probable.

For matters related to income taxes, if the impact of an uncertain tax position is more likely than not to be sustained upon audit by the relevant taxing authority, then we recognize a benefit for the

largest amount that is more likely than not to be sustained. No portion of an uncertain tax position will be recognized if the position has less than a 50% likelihood of being sustained. Interest is recognized on the amount of unrecognized benefit from uncertain tax positions.

For all of these and other matters, actual results could differ from our estimates.

We recognize revenue for services when the related services are provided. Recognition of certain payments received in advance of services being provided is deferred until the service is provided. These advance payments include activation and installation charges, which we recognize as revenue over the expected customer relationship period, which ranges from eighteen months to over ten years depending on the service. We also defer procurement costs related to customer activation and installations. The deferral of customer activation and installation costs is limited to the amount of revenue deferred for such items. Costs in excess of deferred revenue are recorded as expense in the period such costs are incurred. Expected customer relationship periods are estimated using historical experience. 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 offer bundle discounts to our customers who receive certain groupings of services. These bundle discounts are recognized concurrently with the associated revenues and are allocated to the various services in the bundled offering based on the estimated selling price of services included in each bundled combination.

Customer arrangements that include both equipment and services are evaluated to determine whether the elements are separable. If the elements are deemed separable and separate earnings processes exist, the revenue associated with each element is allocated to each element based on the relative estimated selling price of the separate elements. We have estimated the selling prices of each element by reference to vendor-specific objective evidence of selling prices when the elements are sold separately. The revenue associated with each element is then recognized as earned. For example, if we receive an advance payment when we sell equipment and continuing service together, we immediately recognize as revenue the amount allocated to the equipment as long as all the conditions for revenue recognition have been satisfied. The portion of the advance payment allocated to the service based upon its relative selling price is recognized ratably over the longer of the contractual period or the expected customer relationship period.

We have periodically transferred the rights to use 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 cash consideration received on transfers of optical capacity assets and on all of the other elements deliverable under an IRU, as revenue ratably over the term of the agreement. We have not recognized revenue on any contemporaneous exchanges of our optical capacity assets for other optical capacity assets during all periods presented in these financial statements.

We offer some products and services that are provided by third-party vendors. We review the relationship between us, the vendor and the end customer to assess whether revenue should be reported on a gross or net basis. In assessing whether revenue should be reported on a gross or net basis, we consider whether we act as a principal in the transaction, take title to the products, have risk and rewards of ownership or act as an agent or broker. Based on our agreements with DIRECTV and Verizon Wireless, we offer these services through sales agency relationships which are reported on a net basis.

In the normal course of business, we transfer assets and liabilities to and from CenturyLink and its affiliates based on carrying values. We have recorded $38 million of non-cash dividends associated with asset transfers to CenturyLink during the successor year ended December 31, 2012.

In determining whether to include in our revenue and expenses the taxes and surcharges collected from customers and remitted to governmental authorities, including Universal Service Fund ("USF") charges, sales, use, value added and some excise taxes, we assess, among other things, whether we are the primary obligor or principal taxpayer for the taxes assessed in each jurisdiction where we do business. In jurisdictions where we determine that we are the principal taxpayer, we record the surcharges on a gross basis and include them in our revenue and costs of services and products.

In jurisdictions where we determine that we are merely a collection agent for the government authority, we record the taxes on a net basis and do not include them in our revenue and costs of services and products.

Costs related to advertising are expensed as incurred. Our advertising expense was $102 million for the successor year ended December 31, 2012, $176 million for the successor nine months ended December 31, 2011, $66 million for the predecessor three months ended March 31, 2011 and $296 million for the predecessor year ended December 31, 2010. This expense is included in selling, general and administrative expenses in our consolidated statements of operations.

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

Effective April 1, 2011, our results are included in the CenturyLink consolidated federal income tax return and certain combined state income tax returns. CenturyLink allocates income tax expense to us based upon a separate return allocation method which results in income tax expense that approximates the expense that would result if we were a stand-alone entity. Our reported deferred tax assets and liabilities, as discussed below and in Footnote 12 "Income Taxes", are primarily determined as a result of the application of the separate return allocation method and therefore the settlement of these amounts is dependent upon our parent, CenturyLink, rather than tax authorities. CenturyLink can and has utilized some of our net operating losses ("NOLs") in excess of the amount that we have been able to utilize on a separate return basis. As a result, the NOL carryforward of CenturyLink is less than the NOL carryforward included in our financial statements. Our current expectation is that

the majority of the NOL allocated to us will be utilized as taxable income is generated in the future and the associated deferred tax asset will reduce our general intercompany obligations under the current CenturyLink policy. CenturyLink does have the right to change their policy regarding settlement of these assets and liabilities at any time.

The provision for income taxes consists of an amount for taxes currently payable, an amount for tax consequences deferred to future periods, adjustments to our liabilities for uncertain tax positions and amortization of investment tax credits. We record deferred income tax assets and liabilities reflecting future tax consequences attributable to tax NOLs, tax credit carryforwards and differences between the financial statement carrying value of assets and liabilities and the tax bases of those assets and liabilities. Deferred taxes are computed 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 earnings in the period that includes the enactment date.

We establish valuation allowances when necessary to reduce deferred income tax assets to the amounts that we believe are more likely than not to be recovered. A significant portion of our net deferred tax assets relate to tax benefits attributable to NOLs. Each quarter we evaluate the need to retain all or a portion of the valuation allowance on our deferred tax assets. As of the successor date of December 31, 2012, we established a valuation allowance of $260 million, primarily related to state NOLs and state credits, as it is more likely than not that this amount will not be utilized prior to expiration. See Note 12—Income Taxes for additional information.

Cash and cash equivalents include highly liquid investments that are readily convertible into cash and are not subject to significant risk from fluctuations in interest rates. As a result, the value at which cash and cash equivalents are reported in our consolidated financial statements approximates their fair value. Subsequent to CenturyLink's acquisition of us, our cash collections are transferred to CenturyLink on a daily basis and our parent funds our cash disbursement needs. The net cash transferred to CenturyLink has been reflected as short-term affiliate loans in our consolidated balance sheets. As a result, cash and cash equivalents in the successor period are comprised of demand deposits with financial institutions. During the predecessor periods, in evaluating investments for classification as cash equivalents, we required that individual securities have original maturities of ninety days or less and that individual investment funds have dollar-weighted average maturities of ninety days or less. 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.

Accounts receivable are recognized based upon the amount due from customers for the services provided or at cost for purchased and other receivables less an 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. We generally consider our accounts past due if they are outstanding over 30 days. Our collection process varies by the customer segment, amount of the receivable, and our evaluation of the customer's credit risk. Our past due accounts are written off against our allowance for doubtful accounts when collection is considered to be not probable. Any recoveries of accounts previously written off are generally recognized as a reduction in bad debt expense in the period received. The carrying value of accounts receivable net of the allowance for doubtful accounts approximates fair value.

As a result of CenturyLink's acquisition of us, the purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. Therefore, the allocated fair values of the assets represent their new basis of accounting in our consolidated financial statements. This resulted in adjustments to our property, plant and equipment accounts, including accumulated depreciation at the acquisition date. The adjustments related to CenturyLink's acquisition of us are described in Note 2—Acquisition by CenturyLink and Note 6—Property, Plant and Equipment.

Property, plant and equipment acquired since the acquisition date is stated at original cost plus the estimated value of any associated legally or contractually required retirement obligations. Property, plant and equipment is depreciated primarily using the straight-line group method. Under the straight-line group method, assets dedicated to providing 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 for purposes of depreciation and tracking. Generally, under the straight-line group method, when an asset is sold or retired in the course of normal business activities, the cost is deducted from property, plant and equipment and charged to accumulated depreciation without recognition of a gain or loss. A gain or loss is recognized in our consolidated statements of operations only if a disposal is abnormal or unusual. Leasehold improvements are amortized over the shorter of the useful lives of the assets or the expected 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 for construction of network and other internal use assets are also capitalized during the construction phase. Property, plant and equipment supplies are carried at average cost, except for significant individual items for which cost is based on specific identification.

We perform annual internal reviews to evaluate the reasonableness of the depreciable lives for our property, plant and equipment. Our reviews utilize models that take into account actual usage, physical wear and tear, replacement history, assumptions about technology evolution and, in certain instances, actuarially determined probabilities to estimate the remaining life of our asset base.

We have asset retirement obligations associated with the legally or contractually required removal of a limited group of property, plant and equipment assets from leased properties and the disposal of certain hazardous materials present in our owned properties. When an asset retirement obligation is identified, usually in association with the acquisition of the asset, we record the fair value of the obligation as a liability. The fair value of the obligation is also capitalized as property, plant and equipment and then amortized over the estimated remaining useful life of the associated asset. Where the removal obligation is not legally binding, the net cost to remove assets is expensed in the period in which the costs are actually incurred. As a result of CenturyLink's acquisition of us, our asset retirement obligations were adjusted to fair value as of the acquisition date. The asset retirement obligation was $59 million and $62 million as of December 31, 2012 and 2011.

We review property, plant and equipment for impairment whenever facts and circumstances indicate that the carrying amounts of the assets may not be recoverable. For measurement purposes, property, plant and equipment is grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities, absent a material change in operations. An impairment loss is recognized only if the carrying amount of the asset group is not recoverable and exceeds its fair value. Recoverability of the asset group to be held and used is measured by comparing the carrying amount of the asset group to the estimated undiscounted future net cash flows expected to be generated by the asset group. If the asset group's carrying value is not recoverable, an impairment charge is recognized for the amount by which the

carrying amount of the asset group exceeds its fair value. We determine fair values by using a combination of comparable market values and discounted cash flows, as appropriate.

Intangible assets arising from business combinations, such as goodwill, customer relationships, capitalized software, trademarks and trade names are initially recorded at estimated fair value. We amortize customer relationships primarily over an estimated life of 10 years, using either the sum-of-the-years-digits or straight-line methods, depending on the type of customer. We amortize capitalized software using the straight-line method over estimated lives ranging up to seven years and amortize our trademark and trade name assets using the sum-of-the-years digits method over an estimated life of four years. In the predecessor period, we amortized capitalized software using the straight-line group method. In the predecessor period, trade names and trademarks were not amortized as they had an indefinite life. Other intangible assets not arising from business combinations are initially recorded at cost. 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.

As a result of CenturyLink's acquisition of us, the software used by us for internal use was adjusted to fair value as of the acquisition date. During the predecessor and successor periods, we have capitalized certain costs associated with software such as costs of employees devoting time to the projects and external direct costs for materials and services. Costs associated with software to be used for internal purposes 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, data conversion and training costs are expensed in the period in which they are incurred. We review the remaining economic lives of our capitalized software annually. Capitalized software is included in other intangible assets, net, in our consolidated balance sheets.

We test customer relationships for impairment whenever facts and circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized only if the carrying amount is not recoverable and exceeds its fair value. Recoverability of the our customer relationships is measured by comparing the carrying amount to the estimated undiscounted future net cash flows expected to be generated by them. If the customer relationship's carrying value is not recoverable, an impairment charge is recognized for the amount by which the carrying amount exceeds its fair value. We determine fair values by using a combination of comparable market values and discounted cash flows, as appropriate.

We are required to test goodwill for impairment at least annually, or more frequently if events or a change in circumstances indicate that an impairment may have occurred. We are required to write-down the value of goodwill only in periods in which the recorded amount of goodwill exceeds the fair value. Our annual measurement date for testing goodwill impairment is September 30. The impairment testing is at the reporting unit level, and in reviewing the criteria for reporting units when allocating the goodwill resulting from CenturyLink's acquisition of us, we have determined that our operations consist of one reporting unit, consistent with our determination that our business consists of one operating segment. See Note 3—Goodwill, Customer Relationships and Other Intangible Assets for additional information.

We periodically review the estimated lives and methods used to amortize our other intangible assets. The actual amounts of amortization expense may differ materially from our estimates, depending on the results of our periodic reviews.

We recognize the overfunded or underfunded status of our defined benefit and post-retirement plans as an asset or a liability on our balance sheet. Resulting actuarial gains or losses are a component of our other comprehensive (loss) income, which is then included in our accumulated other comprehensive (loss) income. Pension and post-retirement benefit expenses are recognized over the period in which the employee renders service and becomes eligible to receive benefits. We make significant assumptions (including the discount rate, expected rate of return on plan assets and health care trend rates) in computing the pension and post-retirement benefits expense and obligations. See Note 8—Employee Benefits.

On April 1, 2011, we became a wholly owned subsidiary of CenturyLink. Each share of our common stock outstanding immediately prior to the acquisition converted into the right to receive 0.1664 shares of CenturyLink common stock, with cash paid in lieu of fractional shares. The aggregate consideration of $12.273 billion was based on:

The aggregate consideration exceeded the aggregate estimated fair value of the assets acquired and liabilities assumed by $10.123 billion, which we have recognized as goodwill. This goodwill is attributable to strategic benefits, including enhanced financial and operational scale, market diversification and leveraged combined networks that we expect to realize. None of the goodwill associated with this acquisition is deductible for income tax purposes.

	April 1, 2011

	(Dollars in millions)
Cash, accounts receivable and other current assets*	$	2,121
Property, plant and equipment		9,529
Identifiable intangible assets:
Customer relationships		7,558
Capitalized software		1,702
Other		189
Other noncurrent assets		390
Current liabilities, excluding current maturities of long-term debt		(2,463	)
Current maturities of long-term debt		(2,422	)
Long-term debt		(10,253	)
Deferred credits and other liabilities		(4,201	)
Goodwill		10,123

Aggregate consideration	$	12,273

During 2012, we retrospectively adjusted our reported assignment of the aggregate consideration for changes to our original estimates of the fair value of certain items at the acquisition date. These changes are the result of additional information obtained since the filing of our Form 10-K for the combined year ended December 31, 2011. These changes occurred during the one-year measurement period, as well as subsequent to the close of the one-year measurement period due to the discovery and correction of errors as discussed in Note 1—Basis of Presentation and Summary of Significant Accounting Policies. Due to these revisions of our estimates, (i) identifiable intangible assets decreased due to a $67 million decrease in our customer relationships valuation, (ii) property, plant and equipment decreased by $25 million primarily from a revision to our valuation of our buildings, (iii) deferred credits and other liabilities decreased by $100 million primarily from a revision to one of our lease valuations and changes in tax liabilities, and (iv) current liabilities, excluding current maturities of long-term debt, increased by $35 million due to an addition to our accounts payable-affiliates, net to account for the difference in tax rates between CenturyLink and us at the acquisition date. Among other minor revisions, goodwill increased by $17 million as an offset to the above-mentioned changes. The depreciation and amortization expense impact of the adjustments to intangible assets and property, plant and equipment valuations did not result in a material change to previously-reported amounts.

The total amounts of these expenses are recognized in our cost of services and products and selling, general and administrative expenses.

Goodwill, customer relationships and other intangible assets consisted of the following:

As of the successor date of December 31, 2012, the gross carrying amounts of goodwill, customer relationships and other intangible assets were $19.785 billion. These assets were recorded at fair value on April 1, 2011 as a result of CenturyLink's acquisition of us.

We amortize customer relationships primarily over an estimated life of 10 years, using either the sum-of-the-years-digits or straight-line methods, depending on the type of customer. We amortize capitalized software using the straight-line method over estimated lives ranging up to seven years and amortize our trademark and trade name assets using the sum-of-the-years digits method over an estimated life of four years. The estimated future amortization expense for intangible assets is as follows:

We have accounted for CenturyLink's acquisition of us under the acquisition method of accounting, which resulted in the assignment of the aggregate consideration to the assets acquired and liabilities assumed based on their acquisition date fair values. The fair value of the aggregate consideration transferred exceeded the acquisition date fair value of the recorded tangible and intangible assets, and assumed liabilities by $10.123 billion, which has been recognized as goodwill. The impairment testing is done at the reporting unit level; in reviewing the criteria for reporting units when allocating the goodwill resulting from our acquisition by CenturyLink, we have determined that we are one reporting unit. We are required to test goodwill recorded in business combinations for impairment at least annually, or more frequently if events or circumstances indicate there may be impairment. Our annual measurement date for testing goodwill impairment is September 30. We are required to write-down the value of goodwill only in periods in which the recorded amount of goodwill exceeds the fair value.

We adopted the provisions of ASU 2011-08 in the third quarter of 2011, Testing Goodwill for Impairment, which permits us to make a qualitative assessment of whether it is more likely than not that a reporting unit's estimated fair value is less than its carrying amount before applying the two step goodwill impairment test, which requires us (i) in step one, to identify potential impairments by comparing the estimated fair value of a reporting unit against its carrying value and (ii) in step two, to quantify any impairment identified in step one. At September 30, 2012, as a result of changes in our estimate of future cash flows we did not perform a qualitative assessment. Therefore, we determined the estimated fair value of Qwest using an equal weighting based on a market approach and a discounted cash flow method. The market approach includes the use of comparable multiples of publicly traded companies whose services are comparable to ours to corroborate. The discounted cash flow method is based on the present value of projected cash flows and a terminal value, which represents the expected normalized cash flows of Qwest beyond the cash flows from the discrete nine-year projection period. We discounted the estimated cash flows using a rate that represents a market participant's weighted average cost of capital, which we determined to be approximately 6.0% as of the measurement date (which was comprised of an after-tax cost of debt of 3.2% and a cost of equity of 8.4%). Based on our analysis performed with respect to our reporting unit described above, we concluded that our goodwill was not impaired.

			Successor

	Interest Rates	Maturities	December 31, 2012			December 31, 2011
			(Dollars in millions)
Qwest Communications International Inc.
Senior notes	7.125%	2018	$	800			2,650
Unamortized premiums				49			117
Qwest Capital Funding
Senior Notes	6.500% - 7.750%	2018 - 2031		981			981
Unamortized premiums, net				27			28
Qwest Corporation
Senior notes⁽¹⁾	6.500% - 8.375%	2013 - 2052		7,386			7,829
Capital lease and other obligations	Various	Various		113			176
Unamortized premiums, net				127			320
Qwest Communications Company, LLC
Capital lease and other obligations	Various	Various		145			195

Total long-term debt				9,628			12,296
Less current maturities				(856	)		(117	)

Long-term debt, excluding current maturities			$	8,772			12,179

In connection with consummating the April 18, 2012 tender offer described below under "Repayments", QC borrowed from a CenturyLink affiliate approximately $580 million under a revolving promissory note, payable upon demand. The promissory note is unsecured and ranked equally to QC's senior notes.

On October 4, 2011, our wholly owned subsidiary, Qwest Corporation ("QC"), issued $950 million aggregate principal amount of its 6.75% Notes due 2021 in exchange for net proceeds, after deducting underwriting discounts and expenses, of $927 million. The notes are senior unsecured obligations of QC and may be redeemed, in whole or in part, at a redemption price equal to the greater of their principal

amount or the present value of the remaining principal and interest payments discounted at a U.S. Treasury interest rate specified in the indenture agreement plus 50 basis points.

On September 21, 2011, QC issued $575 million aggregate principal amount of its 7.50% Notes due 2051 in exchange for net proceeds, after deducting underwriting discounts and expenses, of $557 million. The notes are senior unsecured obligations of QC and may be redeemed, in whole or in part, on or after September 15, 2016 at a redemption price equal to 100% of the principal amount redeemed plus accrued and unpaid interest to the redemption date.

On June 8, 2011, QC issued $661 million aggregate principal amount of its 7.375% Notes due 2051 in exchange for net proceeds, after deducting underwriting discounts and expenses, of $642 million. The notes are unsecured obligations of QC and may be redeemed, in whole or in part, on or after June 1, 2016 at a redemption price equal to 100% of the principal amount redeemed plus accrued and unpaid interest to the redemption date.

CenturyLink has a revolving credit facility (the "Credit Facility") maturing April 2017 that allows CenturyLink to borrow up to $2 billion for the general corporate purposes of itself and its subsidiaries. Up to $400 million of the Credit Facility can be used for letters of credit, which reduce the amount available for other extensions of credit. Interest is assessed on borrowings using the London Interbank Offered Rate ("LIBOR"), Prime Rate (as defined) or Fed Funds Rate (as defined) plus an applicable margin between 0.25% and 2.25% per annum depending on the type of loan and CenturyLink's then-current senior unsecured long-term debt rating. CenturyLink also maintains a separate letter of credit arrangement with a financial institution amounting to $160 million to which we have access. As of the successor date of December 31, 2012, CenturyLink had approximately $820 million and $120 million outstanding under the Credit Facility and the separate letter of credit arrangement, respectively. QCII and our wholly-owned subsidiary, Qwest Services Corporation ("QSC"), are guarantors of the Credit Facility.

On October 26, 2012, QCII redeemed all $550 million of its 8.00% Notes due 2015 using funds borrowed under CenturyLink's Credit Facility. This redemption resulted in a gain of $15 million.

On July 20, 2012, QC redeemed all $484 million of its 7.50% Notes due 2023, which resulted in an immaterial loss.

On May 17, 2012, QCII redeemed $500 million of its 7.50% Notes due 2014, which resulted in an immaterial gain.

On March 1, 2012, QCII redeemed $800 million of its 7.50% Notes due 2014, which resulted in a gain of $8 million.

In October 2011, QC used the net proceeds of $927 million from the October 4, 2011 issuance, together with the $557 million of net proceeds received from the September 21, 2011 debt issuance

described above and available cash, to redeem the $1.5 billion aggregate principal amount of its 8.875% Notes due 2012 and to pay all related fees and expenses, which resulted in a loss of $6 million.

In June 2011, QC used the net proceeds of $642 million from the June 8, 2011 debt issuance, together with available cash, to redeem $825 million aggregate principal amount of its 7.875% Notes due 2011 and to pay related fees and expenses, which resulted in an immaterial loss.

In February 2011, our wholly owned subsidiary, Qwest Capital Funding, Inc ("QCF") paid at maturity the $179 million aggregate principal amount of its 7.25% Notes due 2011.

In November and December 2010, we redeemed all of the then-outstanding $1.118 billion aggregate principal amount of our 3.50% Convertible Senior Notes due 2025 and the remaining embedded option for $616 million. This, and a partial repurchase of these notes in August 2010, resulted in no gain or loss on the notes and a total loss of $475 million on the embedded conversion option for the year ended predecessor December 31, 2010.

Aggregate maturities of our long-term debt (excluding unamortized premiums, discounts, and other):

On September 27, 2012, we entered into a revolving promissory note with an affiliate of CenturyLink that provides us with a funding commitment with an aggregate principle amount available to $3.0 billion through June 30, 2022, of which $2.0 billion was outstanding as of the successor date of December 31, 2012. The revolving promissory note is payable on demand and ranked equally to our Senior Notes. Interest is accrued on the outstanding balance using a weighted average per annum interest rate of CenturyLink's outstanding borrowings for the interest period. As of the successor date of December 31, 2012, the weighted average interest rate was 6.706%. The accrued interest and outstanding principle balance are payable on demand, or no later than June 30, 2022. This revolving promissory note is reflected on our consolidated balance sheets under "Notes payable—affiliate".

On April 18, 2012, QC entered into a revolving promissory note with an affiliate of CenturyLink that provides us with a funding commitment with an aggregate principle amount available to $1.0 billion through June 30, 2022, of which $701 million was outstanding as of the successor date of December 31, 2012. The revolving promissory note is payable on demand and ranked equally to our Senior Notes. Interest is accrued on the outstanding balance using a weighted average per annum interest rate of CenturyLink's outstanding borrowings for the interest period. As of the successor date of December 31, 2012, the weighted average interest rate was 6.706%. The accrued interest and outstanding principle balance are payable on demand, or no later than June 30, 2022. This revolving promissory note is reflected on our consolidated balance sheets under "Note payable—affiliate".

Interest expense includes interest on long-term debt. The following table presents the amount of gross interest expense, net of capitalized interest and interest expense—affiliates:

As of the successor date of December 31, 2012, we had outstanding a total of $800 million aggregate principal amount of senior notes which are guaranteed on a senior unsecured basis by our wholly owned subsidiaries, QSC and QCF. The indenture governing these notes limits QCII's and its subsidiaries' ability to:

In the event that our senior notes would receive or maintain an investment grade rating, from one rating agency most of the covenants with respect to the notes will be subject to suspension or termination. Under the indenture governing these notes, we must repurchase the notes upon certain changes of control. This indenture also contains provisions for cross acceleration relating to the default on any of our other debt obligations and the debt obligations of our restricted subsidiaries in an aggregate amount in excess of $100 million. CenturyLink's acquisition of us does not constitute a change of control under the indenture governing these notes. We determined we were in compliance with all of the covenants as of the successor date of December 31, 2012.

The indentures governing our subsidiary QCF and QC notes contain certain covenants including, but not limited to: (i) a prohibition on certain liens on our assets; and (ii) a limitation on mergers or sales of all, or substantially all, of our assets, which limitation requires that a successor assume the obligation with regard to these notes. These indentures do not contain any cross-default provisions. Our subsidiaries were in compliance with all of the provisions and covenants of their debt agreements as of the successor date of December 31, 2012.

We are exposed to concentrations of credit risk from residential and business customers within our local service area, business customers outside of our local service area and from other telecommunications service providers. No customers individually represented more than 10% of our accounts receivable for all periods presented herein. 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 primarily on a recourse basis and include these amounts in our accounts receivable balance. We have not experienced any significant loss associated with these purchased receivables.

	Allowance for Doubtful Accounts

	(Dollars in millions)
Balance at January 1, 2010 (Predecessor)	$	100
Charged to expense—net		86
Deductions		(103	)

Balance at December 31, 2010 (Predecessor)		83
Charged to expense—net		19
Deductions		(22	)

Balance at March 31, 2011 (Predecessor)	$	80

Fair value adjustment		(80	)

Balance at April 1, 2011 (Successor)	$	—
Charged to expense—net		62
Deductions		—

Balance at December 31, 2011 (Successor)		62
Charged to expense—net		94
Deductions		(78	)
Adjustments		(2	)

Balance at December 31, 2012 (Successor)	$	76

As a result of CenturyLink's acquisition of us, the allowance for doubtful accounts as of the acquisition date of $80 million was reduced to zero and our gross accounts receivable were reduced by $80 million to reflect its estimated acquisition date fair value.

CenturyLink accounted for its acquisition of us under the acquisition method of accounting, which requires the assignment of the purchase price to the assets acquired based on their fair values at the acquisition date.

			Successor

	Depreciable Lives		December 31, 2012			December 31, 2011
			(Dollars in millions)
Property, plant and equipment:
Land		N/A	$	373			384
Fiber, conduit and other outside plant⁽¹⁾		15-45 years		3,900			3,671
Central office and other network electronics⁽²⁾		3-10 years		4,159			3,460
Support assets⁽³⁾		5-30 years		2,819			2,844
Construction in progress⁽⁴⁾		N/A		514			320

Gross property, plant and equipment				11,765			10,679

Accumulated depreciation				(2,638	)		(1,218	)

Net property, plant and equipment			$	9,127			9,461

During the first quarter of 2012, we retrospectively adjusted our previously reported assignment of the aggregate consideration for changes to our original estimates of the fair value of buildings at the acquisition date. This retrospective adjustment decreased the previously reported December 31, 2011 support assets by $25 million. Also, we reclassified certain prior period amounts of inventory held for construction to conform to the current period presentation. This reclassification increased construction in progress at December 31, 2011 by $55 million with an offsetting decrease to fiber, conduit and other outside plant and central office and other network electronics by $8 million and $47 million, respectively.

We recorded depreciation expense of $1.522 billion, $1.209 billion, $475 million, and $1.979 billion for the successor year ended December 31, 2012, the successor nine months ended December 31, 2011, the predecessor three months ended March 31, 2011 and the predecessor year ended December 31, 2010, respectively.

As of the successor date of December 31, 2012, our asset retirement obligations balance was primarily related to estimated future costs of removing equipment from leased properties and estimated future costs of properly disposing of asbestos and other hazardous materials upon remodeling or demolishing buildings. Asset retirement obligations are included in other long-term liabilities on our consolidated balance sheets. The following table provides asset retirement obligation activity:

	Asset Retirement Obligations

	(Dollars in millions)
Balance at December 31, 2010 (Predecessor)	$	63
Accretion expense		2
Liabilities incurred		—
Liabilities settled and other		(1	)
Change in estimate		—

Balance at March 31, 2011 (Predecessor)	$	64

Fair value adjustment		34

Balance at April 1, 2011 (Successor)	$	98
Accretion expense		5
Liabilities incurred		—
Liabilities settled and other		(3	)
Change in estimate		(38	)

Balance at December 31, 2011 (Successor)		62
Accretion expense		4
Liabilities incurred		—
Liabilities settled and other		(1	)
Change in estimate		(6	)

Balance at December 31, 2012 (Successor)	$	59

During 2011, we revised our estimates for the cost of removal of network equipment, asbestos remediation, and other obligations by $38 million. These revisions resulted in a reduction of the asset retirement obligation and offsetting reduction to gross property, plant and equipment.

Periodically, we have implemented reductions in our workforce and have accrued liabilities for related severance costs. These workforce reductions resulted primarily from the progression or completion of our integration plans related to CenturyLink's acquisition of us, increased competitive pressures and reduced workload demands due to the loss of access lines.

We report severance liabilities within "accrued expenses and other liabilities—salaries and benefits" in our consolidated balance sheets and report severance expenses in cost of services and products and selling, general and administrative expenses in our consolidated statements of operations.

In periods prior to CenturyLink's acquisition of us, we had ceased using certain real estate that we were leasing under long-term operating leases. As of the April 1, 2011 acquisition date, we recognized liabilities to reflect our estimates of the fair values of the existing lease obligations for real estate for which we had ceased using, net of estimated sublease rentals. Our fair value estimates were determined

using discounted cash flow methods. We recognize expense to reflect accretion of the discounted liabilities and periodically, we adjust the expense when our actual experience differs from our initial estimates. We report the current portion of liabilities for ceased-use real estate leases in "accrued expenses and other liabilities—other" and report the noncurrent portion in "deferred credits and other liabilities—other" in our consolidated balance sheets. We report the related expenses in "selling, general and administrative expenses" in our consolidated statements of operations.

As of the successor dates of December 31, 2012 and December 31, 2011, the current portion of our leased real estate accrual was $19 million and $27 million, respectively, and the long-term portion was $112 million and $126 million, respectively. The remaining lease terms range from 0.2 to 13 years, with a weighted average of 9 years.

Changes in our accrued liabilities for severance expenses and leased real estate were as follows:

	Severance

	(Dollars in millions)
Balance at December 31, 2010 (Predecessor)		29		223
Accrued to expense		4		4
Payments, net		(12	)	(12	)
Reversals and adjustments		(1	)	—

Balance at March 31, 2011 (Predecessor)	$	20		215

Fair value adjustment		(2	)	(47	)

Balance at April 1, 2011 (Successor)	$	18		168
Accrued to expense		120		15
Payments, net		(99	)	(21	)
Reversals and adjustments		(10	)	(9	)

Balance at December 31, 2011 (Successor)		29		153
Accrued to expense		67		2
Payments, net		(86	)	(24	)
Reversals and adjustments		(3	)	—

Balance at December 31, 2012 (Successor)	$	7		131

Our severance expenses for the successor nine months ended December 31, 2011 also included $12 million of share-based compensation associated with the accelerated vesting of stock awards that occurred in connection with workforce reductions relating to CenturyLink's acquisition of us.

We sponsor a noncontributory qualified defined benefit pension plan (referred to as our pension plan) for substantially all of our employees. In addition to this tax qualified pension plan, we also maintain a non-qualified pension plan for certain eligible highly compensated employees. We maintain post-retirement benefit plans that provide health care and life insurance benefits for certain eligible retirees. We also provide other post-employment benefits for eligible former employees.

The pension plan provides benefits to participants under five separate formulas which are (i) the pension band or pension factor formula for our union-represented employees, (ii) the account balance formula ("ABF") for our union-represented employees, (iii) the Old Management Formula ("OMF")

for our non-represented employees, (iv) the Defined Lump Sum ("DLS") formula for our non-represented employees and (v) the ABF for our non-represented employees. Participants, upon retirement or termination, may elect any form of annuity option available, a lump sum distribution or a combination annuity/lump sum.

For union-represented employees hired or rehired prior to January 1, 2009, pension benefits are based on either the pension band or pension factor formula. The pension band formula uses a flat dollar amount per year of service in which each job title has been assigned a dollar amount. The pension factor formula, which covers union-represented sales employees, uses a factor based on final average compensation times years of service. All union-represented employees hired or rehired on or after January 1, 2009, upon meeting certain requirements, earn a pension under the ABF, which provides a compensation credit equal to 3% of eligible compensation plus an annual interest credit.

For non-represented employees, the OMF is based on final average compensation and years of service, the DLS formula is based on final average compensation and age-related service credits and the ABF is based on a compensation credit equal to 3% of eligible compensation plus an annual interest credit. Participants who earned their pension under the OMF and DLS formula were non-represented participants who had completed 20 years of service by December 31, 2000 or who were service pension eligible by December 31, 2003. Employees who did not meet these requirements accrued a pension under the OMF and DLS formula until December 31, 2000, or earlier based on the plan's provisions and then commenced accruing a pension under the ABF beginning on January 1, 2001. The ABF covers non-represented participants hired after December 31, 2000 and management employees who did not have 20 years of service by December 31, 2000 or who did not become service pension eligible by December 31, 2003. In November 2009, we amended the pension plan to no longer provide pension benefit accruals for active non-represented employees after December 31, 2009. In addition, non-represented employees hired after January 1, 2009 are not eligible to participate in the plan. This amendment froze final average compensation calculations under the OMF and DLS formulas. In addition, the plan no longer includes service after December 31, 2009 in the calculation under the OMF, percentage credits under the DSL formula, nor compensation credits under the ABF. Active non-represented employees who participate in the plan retain their accrued pension benefit earned as of December 31, 2009 and employees under the ABF will continue to earn interest credits on their benefit after December 31, 2009. Employees are eligible to receive their accrued benefit when they separate from Qwest.

In addition to the benefits described above, the pension plan provides survivor and disability benefits to certain participants. The plan also provided a death benefit for eligible beneficiaries of certain retirees; however, we have eliminated this benefit effective March 1, 2010 for retirees who retired prior to January 1, 2004 and whose deaths occur after February 28, 2010. We previously eliminated the death benefit for eligible beneficiaries of certain retirees who retired after December 31, 2003.

Current funding laws require a company with a plan shortfall to fund the annual cost of benefits earned in addition to a seven-year amortization of the shortfall. Our funding policy for the pension plan is to make contributions with the objective of accumulating sufficient assets to pay all qualified pension benefits when due under the terms of the plan. The accounting unfunded status of our pension plan was $948 million as of the successor date of December 31, 2012. Based on current funding laws and regulations, we are not required to make a contribution in 2013. Although potentially significant in the aggregate, we currently do not expect contributions in 2014. However, the actual amount of required contributions to the plan in 2014 and beyond will depend on earnings on investments, discount rates, demographic experience, changes in the benefits and funding laws and regulations.

We maintain a non-qualified pension plan for certain eligible highly compensated employees. In November 2009, we amended the non-qualified pension plan to no longer provide benefit accruals after December 31, 2009. In addition, non-represented employees hired after January 1, 2009 are not eligible to participate in the plan. Employees who participate in the plan retain their accrued pension benefit earned as of December 31, 2009 and employees under the ABF will continue to earn interest credits on their benefit after December 31, 2009. Employees are eligible to receive their accrued benefit when they separate from Qwest. In addition, this plan provides survivor and disability benefits to certain participants. The plan also provided a death benefit for eligible beneficiaries of certain retirees; however, we have eliminated this benefit for retirees who retired prior to January 1, 2004 and whose deaths occur after February 28, 2010. We previously eliminated the death benefit for eligible beneficiaries of certain retirees who retired after December 31, 2003.

The benefit obligation for our occupational health care and life insurance post-retirement plans is estimated based on the terms of our written benefit plans. In calculating this obligation, we consider numerous assumptions, estimates and judgments, including but not limited to, discount rates, health care cost trend rates and plan amendments. In October 2012, our current four-year collective bargaining agreements expired which covered approximately 100% of our unionized employees as of the successor date of December 31, 2012. In 2008, the plan was amended to reflect changes affecting eligible post-1990 retirees who are former non-represented employees, including: (i) a Letter of Agreement that states such post-1990 retirees will begin contributing to the cost of health care benefits in excess of specified limits on the company-funded portion of retiree health care costs (also referred to as "caps") beginning January 1, 2009 and (ii) a provision that such post-1990 retirees will pay increased out-of-pocket costs through plan design changes starting January 1, 2009, including the elimination of Medicare Part B premium reimbursements for post-1990 retirees who are former non-represented employees. These changes have been considered in calculating the benefit obligation under the occupational health care plan.]

No contributions were made to the post-retirement occupational health care trust in 2012 or 2011 and we do not expect to make a contribution in 2013.

The terms of the post-retirement health care and life insurance plans between us and our eligible non-represented employees and our eligible post-1990 non-represented retirees are established by us and are subject to change at our discretion. We have a practice of sharing some of the cost of providing health care benefits with our non-represented employees and post-1990 non-represented retirees. The benefit obligation for the non-represented post-retirement health care benefits is based on the terms of the current written plan documents and is adjusted for anticipated continued cost sharing with non-represented employees and post-1990 non-represented retirees. However, our contribution under our post-1990 non-represented retirees' health care plan is capped at a specific dollar amount. Effective January 1, 2009, we amended our post-1990 non-represented retiree plan to, among other things, (i) require retirees to pay increased out-of-pocket costs and (ii) eliminate the reimbursement of Medicare Part B premiums.

A change of 100 basis points in the assumed initial health care cost trend rate would have had the following effects in 2012:

We expect our health care cost trend rate to decrease by 0.25% per year from 6.75% in 2013 to an ultimate rate of 4.50% in 2022. Our post-retirement health care expense for certain eligible post-1990 non-represented retirees and for certain eligible union-represented retirees is capped at a set dollar amount. Therefore, those health care benefit obligations are not subject to increasing health care trends after the effective date of the caps.

The qualified, pension, non-qualified pension and post-retirement health care benefit payments and premiums and life insurance premium payments are paid by us or distributed from plan assets. The estimated benefit payments provided below are based on actuarial assumptions using the demographics of the employee and retiree populations and have been reduced by estimated participant contributions.

The measurement date used to determine pension, non-qualified pension and post-retirement health care and life insurance benefits is December 31. The actuarial assumptions used to compute the net periodic benefit expense for our pension, non-qualified pension and post-retirement benefit plans

are based upon information available as of the beginning of the year, as presented in the following table.



	Pension Plan						Non-Qualified Pension Plan						Post-Retirement Benefit Plans
	Successor⁽¹⁾				Predecessor		Successor⁽¹⁾				Predecessor		Successor⁽¹⁾				Predecessor
	2012		2011		2010		2012		2011		2010		2012		2011		2010
Actuarial assumptions at beginning of year:
Discount rate		4.70%		5.40%		5.80%		4.40%		5.00%		5.50%		4.60%		5.30%		5.70%
Rate of compensation increase		3.25%		3.50%		3.50%		N/A		N/A		3.50%		N/A		N/A		N/A
Expected long-term rate of return on plan assets		7.50%		7.50%		8.00%		N/A		N/A		N/A		7.50%		7.50%		8.00%
Initial health care cost trend rate		N/A		N/A		N/A		N/A		N/A		N/A		7.25% / 8.00%		7.50%		8.00%
Ultimate health care 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		2018		2016		2016

The components of net periodic benefit expense for our pension, non-qualified pension and post-retirement benefit plans are detailed below:

The net periodic benefit expense (income) for our qualified pension, non-qualified pension and post-retirement benefit plans is included in cost of services and products and selling, general and administrative expenses in our consolidated statements of operations. Beginning on January 1, 2010, we no longer provide pension benefit accruals for active non-represented employees under our qualified and non-qualified pension plans.

The actuarial assumptions used to compute the funded status for the plans are based upon information available as of the successor dates of December 31, 2012 and December 31, 2011 are as follows:

The following table summarizes the change in the benefit obligations for the qualified pension, non-qualified pension and post-retirement benefit plans:

	Post Retirement Benefits Plans

	Successor						Predecessor
	Year Ended December 31, 2012			Nine Months Ended December 31, 2011			Three Months Ended March 31, 2011
	(Dollars in millions)
Benefit obligations accrued at beginning of period:	$	3,348			3,284			3,323
Service cost		9			5			2
Interest cost		147			124			41
Actuarial loss		185			130			—
Plan amendments		—			27			—
Participant contributions		75			46			15
Benefits paid from plan assets		(144	)		(130	)		(47	)
Benefits paid by company		(201	)		(159	)		(46	)
Medicare Part D reimbursements		19			21			—

Benefit obligations accrued at end of period	$	3,438			3,348			3,288

Accumulated benefit obligations	$	3,438			3,348			3,288

We maintain plan assets for our qualified pension plan and certain post-retirement benefit plans. The qualified pension plan assets are used for the payment of pension benefits and certain eligible plan expenses. The post-retirement benefit plan assets are used to pay health care benefits and premiums on behalf of eligible retirees who are former union-represented plan participants and to pay certain eligible plan expenses. The expected rate of return on plan assets is the long-term rate of return we expect to earn on the plans' assets. The rate of return is determined by the strategic allocation of plan assets and the long-term risk and return forecast for each asset class. The forecasts for each asset class are generated primarily from an analysis of the long-term expectations of various third party investment management organizations. The expected rate of return on plan assets is reviewed annually and revised, as necessary, to reflect changes in the financial markets and our investment strategy. The following

table summarizes the change in the fair value of plan assets for the pension and post-retirement benefit plans:

	Pension Plan Assets

	(Dollars in millions)
Fair value of plan assets January 1, 2010 (Predecessor)	$	7,326		863
Actual gain on plan assets		1,094		124
Benefits paid from plan assets		(760	)	(186	)

Fair value of plan assets December 31, 2010 (Predecessor)		7,660		801
Actual gain on plan assets		133		13
Benefits paid from plan assets		(152	)	(47	)

Fair value of plan assets March 31, 2011 (Predecessor)		7,641		767

Fair value of plan assets April 1, 2011 (Successor)		7,777		762
Actual gain on plan assets		449		11
Contribution to qualified trust		307		—
Benefits paid from plan assets		(489	)	(130	)

Fair value of plan assets December 31, 2011 (Successor)		8,044		643
Actual gain on plan assets		1,006		73
Benefits paid from plan assets		(720	)	(144	)

Fair value of plan assets December 31, 2012 (Successor)	$	8,330		572

Pension Plan: Our investment objective for the pension plan assets is to achieve an attractive risk-adjusted return over time that will provide for the payment of benefits and minimize the risk of large losses. Our pension plan investment strategy is designed to meet this objective by broadly diversifying plan assets across numerous strategies with differing expected returns, volatilities and correlations. The pension plan assets have target allocations of 55% to interest rate sensitive investments and 45% to investments designed to provide higher expected returns than the interest rate sensitive investments. Interest rate sensitive investments include 35% of plan assets targeted primarily to long-duration investment grade bonds, 13.5% targeted to high yield, emerging market bonds, and convertible bonds and 6.5% targeted to diversified strategies, which primarily have exposures to global government, corporate and inflation-linked bonds, as well as some exposures to global stocks and commodities. Assets expected to provide higher returns than the interest rate sensitive assets include broadly diversified equity investments with targets of approximately 14% to U.S. stocks, and 14% to developed and emerging market non-U.S. stocks. Approximately 12% is allocated to other private markets investments including funds primarily invested in private equity, debt and hedge funds. Real estate investments are targeted at 5% of plan assets. At the beginning of 2013, our expected annual long-term rate of return on pension assets is assumed to be 7.5%.

Post-Retirement Benefit Plan: Our investment objective for the post-retirement benefit plan assets is to achieve an attractive risk-adjusted return and minimize the risk of large losses over the expected life of the assets. Investment risk is managed by broadly diversifying assets across numerous strategies with differing expected returns, volatilities and correlations. Our investment strategy is designed to be consistent with the investment objective, with particular focus on providing liquidity for the reimbursement of our occupational post-retirement health care costs. The post-retirement benefit plan assets have target allocations of 35% to equities and 65% to non-equity investments. Specific target allocations within these broad categories are allowed to vary to provide liquidity in order to meet reimbursement requirements. Equity investments are broadly diversified with exposure to publicly

traded U.S., non-U.S. and emerging market stocks and private equity. While no new private equity investments have been made in recent years, the percent allocation to existing private equity investments is expected to increase in the near term as liquid, publicly traded stocks are drawn down for the reimbursement of health care costs. The 65% non-equity allocation includes investment grade bonds, high yield bonds, convertible bonds, emerging market debt, real estate, hedge funds, private debt and diversified strategies. At the beginning of 2013, our expected annual long-term rate of return on post-retirement benefit plan assets is assumed to be 7.5%.

Permitted investments: Plan assets are managed consistent with the restrictions set forth by the Employee Retirement Income Security Act of 1974, as amended, which requires diversification of assets and also generally prohibits defined benefit and welfare plans from investing more than 10% of their assets in securities issued by the sponsor company. As of December 31, 2012, the pension and post-retirement benefit plans did not directly own any shares of CenturyLink's common stock or debt, or any of our debt.

Derivative instruments: Derivative instruments are used to reduce risk as well as provide return. The pension and post-retirement benefit plans use exchange traded futures to gain exposure to equity and Treasury markets consistent with target asset allocations. Interest rate swaps are used in the pension plan to reduce risk relative to measurement of the benefit obligation, which is sensitive to interest rate changes. Foreign exchange forward contracts and total return swaps are used primarily to manage currency exposures. Credit default swaps are used to manage credit risk exposures in a cost effective and targeted manner relative to transacting with physical corporate fixed income securities. Options are currently used to manage interest rate exposure taking into account the implied volatility and current pricing of the specific underlying market instrument. Some derivative instruments subject the plans to counterparty risk. We closely monitor counterparty exposure and mitigate this risk by diversifying the exposure among multiple high credit quality counterparties, requiring collateral and limiting exposure by periodically settling contracts.

The gross notional exposure of the derivative instruments directly held by the plans is shown below. The notional amount of the derivatives corresponds to market exposure but does not represent an actual cash investment.

	Gross Notional Exposure

	Pension Plan				Post-Retirement Benefit Plan
	Successor				Successor
	December 31, 2012		December 31, 2011		December 31, 2012		December 31, 2011
	(Dollars in millions)
Derivative instruments:
Exchange-traded U.S. equity futures	$	204		535		—		12
Exchange-traded non-U.S. equity futures		1		4		—		—
Exchange-traded treasury futures		1,190		1,512		30		19
Interest rate swaps		993		435		—		—
Total return swaps		—		110		—		51
Foreign exchange forwards		490		379		21		23
Credit default swaps		334		—		—		—
Options		519		—		—		—

Fair Value Measurements: Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between independent and knowledgeable parties

who are willing and able to transact for an asset or liability at the measurement date. We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs when determining fair value and then we rank the estimated values based on the reliability of the inputs used following the fair value hierarchy set forth by the Financial Accounting Standards Board ("FASB"). For additional information on the fair value hierarchy, see Note 13—Fair Value Disclosure.

The tables below presents the fair value of plan assets by category and the input levels used to determine those fair values as of the successor date of December 31, 2012. It is important to note that the asset allocations do not include market exposures that are gained with derivatives. The investment category amounts include pending trade receivables and pending trade payable for 2012.

	Fair Value of Pension Plan Assets

	Level 1			Level 2		Level 3		Total
	(Dollars in millions)
Investment grade bonds (a)	$	561			1,050		—		1,611
High yield bonds (b)		—			881		40		921
Emerging market bonds (c)		134			269		—		403
Convertible bonds (d)		—			253		—		253
Diversified strategies (e)		—			443		—		443
U.S. stocks (f)		828			81		—		909
Non-U.S. stocks (g)		819			120		—		939
Emerging market stocks (h)		78			131		—		209
Private equity (i)		—			—		480		480
Private debt (j)		—			—		314		314
Market neutral hedge funds (k)		—			612		—		612
Directional hedge funds (k)		—			230		131		361
Real estate (l)		—			150		228		378
Derivatives (m)		(3	)		2		—		(1	)
Cash equivalents and short-term investments (n)		—			507		—		507

Total investments	$	2,417			4,729		1,193		8,339

Accrued expenses									(9	)

Total pension plan assets								$	8,330

	Fair Value of Post-Retirement Plan Assets

	Level 1		Level 2		Level 3		Total
	(Dollars in millions)
Investment grade bonds (a)	$	—		85		—		85
High yield bonds (b)		—		89		—		89
Emerging market bonds (c)		—		40		—		40
Convertible bonds (d)		—		2		—		2
Diversified strategies (e)		—		71		—		71
U.S. stocks (f)		40		—		—		40
Non-U.S. stocks (g)		51		1		—		52
Emerging market stocks (h)		—		20		—		20
Private equity (i)		—		—		44		44
Private debt (j)		—		—		5		5
Market neutral hedge funds (k)		—		41		—		41
Directional hedge funds (k)		—		24		—		24
Real estate (l)		—		20		28		48
Cash equivalents and short-term investments (n)		2		20		—		22

Total investments	$	93		413		77		583

Accrued expenses								(1	)
Reimbursement accrual								(10	)

Total post-retirement plan assets							$	572

The tables below present the fair value of plan assets by category and the input levels used to determine those fair values as of the successor date of December 31, 2011. The asset allocations do not include market exposures that are gained with derivatives.

	Fair Value of Pension Plan Assets

	Level 1		Level 2			Level 3		Total
	(Dollars in millions)
Investment grade bonds (a)	$	694		756			—		1450
High yield bonds (b)		—		530			78		608
Emerging market bonds (c)		—		189			—		189
Convertible bonds (d)		—		335			—		335
Diversified strategies (e)		—		489			—		489
U.S. stocks (f)		224		85			—		309
Non-U.S. stocks (g)		697		42			—		739
Emerging market stocks (h)		65		136			—		201
Private equity (i)		—		—			791		791
Private debt (j)		—		—			448		448
Market neutral hedge funds (k)		—		620			188		808
Directional hedge funds (k)		—		268			28		296
Real estate (l)		—		48			334		382
Derivatives (m)		12		(5	)		—		7
Cash equivalents and short-term investments (n)		13		1,118			—		1,131

Total investments	$	$1,705		4,611			1,867		8,183

Dividends and interest receivable									21
Pending trades receivable									388
Accrued expenses									(8	)
Pending trades payable									(540	)

Total pension plan assets								$	8,044

	Fair Value of Post-Retirement Plan Assets

	Level 1		Level 2		Level 3		Total
	(Dollars in millions)
Investment grade bonds (a)	$	12		95		—		107
High yield bonds (b)		—		61		—		61
Emerging market bonds (c)		—		33		—		33
Convertible bonds (d)		—		30		—		30
Diversified strategies (e)		—		62		—		62
U.S. stocks (f)		64		—		—		64
Non-U.S. stocks (g)		58		2		—		60
Emerging market stocks (h)		—		17		—		17
Private equity (i)		—		—		60		60
Private debt (j)		—		—		8		8
Market neutral hedge funds (k)		—		67		—		67
Directional hedge funds (k)		—		20		—		20
Real estate (l)		—		19		26		45
Cash equivalents and short-term investments (n)		1		20		—		21

Total investments	$	135		426		94		655

Dividends and interest receivable								3
Pending trades receivable								23
Accrued expenses								(15	)
Pending trades payable								(23	)

Total post-retirement plan assets							$	643

The plans' assets are invested in various asset categories utilizing multiple strategies and investment managers. For several of the investments in the tables above and discussed below, the plans own units in commingled funds and limited partnerships that invest in various types of assets. Interests in commingled funds are valued using the net asset value ("NAV") per unit of each fund. The NAV reported by the fund manager is based on the market value of the underlying investments owned by each fund, minus its liabilities, divided by the number of shares outstanding. Commingled funds held by the plans that can be redeemed at NAV within a year of the financial statement date are generally classified as Level 2. Investments in limited partnerships represent long-term commitments with a fixed maturity date, typically ten years. Valuation inputs for these limited partnership interests are generally based on assumptions and other information not observable in the market and are classified as Level 3 investments. The assumptions and valuation methodologies of the pricing vendors, account managers, fund managers and partnerships are monitored and evaluated for reasonableness. Below is an overview of the asset categories, the underlying strategies and valuation inputs used to value the assets in the preceding tables:

Concentrations of Risk: Investments, in general, are exposed to various risks, such as significant world events, interest rate, credit, foreign currency and overall market volatility risk. These risks are managed by broadly diversifying assets across numerous asset classes and strategies with differing expected returns, volatilities and correlations. Risk is also broadly diversified across numerous market sectors and individual companies. Financial instruments that potentially subject the plans to concentrations of counterparty risk consist principally of investment contracts with high quality financial institutions. These investment contracts are typically collateralized obligations and/or are actively managed, limiting the amount of counterparty exposure to any one financial institution. Although the investments are well diversified, the value of plan assets could change materially depending upon the overall market volatility, which could affect the funded status of the plans.

The table below presents a rollforward of the pension plan assets valued using Level 3 inputs:

	Pension Plan Assets Valued Using Level 3 Inputs

	High Yield Bonds			Private Equity			Private Debt			Market Neutral Hedge Fund			Directional Hedge Funds			Real Estate			Total
	(Dollars in millions)
Balance at December 31, 2010 (Predecessor)	$	114			831			530			102			29			288			1,894
Net transfers		—			—			—			—			—			—			—
Net (dispositions) acquisitions		(5	)		(20	)		(32	)		80			—			22			45
Actual return on plan assets:
Realized (losses) gains relating to assets sold during the period		(2	)		62			(1	)		—			—			4			63
Unrealized gains (losses) relating to assets still held at period-end		9			13			4			3			3			15			47

Balance at March 31, 2011 (Predecessor)		116			886			501			185			32			329			2,049

Balance at April 1, 2011 (Successor)		116			886			501			185			32			329			2,049

Net transfers		—			—			—			—			—			—			—

Net (dispositions) acquisitions		(21	)		(90	)		(60	)		—			(2	)		(1	)		(174	)

Actual return on plan assets:
Realized (losses) gains relating to assets sold during the period		(12	)		197			15			3			(1	)		9			211

Unrealized gains (losses) relating to assets still held at period-end		(5	)		(202	)		(8	)		—			(1	)		(3	)		(219	)
Balance at December 31, 2011 (Successor)		78			791			448			188			28			334			1,867
Transfer to Defined Benefit Master Trust at January 1, 2012 (Successor)		(78	)		(791	)		(448	)		(188	)		(28	)		(334	)		(1,867	)
QCII share of master trust at January 1, 2012 (Successor)		53			535			312			127			124			361			1,512
Net transfers		(8	)		—			—			(127	)		—			(71	)		(206	)
Net (dispositions) acquisitions		(6	)		(27	)		11			—			—			(69	)		(91	)
Actual return on plan assets:
Realized gains relating to assets sold during the year		—			2			1			—			—			—			3
Unrealized gains (losses) relating to assets still held at year-end		1			(30	)		(10	)		—			7			7			(25	)

Balance at December 31, 2012 (Successor)	$	40			480			314			—			131			228			1,193

The table below presents a rollforward of the post-retirement benefits plan assets valued using Level 3 inputs:

	Post-Retirement Benefit Plan Assets Valued Using Level 3 Inputs

	Private Equity			Private Debt			Real Estate			Total
	(Dollars in millions)
Balance at December 31, 2010 (Predecessor)	$	77			11			25			113
Net dispositions		(3	)		—			(1	)		(4	)
Actual return on plan assets:
Realized gains (losses) relating to assets sold during the period		8			—			1			9
Unrealized losses relating to assets still held at period-end		(6	)		(1	)		(1	)		(8	)

Balance at March 31, 2011 (Predecessor)		76			10			24			110


Balance at April 1, 2011 (Successor)		76			10			24			110
Net dispositions		(21	)		(2	)		—			(23	)
Actual return on plan assets:
Realized gains (losses) relating to assets sold during the period		33			1			—			34
Unrealized losses relating to assets still held at period-end		(28	)		(1	)		2			(27	)

Balance at December 31, 2011 (Successor)		60			8			26			94

Net dispositions		(14	)		(3	)		(1	)		(18	)
Actual return on plan assets:
Realized gains (losses) relating to assets sold during the year		4			2			(1	)		5
Unrealized losses relating to assets still held at year-end		(6	)		(2	)		4			(4	)

Balance at December 31, 2012 (Successor)	$	44			5			28			77

Certain gains and losses are allocated between assets sold during the year and assets still held at year-end based on transactions and changes in valuations that occurred during the year. These allocations also impact our calculation of net acquisitions and dispositions.

At December 31, 2012, the investment program produced actual gains on qualified pension and post-retirement plan assets of $1.079 billion for the successor year ended December 31, 2012 as compared to the expected returns of $617 million for a difference of $462 million. For the successor nine months ended December 31, 2011 and the predecessor three months ended March 31, 2011, the investment program produced actual gains on pension and post-retirement plan assets of $443 million and $294 million, respectively, as compared to the expected returns of $454 million for the successor nine months ended December 31, 2011 and $146 million for the predecessor three months ended March 31, 2011 for a difference of $11 million for the successor nine months ended December 31, 2011 and $148 million for the predecessor three months ended March 31, 2011. The short-term annual

returns on plan assets will almost always be different from the expected long-term returns and the plans could experience net gains or losses, due primarily to the volatility occurring in the financial markets during any given year.

The following table presents the unfunded status of the pension, non-qualified pension and post-retirement benefit plans:

The current portion of our non-qualified pension and post-retirement benefit obligations is recorded on our consolidated balance sheets in accrued expenses and other current liabilities-salaries and benefits. The non-current portion of our pension, non-qualified pension and post-retirement obligations is recorded on our consolidated balance sheets in benefit plan obligations-net. Also included in accrued expenses and other current liabilities are obligations for the current portion of post-employment perquisites, post-employment disability insurance and workers compensation benefit obligations. These amounts totaled $16 million as of the successor dates of December 31, 2012 and December 31, 2011. Also included in other deferred credits are obligations for the non-current portion of our executive life insurance plans, post-employment perquisites, post-employment disability insurance and workers compensation benefit obligations. These amounts totaled $149 million and $143 million as of the successor dates of December 31, 2012 and December 31, 2011, respectively.

The following tables present cumulative items not recognized as a component of net periodic benefits expense, items recognized as a component of net periodic benefits expense, additional items deferred during 2012 and cumulative items not recognized as a component of net periodic benefits

expense. The items not recognized as a component of net periodic benefits expense have been recorded on our consolidated balance sheets in accumulated other comprehensive loss:

	Predecessor

	Year Ended December 31, 2010			Recognition of Net Periodic Benefits Expense			Deferrals		Net Change in AOCI			Three Months Ended March 31, 2011
	(Dollars in millions)
Accumulated other comprehensive (loss) income:
Pension plan:
Net actuarial (loss) gain	$	(1,695	)		30			—		30			(1,665	)
Prior service benefit (cost)		163			(5	)		—		(5	)		158
Deferred income tax benefit (expense)		676			(7	)		—		(7	)		669

Total pension plan		(856	)		18			—		18			(838	)

Non-qualified pension plan:
Net actuarial (loss) gain		(8	)		—			—		—			(8	)
Deferred income tax benefit (expense)		1			(1	)		—		(1	)		—

Total non-qualified pension plan		(7	)		(1	)		—		(1	)		(8	)

Post-retirement benefit plans:
Net actuarial (loss) gain		(544	)		10			—		10			(534	)
Prior service benefit (cost)		890			(26	)		—		(26	)		864
Deferred income tax benefit (expense)		158			6			—		6			164

Total post-retirement benefit plans		504			(10	)		—		(10	)		494

Total accumulated other comprehensive (loss) income	$	(359	)		7			—		7			(352	)

	Successor

	April 1, 2011		Recognition of Net Periodic Benefits Expense		Deferrals			Net Change in AOCI			Nine Months Ended December 31, 2011
	(Dollars in millions)
Accumulated other comprehensive (loss) income:
Pension plan:
Net actuarial loss	$	—		—		(533	)		(533	)		(533	)
Deferred income tax benefit		—		—		205			205			205

Total pension plan		—		—		(328	)		(328	)		(328	)

Non-qualified pension plan:
Net actuarial gain (loss)		—		1		(3	)		(2	)		(2	)
Deferred income tax benefit		—		—		1			1			1

Total non-qualified pension plan		—		1		(2	)		(1	)		(1	)

Post-retirement benefit plans:
Net actuarial loss		—		—		(163	)		(163	)		(163	)
Prior service cost		—		—		(27	)		(27	)		(27	)
Deferred income tax benefit		—		—		73			73			73

Total post-retirement benefit plans		—		—		(117	)		(117	)		(117	)

Total accumulated other comprehensive (loss) income	$	—		1		(447	)		(446	)		(446	)

	Successor

	Nine Months Ended December 31, 2011			Recognition of Net Periodic Benefits Expense		Deferrals			Net Change in AOCI			Year Ended December 31, 2012
	(Dollars in millions)
Accumulated other comprehensive (loss) income:
Pension plan:
Net actuarial loss	$	(533	)		—		(452	)		(452	)		(985	)
Deferred income tax benefit		205			—		174			174			379

Total pension plan		(328	)		—		(278	)		(278	)		(606	)

Non-qualified pension plan:
Net actuarial loss		(2	)		—		(1	)		(1	)		(3	)
Deferred income tax benefit		1			—		—			—			1

Total non-qualified pension plan		(1	)		—		(1	)		(1	)		(2	)

Post-retirement benefit plans:
Net actuarial loss		(163	)		—		(153	)		(153	)		(316	)
Prior service (cost) benefit		(27	)		1		—			1			(26	)
Deferred income tax benefit		73			—		59			59			132

Total post-retirement benefit plans		(117	)		1		(94	)		(93	)		(210	)

Total accumulated other comprehensive (loss) income	$	(446	)		1		(373	)		(372	)		(818	)

The following table presents estimated items to be recognized in 2013 as a component of net periodic benefit expense of the pension, non-qualified pension and post-retirement benefit plans:

We sponsor post-retirement health care plans with several benefit options that provide prescription drug benefits that we deem actuarially equivalent to or exceeding Medicare Part D. We recognize the impact of the federal subsidy received under the Medicare Prescription Drug, Improvement and Modernization Act of 2003 in the calculation of our post-retirement benefit obligation and net periodic post-retirement benefit expense.

We provide health care and life insurance benefits to essentially all of our active employees. We are largely self-funded for the cost of the health care plan. Our active health care benefit expenses were $236 million, $179 million, $61 million and $238 million for the successor year ended December 31, 2012, the successor nine months ended December 31, 2011, the predecessor three months ended March 31, 2011 and the predecessor year ended December 31, 2010, respectively. Represented employee benefits are based on negotiated collective bargaining agreements. Employees are required to partially fund the health care benefits provided by us, in addition to paying their own out-of-pocket costs. Our group life insurance plans are fully insured and the premiums are paid by us.

We sponsor a qualified defined contribution benefit plan covering substantially all of our 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 cash. As of the successor date of December 31, 2012, the assets of the plan included approximately 10 million shares of CenturyLink common stock. As of the successor date of December 31, 2011, the assets of the plan included approximately 6 million shares of CenturyLink common stock. In both years, our 401k plan included common stock as a result of the combination of our employer match and participant directed contributions. We recognized $50 million, $39 million, $14 million and $56 million in expense related to this plan for the successor year ended December 31, 2012, the successor nine months ended December 31, 2011, the predecessor three months ended March 31, 2011 and the predecessor year ended December 31, 2010, respectively.

We sponsor non-qualified unfunded deferred compensation plans for various groups that include certain of our current and former highly compensated employees. These plans have been frozen and

participants can no longer defer compensation to the plans. The value of the assets and liabilities related to this plan is not significant.

During the predecessor year ended December 31, 2010, our employees participated in an Equity Incentive Plan ("EIP") and Employee Stock Purchase Plan ("ESPP"). Due to CenturyLink's acquisition of us and the purchasing of our outstanding stock, we no longer offer these plans.

Stock-based compensation expenses are included in cost of services and products, and selling, general, and administrative expenses in our consolidated statements of operations. During our predecessor years, we recognized compensation expense relating to awards granted to our employees under the EIP using the straight-line method over the applicable vesting periods. We also recognized compensation expense when our employees purchased our common stock under the ESPP for the difference between the employees' purchase price and the fair value of our stock.

For the successor year ended December 31, 2012, we were allocated a stock based compensation expense of $20 million from CenturyLink. For the successor nine months ended December 31, 2011, the predecessor three months ended March 31, 2011 and the predecessor year ended December 31, 2010, our total stock-based compensation expense was approximately $20 million, $4 million and $123 million, respectively. We also recognized an income tax benefit of $8 million, $8 million, $2 million and $31 million associated with our stock compensation expense during the successor year ended December 31, 2012, the successor nine months ended December 31, 2011, the predecessor three months ended March 31, 2011 and the predecessor year ended December 31, 2010, respectively.

On December 21, 2010, we accelerated the vesting of certain restricted stock and performance share awards issued under our previous Equity Incentive Plan in order to preserve certain economic benefits to employees that otherwise would have been lost in connection with CenturyLink's acquisition of us. Accordingly, an additional $63 million of stock compensation expense was recorded in the predecessor fourth quarter 2010 as a result of the acceleration.

Due to CenturyLink's acquisition of us, we now record stock based compensation expense that is allocated to us from CenturyLink, which is included in operating expenses-affiliates in our consolidated statements of operations. Based on many factors that affect the allocation, the amount of stock-based compensation expense recorded at CenturyLink and ultimately allocated to us may fluctuate. We cash settle the stock-based compensation expense allocated to us from CenturyLink.

We are an integrated communications company engaged primarily in providing an array of communications services, including local and long-distance, network access, private line (including special access), broadband, Ethernet, data, managed hosting, wireless and video services. We strive to maintain our customer relationships by, among other things, bundling our service offerings to provide our customers with a complete offering of integrated communications services. We categorize our products and services into the following four categories:

During the first quarter of 2012, we reclassified certain prior period revenues between the aforementioned four categories to conform to the current period presentation.

Since the April 1, 2011 closing of CenturyLink's acquisition of us, our operations have been integrated into and reported as part of the segments of CenturyLink. CenturyLink's chief operating decision maker ("CODM") has become our CODM, but reviews our financial information on an aggregate basis only in connection with our quarterly and annual reports that we file with the Securities and Exchange Commission. Consequently, we do not provide our discrete financial information to the CODM on a regular basis. As such, we believe we now have one reportable segment and have reclassified our prior period results to conform to our current view.

We do not have any single customer that provides more than 10% of our total revenue. Substantially all of our revenue comes from customers located in the United States.

The table below presents the aggregate USF surcharges recognized on a gross basis:

We charge our affiliates for services based on market price or fully distributed cost ("FDC"). We charge our affiliates market price for services that we also provide to external customers, while other services that we provide only to our affiliates are priced by applying an FDC methodology. FDC rates include salaries and wages, payroll taxes, employee benefits, miscellaneous expenses, and charges for the use of our buildings, computing and software assets. Whenever possible, costs are directly assigned to our affiliates for the services they use. If costs cannot be directly assigned, they are allocated among all affiliates based upon cost causative measures; or if no cost causative measure is available, these costs are allocated based on a general allocator. These cost allocation methodologies are reasonable. From time to time, we adjust the basis for allocating the costs of a shared service among affiliates. Such changes in allocation methodologies are generally billed prospectively.

We also purchase services from our affiliates including telecommunication services, insurance, flight services and other support services such as legal, regulatory, finance and accounting, tax, human resources and executive support. Our affiliates charge us for these services based on market price or FDC.

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

	Successor				Predecessor

	Year Ended December 31, 2012		Nine Months Ended December 31, 2011		Three Months Ended March 31, 2011			Year Ended December 31, 2010
	(Dollars in millions)
Income tax expense:
Current tax provision (benefit):
Federal	$	22		2		(1	)		(14	)
State and local		—		2		1			11

Total current tax (benefit) provision		22		4		—			(3	)

Deferred tax provision:
Federal		155		24		120			470
State and local		19		4		26			38

Total deferred tax expense		174		28		146			508

Income tax expense	$	196		32		146			505

For the successor year ended December 31, 2012, the successor nine months ended December 31, 2011 and the predecessor three months ended March 31, 2011, we increased the total valuation allowance by $4 million, $7 million and $1 million, respectively. For the predecessor year ended December 31, 2010, we increased the total valuation allowance by $7 million. These amounts are included in the deferred tax provision.

Income tax expense for the successor year ended December 31, 2012 and the combined year ended December 31, 2011 were $196 million and $178 million, respectively. Income tax expense for the successor year ended December 31, 2012 increased $18 million as compared to the combined year ended December 31, 2011, primarily related to an increase in book income before tax which is partially offset by the 2011 impact of a valuation allowance increase.

Income tax expense for the combined year ended December 31, 2011, as compared to the predecessor year ended December 31, 2010, decreased by $327 million largely as a result of the March 2010 enactments of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010. Income tax expense also decreased due to the 2010 tax treatments of (i) the premium paid on our convertible debt, (ii) the expenses incurred when we accelerated the vesting of certain stock-based compensation and (iii) certain expenses associated with CenturyLink's acquisition of us.

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

	Successor						Predecessor

	Year Ended December 31, 2012			Nine Months Ended December 31, 2011			Three Months Ended March 31, 2011		Year Ended December 31, 2010
	(in percent)
Effective income tax rate:
Federal statutory income tax rate		35.0%			35.0%			35.0%		35.0%
State income taxes—net of federal effect and tax expense (benefit) of income (loss) not recognized		2.5			5.3			4.8		9.0
Medicare subsidy, including effect of 2010 Health Care Legislation		(0.1	)		(1.5	)		—		22.8
Loss on embedded option in convertible debt		—			—			—		37.0
Excess compensation		—			—			—		4.3
Merger-related costs		—			—			—		1.7
Uncertain tax position changes		—			(1.1	)		0.2		—
Disallowed meals and entertainment		0.2			4.2			0.2		0.5
Foreign tax expense		0.8			2.5			—		—
Other		0.5			3.7			0.5		1.2
Adjustments related to prior periods		—			—			—		(0.6	)
Changes in valuation allowance		—			15.3			0.1		1.3

Effective income tax rate		38.9%			63.4%			40.8%		112.2%

	Successor

	Year Ended December 31, 2012			Year Ended December 31, 2011
	(Dollars in millions)
Deferred tax assets and liabilities:
Deferred tax assets:
Net operating loss carryforwards	$	1,973			2,437
Post-retirement and pension benefit costs		1,506			1,296
Deferred loss subject to amortization		244			260
Debt related differences		154			258
Other employee benefits		110			97
Other		422			521

Gross deferred tax assets		4,409			4,869
Valuation allowance on deferred tax assets		(260	)		(256	)

Net deferred tax assets		4,149			4,613

Deferred tax liabilities:
Property, plant and equipment and intangible assets		(1,817	)		(1,512	)
Intangibles		(2,163	)		(2,963	)
Other		(190	)		(209	)

Total deferred tax liabilities		(4,170	)		(4,684	)

Net deferred tax (liability) assets	$	(21	)		(71	)

The IRS previously examined all of our federal income tax returns prior to 2008 because we were included in its coordinated industry case program and now examines all of our federal income tax returns as included in the consolidated federal return of our parent company. We previously filed amended federal income tax returns for 2002-2007 to make protective claims with respect to items reserved in our audit settlements and to correct items not addressed in prior audits. The examination of those amended federal income tax returns by the IRS was completed in 2012. In 2012, we also filed an amended 2008 federal income tax return primarily to report the carryforward impact of the prior year settlements. Such amended filing is subject to adjustment by the IRS. Qwest also previously filed an amended return for 1999 for its predecessor U S WEST, Inc. to make certain refund claims. An agreed resolution of those claims is pending conditioned upon Congressional Joint Committee Approval.

We file combined income tax returns in many states, and these combined returns remain open for adjustments to our federal income tax returns. In addition, certain combined state income tax returns we have filed since 1996 are still open for state specific adjustments.

A reconciliation of the change in our gross unrecognized tax benefits (excluding both interest and any related federal benefit) is as follows:

As of the successor date of December 31, 2011, approximately $64 million of the unrecognized tax benefits could affect our income tax provision and effective income tax rate. As of December 31, 2012, approximately $21 million of the unrecognized tax benefits could affect our income tax provision and effective income tax rate.

During 2012, we entered into negotiations with the IRS to resolve a claim that was previously filed for 1999. Based on the status of those negotiations at year end, we have partially reversed an unrecognized tax benefit which decreased our total unrecognized tax benefits.

Effective on April 1, 2011 in conjunction with CenturyLink's acquisition of us, we changed our accounting policy to recognize interest expense and penalties related to income taxes as income tax expense. Prior to April 1, 2011, interest expense and penalties related to income taxes are included in the other—net line of our consolidated statements of operations. For the successor period ended December 31, 2012, we did not recognize any in income tax expense. For the successor nine months ended December 31, 2011 and the predecessor three months ended March 31, 2011, we recognized $1 million and $1 million, respectively. We had accrued interest (presented before related tax benefits) of approximately $28 million at December 31, 2012 and December 31, 2011. We made no accrual for penalties related to income tax positions.

As of December 31, 2012, we had a federal NOL carryforward attributed to us under the separate return method of approximately $5.3 billion. If unused, the NOLs would expire between 2015 and 2032; however, no significant amounts expire until 2020. We have alternative minimum tax credits of $45 million as of December 31, 2012 which do not expire. As of December 31, 2012 and 2011, we also have $72 million ($47 million, net of federal income tax) of state investment tax credit carryforwards that will expire between 2013 and 2024, if not utilized.

In the predecessor year ended December 31, 2010, we increased our state tax rate based on a review of our state apportionment factors and the current tax rate of the states where we conduct business. This change resulted in a $4 million state deferred tax benefit, net of federal effect.

Effective on April 1, 2011 in conjunction with CenturyLink's acquisition of us, our tax payments and receipts for combined or consolidated returns will be paid to or received from CenturyLink. We will continue to make some tax payments directly to certain tax jurisdictions where we file separate income tax returns. For the successor year ended December 31, 2012, we paid $2 million for income taxes. We did not make or receive any tax payments during 2011 but, we received refunds of approximately $13 million and $1 million for the successor nine months ended December 31, 2011 and

the predecessor three months ended March 31, 2011, respectively, primarily associated with periods prior to April 1, 2011. In 2010, we paid $25 million for income taxes.

From 2001 through 2005, we reported a significant cumulative loss and generated substantial NOLs for income tax purposes, and we maintained a valuation allowance against the majority of our net deferred tax assets at that time because we could not sustain a conclusion that it was more likely than not that we would realize the NOLs and other deferred tax assets.

We establish valuation allowances necessary to reduce the deferred tax assets to amounts we expect to realize. As of the successor dates of December 31, 2012 and December 31, 2011, a valuation allowance of $260 million and $256 million, respectively, was established as it is more likely than not that this amount of net operating loss carryforwards or other deferred tax assets will not be realized.

We recognized a $110 million increase in the valuation allowance as a result of acquisition accounting. The allowance was primarily related to state credit carryforwards recognized in acquisition accounting. Previously, the state credit carryforwards were not recognized due to the deferral method of accounting for investment tax credits.

Based on our current assessment of various factors, including (i) the potential outcomes of these ongoing examinations, (ii) the expiration of statute of limitations for specific jurisdictions, (iii) the negotiated settlement of certain disputed issues, and (iv) the administrative practices of applicable taxing jurisdictions, it is reasonably possible that the related unrecognized tax benefits for uncertain tax positions previously taken may decrease by up to $25 million within the next 12 months. The actual amount of such decrease, if any, will depend on several future developments and events, many of which are outside our control.

Our financial instruments consist of cash and cash equivalents, accounts receivable, advances to affiliates, accounts payable, accounts payable—affiliates, notes payable—affiliate and long-term debt, excluding capital lease obligations. Due to their short-term nature, the carrying amounts of our cash and cash equivalents, accounts receivable, advances to affiliates, accounts payable, accounts payable—affiliates and notes payable—affiliate approximate their fair values.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between independent and knowledgeable parties who are willing and able to transact for an asset or liability at the measurement date. We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs when determining fair value and then we rank the estimated values based on the reliability of the inputs used.

We determined the fair values of our long-term debt, including the current portion, based on quoted market prices where available or, if not available, based on discounted future cash flows using current market interest rates.

The three input levels in the hierarchy of fair value measurements are defined by FASB generally as follows:

The following table presents the carrying amounts and estimated fair values of our long-term debt, excluding capital lease obligations, as well as the input levels used to determine the fair values:

For the assets and liabilities measured at fair value on our acquisition date, we employed a variety of methods to determine these fair values, including quoted market price, observable market values of comparable assets, current replacement costs and discounted cash flow analysis. The factors that most significantly impact our estimate of fair value included forecasted cash flows and a market participant discount rate. The applicable market participant discount rate is impacted by the market risk free rate of return and risk premium associated with a group of peer telecommunication companies which have been deemed to be market participants for determining the fair value. The discount rates used in our valuations ranged from 7.5% of 9.5% depending upon the asset or liability valued and relative risk associated with the cash flows.

On April 1, 2011, we became a wholly owned subsidiary of CenturyLink. Each outstanding share of our common stock immediately prior to the acquisition converted into the right to receive 0.1664 shares of CenturyLink common stock, with cash paid in lieu of fractional shares. We had 1.792 billion shares issued and 1.764 billion shares outstanding as of the predecessor date of December 31, 2010.

As of the successor dates of December 31, 2012 and December 31, 2011, we had one thousand shares of common stock ($0.01 par value) issued and outstanding, which are owned by CenturyLink.

Rabbi trusts were established for two of our four deferred compensation plans. As of the successor date of December 31, 2011, the rabbi trusts were dissolved and there was no treasury stock held in the rabbi trust. As of predecessor date of December 31, 2010, the rabbi trusts held approximately 22,000 shares of our common stock with a cost of approximately $1 million. Shares of our common stock held by the rabbi trusts were accounted for as treasury stock, but were considered outstanding for legal purposes.

Under our predecessor period Equity Incentive Plan and equity award agreements, we automatically withheld a portion of vesting restricted stock and common stock underlying vesting performance shares to cover the withholding taxes due upon vesting. As a result of these withholdings, we acquired approximately 18,779,000 shares of treasury stock during the predecessor year of 2010.

We recognized $127 million of certain expenses associated with activities related to CenturyLink's acquisition of us during the successor three months ended June 30, 2011. These expenses were comprised primarily of severance of $99 million, retention bonuses of $14 million, share-based compensation of $11 million and system integration consulting of $1 million.

We have established accrued liabilities for the matters described below where losses are deemed probable and reasonably estimable.

The terms and conditions of applicable bylaws, certificates or articles of incorporation, agreements or applicable law may obligate us to indemnify our former directors, officers or employees with respect to certain of the matters described below, and we have been advancing legal fees and costs to certain former directors, officers or employees in connection with certain matters described below.

On September 29, 2010, the trustees in the Dutch bankruptcy proceeding for KPNQwest, N.V. (of which we were a major shareholder) filed a lawsuit in the District Court in Haarlem, the Netherlands, alleging tort and mismanagement claims under Dutch law. We and Koninklijke KPN N.V. ("KPN") are defendants in this lawsuit along with a number of former KPNQwest supervisory board members and a former officer of KPNQwest, some of whom were formerly affiliated with us. Plaintiffs allege, among other things, that defendants' actions were a cause of the bankruptcy of KPNQwest, and they seek damages for the bankruptcy deficit of KPNQwest, which is claimed to be approximately €4.2 billion (or approximately $5.6 billion based on the exchange rate on December 31, 2012), plus statutory interest. Two lawsuits asserting similar claims were previously filed against Qwest and others in federal courts in New Jersey in 2004 and Colorado in 2009; those courts dismissed the lawsuits without prejudice on the grounds that the claims should not be litigated in the United States.

We have not accrued for the above matters as it is premature to determine whether an accrual is warranted and, if so, a reasonable estimate of probable liability. We will continue to defend against the pending KPNQwest litigation matters vigorously.

Tennessee, Virginia and Wisconsin), have received preliminary approval of the settlements in eight states (California, Kentucky, Nevada, Ohio, Oregon, Pennsylvania, South Carolina and Utah), and have not yet received either preliminary or final approval in four states (Arizona, Massachusetts, New Mexico and Texas). We have accrued an amount that we believe is probable for these matters; however, the amount is not material to our consolidated financial statements.

As of December 31, 2012, CenturyLink has a credit facility having a borrowing capacity of up to $2 billion and has a term loan in the amount of $440 million. Both of these obligations have been guaranteed by QCII and QSC.

We lease certain facilities and equipment under various capital lease arrangements. Depreciation of assets under capital leases is included in depreciation and amortization expense. Payments on capital leases are included in repayments of long-term debt, including current maturities in the consolidated statements of cash flows.

The future annual minimum payments under capital lease arrangements as of December 31, 2012 were as follows:

We lease various equipment, office facilities, retail outlets, switching facilities and other network sites. These leases, with few exceptions, provide for renewal options and escalations that are either fixed or based on the consumer price index. Any rent abatements, along with rent escalations, are included in the computation of rent expense calculated on a straight-line basis over the lease term. The lease term for most leases includes the initial non-cancelable term plus any term under renewal options that are reasonably assured. For the successor year ended December 31, 2012 and the successor nine months ended December 31, 2011, our gross rental expense was $249 million and $195 million, respectively. Also, gross rental expense was $80 million and $322 million for the predecessor three months ended March 31, 2011 and the predecessor year ended December 31, 2010, respectively. We also received sublease rental income for the same periods of $17 million, $17 million, $6 million and $25 million, respectively.

At December 31, 2012, our future minimum payments under operating leases were as follows:

We have several commitments primarily for marketing activities and support services from a variety of vendors to be used in the ordinary course of business totaling $341 million as of December 31, 2012. Of this amount, we expect to purchase $66 million in 2013, $99 million in 2014 through 2015, $82 million in 2016 through 2017 and $94 million in 2018 and thereafter. These amounts do not represent our entire anticipated purchases in the future, but represent only those items for which we are contractually committed.

Other current assets reflected on our balance sheets consisted of the following:

Approximately 48%, or 12,000, of our employees are members of bargaining units represented by the Communications Workers of America and the International Brotherhood of Electrical Workers. These employees are subject to collective bargaining agreements that expired October 6, 2012. Our parent company, CenturyLink, is currently negotiating the terms of new agreements. In the meantime, the predecessor agreements have been extended, and the unions have agreed to provide at least a twenty-four hour advance notice before terminating those predecessor agreements. Any strikes or other changes in our labor relations could have a significant impact on our business. If we fail to extend or renegotiate our collective bargaining agreements 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. To help mitigate this potential risk, we have established contingency plans in which we would assign trained, non-represented employees to cover jobs for represented employees in the event of a work stoppage to provide continuity for our customers.

Our Board of Directors, declared the following cash and non-cash dividends during the successor years ended December 31, 2012 and December 31, 2011:

For the periods prior to CenturyLink's acquisition of us on April 1, 2011, our Board of Directors declared the following cash dividends payable in 2011 and 2010:

Dividends paid are reflected on our consolidated statement of cash flows under "Financing Activities".

QCII, QCF and QSC, guarantee the payment of certain of each other's registered debt securities. As of the successor date of December 31, 2012, each series of QCII's outstanding notes totaling approximately $849 million in aggregate principal amount is guaranteed on a senior unsecured basis by QCF and QSC (the "QCII Guaranteed Notes"). These notes are guaranteed through their respective maturity dates, the latest of which is in April 2018. In addition, each series of QCF's outstanding notes totaling approximately $1billion in aggregate principal amount is guaranteed on a senior unsecured basis by QCII (the "QCF Guaranteed Notes"). These notes are guaranteed through their respective maturity dates, the latest of which is in February 2031. The guarantees described above are full and unconditional and joint and several. A significant amount of QCII's and QSC's income and cash flow are generated by their subsidiaries. As a result, the funds necessary to meet their debt service or guarantee obligations are provided in large part by distributions or advances from their subsidiaries.

The following information sets forth our condensed consolidating statements of operations, balance sheets and statements of cash flows for the periods indicated. The information for QCII is presented on a stand-alone basis, information for QSC and QCF is presented on a combined basis and information for all of our other non-guarantor subsidiaries is presented on a combined basis. Each entity's investments in its subsidiaries, if any, are presented under the equity method. The consolidating

statements of operations and balance sheets include the effects of consolidating adjustments to our subsidiaries' tax provisions and the related income tax assets and liabilities in the QSC and QCII results. Both QSC and QCF are 100% owned by QCII and QCF is a finance subsidiary of QCII. Other than as already described in this note, the accounting principles used to determine the amounts reported in this note are the same as those used in our consolidated financial statements.

CenturyLink periodically restructures the internal capital structure of its subsidiaries, including QCII and its subsidiaries, based on the needs of its business.

We allocate the costs of shared services among our affiliates. These services include marketing and advertising, IT, product and technical services as well as general support services. The allocation of these costs is based on estimated market values or FDC. Most of our affiliate services are priced by applying an FDC methodology. FDC rates are determined using salary rates, which include payroll taxes, employee benefits, facilities and overhead costs. Whenever possible, costs are directly assigned to the affiliate that uses the service. If costs cannot be directly assigned, they are allocated among all affiliates based on cost usage measures; or if no cost usage measure is available, these costs are allocated based on a general allocator. From time to time, we adjust the basis for allocating the costs of a shared service among our affiliates. Such changes in allocation methodologies are generally billed prospectively.

Under our tax allocation policy, we treat our subsidiaries as if they were separate taxpayers. The policy requires that each subsidiary pay its tax liabilities in cash or settle its tax liabilities through a change in its general intercompany obligation based on that subsidiary's separate return taxable income. To the extent a subsidiary has taxable losses, the subsidiary does not pay any amount and therefore retains the benefit of the losses. Subsidiaries are also included in the combined state tax returns we file and the same payment and allocation policy applies.

Eligible employees of our subsidiaries participate in the QCII pension and non-qualified pension plan and may become eligible to participate in our post-retirement health care and life insurance, and other post-employment benefit plans. The amounts contributed by our subsidiaries are not segregated or restricted to pay amounts due to their employees and may be used to provide benefits to our other employees or employees of other subsidiaries. We allocate the cost of pension, non-qualified pension, and post-retirement health care and life insurance benefits and the associated obligations and assets to our subsidiaries and determine the subsidiaries' required contributions. The allocation is based upon demographics of each subsidiary's employees compared to all participants. In determining the allocated amounts, we make numerous assumptions. Changes in any of our assumptions could have a material impact on the expense allocated to our subsidiaries.

During the first quarter of 2012, in connection with post-acquisition systems integration activities, CenturyLink changed certain cash management processes applicable to us. Therefore, we now present the balances related to these cash management transactions on a net basis with our other affiliate transactions.

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2012
SUCCESSOR

	QCII⁽¹⁾

	(Dollars in millions)
OPERATING REVENUES:
Operating revenues	$	—		—		10,889		—		10,889
Operating revenues—affiliates		—		4		467		(4	)	467

Total operating revenues		—		4		11,356		(4	)	11,356

OPERATING EXPENSES:
Cost of services and products (exclusive of depreciation and amortization)		—		(4	)	4,818		—		4,814
Selling, general and administrative		8		2		1,707		—		1,717
Operating expenses—affiliates		—		—		603		(4	)	599
Depreciation and amortization		62		—		2,886		—		2,948

Total operating expenses		70		(2	)	10,014		(4	)	10,078

OPERATING (LOSS) INCOME		(70	)	6		1,342		—		1,278
OTHER INCOME (EXPENSE)
Interest expense		(99	)	(68	)	(444	)	—		(611	)
Interest expense—affiliates		(91	)	(110	)	(50	)	107		(144	)
Net loss on early retirement of debt		27		—		(50	)	—		(23	)
Income (loss) from equity investments in subsidiaries		528		219		—		(747	)	—
Other income (expense)		—		106		5		(107	)	4

Total other income (expense)		365		147		(539	)	(747	)	(774	)

INCOME (LOSS) BEFORE INCOME TAX (BENEFIT) EXPENSE		295		153		803		(747	)	504
Income tax (benefit) expense		(13	)	(375	)	584		—		196

NET INCOME (LOSS)	$	308		528		219		(747	)	308

COMPREHENSIVE INCOME	$	(64	)	528		219		(747	)	(64	)

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED DECEMBER 31, 2011
SUCCESSOR

	QCII⁽¹⁾

	(Dollars in millions)
OPERATING REVENUES:
Operating revenues	$	—		—		8,276		—		8,276
Operating revenues—affiliates		—		20		76		(45	)	51

Total operating revenues		—		20		8,352		(45	)	8,327

OPERATING EXPENSES:
Cost of services and products (exclusive of depreciation and amortization)		—		—		3,523		—		3,523
Selling, general and administrative		13		20		1,708		—		1,741
Operating expenses—affiliates		—		—		171		(45	)	126
Depreciation and amortization		61		—		2,333		—		2,394

Total operating expenses		74		20		7,735		(45	)	7,784

OPERATING (LOSS) INCOME		(74	)	—		617		—		543
OTHER INCOME (EXPENSE)
Interest expense		(131	)	(53	)	(302	)	—		(486	)
Interest expense—affiliates		(12	)	(68	)	1		79		—
Interest income—affiliates		—		79		—		(79	)	—
Net loss on early retirement of debt		—		—		(8	)	—		(8	)
Income (loss) from equity investments in subsidiaries		223		(79	)	—		(144	)	—
Other income (expense)		1		3		(2	)	—		2

Total other income (expense)		81		(118	)	(311	)	(144	)	(492	)

INCOME (LOSS) BEFORE INCOME TAX (BENEFIT) EXPENSE		7		(118	)	306		(144	)	51
Income tax (benefit) expense		(12	)	(335	)	379		—		32

NET INCOME (LOSS)	$	19		217		(73	)	(144	)	19

COMPREHENSIVE INCOME	$	(427	)	217		(73	)	(144	)	(427	)

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2011
PREDECESSOR

	QCII⁽¹⁾

	(Dollars in millions)
OPERATING REVENUES:
Operating revenues	$	—		—		2,846		—		2,846
Operating revenues—affiliates		—		2		9		(11	)	—

Total operating revenues		—		2		2,855		(11	)	2,846

OPERATING EXPENSES:
Cost of services and products (exclusive of depreciation and amortization)		—		—		1,178		—		1,178
Selling, general and administrative		3		2		551		—		556
Operating expenses—affiliates		—		—		11		(11	)	—
Depreciation and amortization		—		—		533		—		533

Total operating expenses		3		2		2,273		(11	)	2,267

OPERATING INCOME		(3	)	—		582		—		579
OTHER INCOME (EXPENSE)
Interest expense		(56	)	(19	)	(152	)	—		(227	)
Interest expense—affiliates		(1	)	(26	)	(1	)	28		—
Interest income—affiliates		—		28		—		(28	)	—
Income from equity investments in subsidiaries		272		226		—		(498	)	—
Other income (expense)		—		(1	)	6		—		5

Total other income (expense)		215		208		(147	)	(498	)	(222	)

INCOME BEFORE INCOME TAX EXPENSE(BENEFIT)		212		208		435		(498	)	357
Income tax expense (benefit)		1		(64	)	209		—		146

NET INCOME	$	211		272		226		(498	)	211

COMPREHENSIVE INCOME	$	218		272		226		(498	)	218

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2010
PREDECESSOR

	QCII⁽¹⁾

	(Dollars in millions)
OPERATING REVENUES:
Operating revenues	$	—		—		11,730		—		11,730
Operating revenues—affiliates		—		(1	)	24		(23	)	—

Total operating revenues		—		(1	)	11,754		(23	)	11,730

OPERATING EXPENSES:
Cost of services and products (exclusive of depreciation and amortization)		—		—		5,011		—		5,011
Selling, general and administrative		75		(2	)	2,445		—		2,518
Operating expenses—affiliates		—		—		23		(23	)	—
Depreciation and amortization		—		—		2,200		—		2,200

Total operating expenses		75		(2	)	9,679		(23	)	9,729

OPERATING INCOME		(75	)	1		2,075		—		2,001
OTHER INCOME (EXPENSE)
Interest expense		(318	)	(101	)	(620	)	—		(1,039	)
Interest expense—affiliates		(1	)	(292	)	—		293		—
Interest income—affiliates		—		293		—		(293	)	—
Net loss on early retirement of debt		(5	)	(40	)	—		—		(45	)
Loss on embedded option in convertible debt		(475	)	—		—		—		(475	)
Income from equity investments in subsidiaries		755		602		—		(1,357	)	—
Other income (expense)		—		8		—		—		8

Total other income (expense)		(44	)	470		(620	)	(1,357	)	(1,551	)

(LOSS) INCOME BEFORE INCOME TAX (BENEFIT) EXPENSE		(119	)	471		1,455		(1,357	)	450
Income tax (benefit) expense		(64	)	(284	)	853		—		505

NET (LOSS) INCOME	$	(55	)	755		602		(1,357	)	(55	)

COMPREHENSIVE INCOME	$	62		755		598		(1,357	)	58

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 2012
SUCCESSOR

	QCII(1)

	(Dollars in millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	11	59	17	—		87
Accounts receivable, less allowance		10	—	1,167	—		1,177
Advances to affiliates		—	938	223	(661	)	500
Notes receivable—affiliates		—	1,413	—	(1,413	)	—
Deferred income taxes, net		—	272	201	—		473
Other		8	—	321	(9	)	320

Total current assets		29	2,682	1,929	(2,083	)	2,557
Net property, plant and equipment		—	—	9,127	—		9,127
Goodwill		—	—	10,123	—		10,123
Customer relationships, net		—	—	5,822	—		5,822
Other intangible assets, net		64	—	1,213	—		1,277
Investments in subsidiaries		14,322	13,478	—	(27,800	)	—
Deferred income taxes, net		1,336	931	—	(2,267	)	—
Prepaid pension, post-retirement and other post-employment benefits—affiliate		1,697	—	—	(1,693	)	4
Other		37	7	292	—		336

TOTAL ASSETS	$	17,485	17,098	28,506	(33,843	)	29,246

LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt	$	—	—	856	—		856
Current debt—affiliates		1,322	1,413	701	(1,413	)	2,023
Accounts payable		—	1	695	(9	)	687
Accounts payable—affiliates		661	—	—	(661	)	—
Accrued expenses and other liabilities		178	57	689	—		924
Advance billings and customers deposits		—	—	452	—		452

Total current liabilities		2,161	1,471	3,393	(2,083	)	4,942

LONG-TERM DEBT		849	1,008	6,915	—		8,772

DEFERRED CREDITS AND OTHER LIABILITIES
Deferred revenues		—	—	192	—		192
Benefit plan obligations, net		3,699	—	—	—		3,699
Deferred income taxes		—	—	2,761	(2,267	)	494
Other		152	27	344	—		523
Other—affiliates		—	270	1,423	(1,693	)	—

Total deferred credits and other liabilities		3,851	297	4,720	(3,960	)	4,908
Stockholder's equity		10,624	14,322	13,478	(27,800	)	10,624

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY	$	17,485	17,098	28,506	(33,843	)	29,246

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 2011
SUCCESSOR

	QCII(1)

	(Dollars in millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	—	40	8	—		48
Accounts receivable, less allowance		15	2	1,184	—		1,201
Accounts receivable—affiliates, net		211	336	36	(583	)	—
Advances to affiliates		184	1,694	400	(1,536	)	742
Deferred income taxes, net		—	438	121	—		559
Other		—	19	259	(13	)	265

Total current assets		410	2,529	2,008	(2,132	)	2,815
Net property, plant and equipment		—	—	9,461	—		9,461
Goodwill		—	—	10,123	—		10,123
Customer relationships, net		—	—	6,788	—		6,788
Other intangible assets, net		126	—	1,461	—		1,587
Investments in subsidiaries		14,856	13,999	—	(28,855	)	—
Deferred income taxes, net		1,102	1,390	117	(2,609	)	—
Prepaid pension, post-retirement and other post-employment benefits—affiliate		2,851	76	955	(3,882	)	—
Other		36	7	338	—		381

TOTAL ASSETS	$	19,381	18,001	31,251	(37,478	)	31,155

LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt	$	—	—	117	—		117
Current debt—affiliates		122	1,413	—	(1,535	)	—
Accounts payable		4	19	950	—		973
Accounts payable—affiliates, net		360	42	23	(31	)	394
Dividends payable—affiliates		200	—	310	(310	)	200
Accrued expenses and other liabilities		272	40	700	(1	)	1,011
Accrued expenses and other—affiliates		1	62	192	(255	)	—
Advance billings and customers deposits		—	—	400	—		400

Total current liabilities		959	1,576	2,692	(2,132	)	3,095

LONG-TERM DEBT		2,767	1,009	8,403	—		12,179

DEFERRED CREDITS AND OTHER LIABILITIES
Deferred revenue		—	—	110	—		110
Benefit plan obligations, net		3,198	—	—	—		3,198
Pension, post-retirement and other post-employment benefits obligations and other—affiliates		1,031	344	2,507	(3,882	)	—
Deferred income taxes, net		—	223	3,016	(2,609	)	630
Other		150	31	486	—		667

Total deferred credits and other liabilities		4,379	598	6,119	(6,491	)	4,605
STOCKHOLDER'S EQUITY		11,276	14,818	14,037	(28,855	)	11,276

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY	$	19,381	18,001	31,251	(37,478	)	31,155

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2012
SUCCESSOR

	QCII⁽¹⁾

	(Dollars in millions)
Net cash (used in) provided by operating activities	$	(593	)	756		2,656		(13	)	2,806
INVESTING ACTIVITIES
Payments for property, plant and equipment and capitalized software		—		—		(1,589	)	—		(1,589	)
Changes in advances to affiliates		395		(820	)	(714	)	1,381		242
Dividends received from subsidiaries		1,025		1,150		—		(2,175	)	—
Proceeds from sale of property, plant and equipment		—		—		133		—		133

Net cash provided by (used in) investing activities		1,420		330		(2,170	)	(794	)	(1,214	)

FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt		—		—		896		—		896
Payments of long-term debt		(1,851	)	—		(1,484	)	—		(3,335	)
Early retirement of debt costs		(22	)	—		(178	)	—		(200	)
Dividends paid to CenturyLink, Inc.		(750	)	(1,025	)	(1,150	)	2,175		(750	)
Changes in notes payable—affiliate		1,322		—		701		—		2,023
Changes in accounts payable—affiliates		485		(42	)	738		(1,368	)	(187	)

Net cash used in financing activities		(816	)	(1,067	)	(477	)	807		(1,553	)

Net increase in cash and cash equivalents		11		19		9		—		39
Cash and cash equivalents at beginning of period		—		40		8		—		48

Cash and cash equivalents at end of period	$	11		59		17		—		87

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED DECEMBER 31, 2011
SUCCESSOR

	QCII⁽¹⁾

	(Dollars in millions)
Net cash (used in) provided by operating activities	$	(171	)	316		2,007		—		2,152
INVESTING ACTIVITIES
Payments for property, plant and equipment and capitalized software		—		—		(1,207	)	—		(1,207	)
Changes in advances to affiliates		(184	)	(277	)	(240	)	38		(663	)
Dividends received from subsidiaries		770		990		—		(1,760	)	—
Cash infusion to subsidiaries		—		(555	)	—		555		—
Other, net		—		—		2		—		2

Net cash provided by (used in) investing activities		586		158		(1,445	)	(1,167	)	(1,868	)

FINANCING ACTIVITIES
Net proceeds from (repayments of) short-term affiliate debt		(115	)	153		—		(38	)	—
Net proceeds from issuance of long-term debt		—		—		2,126		—		2,126
Payments of long-term debt		—		—		(2,402	)	—		(2,402	)
Early retirement of debt costs		—		—		(66	)	—		(66	)
Cash infusion from parent		—		—		555		(555	)	—
Dividends paid to parent		(300	)	(770	)	(990	)	1,760		(300	)
Other		—		—		(18	)	—		(18	)

Net cash used in financing activities		(415	)	(617	)	(795	)	1,167		(660	)

Net (decrease) increase in cash and cash equivalents		—		(143	)	(233	)	—		(376	)
Cash and cash equivalents at beginning of period		—		183		241		—		424

Cash and cash equivalents at end of the period	$	—		40		8		—		48

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2011
PREDECESSOR

	QCII⁽¹⁾

	(Dollars in millions)
Net cash provided by (used in) operating activities	$	7		(62	)	828		4		777
INVESTING ACTIVITIES
Payments for property, plant and equipment and capitalized software		—		—		(410	)	—		(410	)
Changes in advances to affiliates		—		180		1		(181	)	—
Dividends received from subsidiaries		—		590		—		(590	)	—
Changes in interest in investments managed by QSC		—		(3	)	3		—		—
Cash infusion to subsidiaries		—		(191	)	—		191		—
Other, net		—		—		2		—		2

Net cash provided by (used in) investing activities		—		576		(404	)	(580	)	(408	)

FINANCING ACTIVITIES
Net proceeds from (repayments of) short-term affiliate debt		119		(300	)	—		181		—
Payments of long-term debt		—		(179	)	(24	)	—		(203	)
Cash infusion from parent		—		—		191		(191	)	—
Dividends paid		(141	)	—		—		—		(141	)
Dividends paid to parent		—		—		(590	)	590		—
Net proceeds from issuance of common stock		14		—		—		—		14
Other, net		1		—		16		(4	)	13

Net cash used in financing activities		(7	)	(479	)	(407	)	576		(317	)

Net increase in cash and cash equivalents		—		35		17		—		52
Cash and cash equivalents at beginning of period		—		148		224		—		372

Cash and cash equivalents at end of the period	$	—		183		241		—		424

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2010
PREDECESSOR

	QCII⁽¹⁾

	(Dollars in millions)
Net cash (used in) provided by operating activities	$	(358	)	514		3,106		105		3,367
INVESTING ACTIVITIES
Payments for property, plant and equipment and capitalized software		—		—		(1,488	)	—		(1,488	)
Changes in advances to affiliates		—		3,254		3		(3,257	)	—
Dividends received from subsidiaries		2,320		2,611		—		(4,931	)	—
Proceeds from sales or maturities of investment securities		—		943		—		—		943
Purchase of investment securities		—		(944	)	—		—		(944	)
Changes in interest in investments managed by QSC		10		7		(17	)	—		—
Cash infusion to subsidiaries		—		(577	)	—		577		—
Other, net		—		—		1		—		1

Net cash provided by (used in) investing activities		2,330		5,294		(1,501	)	(7,611	)	(1,488	)

FINANCING ACTIVITIES
Net proceeds from (repayments of) short-term affiliate debt		5		(3,262	)	—		3,257		—
Net proceeds from issuance of long-term debt		775		—		—		—		775
Payments of long-term debt		(1,790	)	(1,025	)	(564	)	—		(3,379	)
Early retirement of debt costs		(1	)	(40	)	—		—		(41	)
Cash infusion from parent		—		—		577		(577	)	—
Dividends Paid		(555	)	—		—		—		(555	)
Dividends paid to parent		—		(2,320	)	(2,611	)	4,931		—
Net proceeds from issuance of common stock		67		—		—		—		67
Purchase of treasury stock		(136	)	—		—		—		(136	)
Settlement of embedded option in convertible debt		(640	)	—		—		—		(640	)
Other, net		109		—		(8	)	(105	)	(4	)

Net cash used in financing activities		(2,166	)	(6,647	)	(2,606	)	7,506		(3,913	)

Net (decrease) increase in cash and cash equivalents		(194	)	(839	)	(1,001	)	—		(2,034	)
Cash and cash equivalents at beginning of period		194		987		1,225		—		2,406

Cash and cash equivalents at end of period	$	—		148		224		—		372

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, or the "Exchange Act") as of December 31, 2012 based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our management concluded that our internal control over financial reporting was effective as of December 31, 2012.

There were no changes in our internal control over financial reporting that occurred in the fourth quarter of 2012 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The Audit Committee of CenturyLink's Board of Directors is responsible for the appointment, compensation and oversight of the work of our independent registered public accounting firm. Under the Audit Committee's charter, the Audit Committee pre-approves all audit and permissible non-audit services provided by our independent registered public accounting firm. The approval may be given as part of the Audit Committee's approval of the scope of the engagement of our independent registered public accounting firm or on an individual basis. The pre-approval of non-audit services may be delegated to one or more of the Audit Committee's members, but the decision must be reported to the full Audit Committee. Our independent registered public accounting firm may not be retained to perform the non-audit services specified in Section 10A (g) of the Exchange Act.

We first engaged KPMG LLP to be our independent registered public accounting firm in May 2002. The aggregate fees billed to us for the years ended December 31, 2012 and 2011 for professional accounting services, including KPMG's audit of our annual consolidated financial statements, are set forth in the table below.

For purposes of the preceding table, the professional fees are classified as follows:

Audit fees—These are fees billed for the year shown for professional services performed for the audit of the consolidated financial statements included in our Form 10-K filing for that year, the review

of condensed consolidated financial statements included in our Form 10-Q filings made during that year, comfort letters, consents and assistance with and review of documents filed with the SEC. Audit fees for each year shown include amounts that have been billed to us through the date of this filing and any additional amounts that are expected to be billed to us thereafter.

Audit-related fees—These are fees billed for assurance and related services that were performed in the year shown and that are traditionally performed by our independent registered public accounting firm. More specifically, these services include: international statutory audits; regulatory filings; the audit of certain of our subsidiaries' annual financial statements; employee benefit plan audits (including audits of employee benefit plans and trust funds where the fees are paid by the plan or trust fund instead of by us); due diligence services related to mergers, acquisitions and dispositions; internal control reviews; attestation services that are not required by statute or regulation (including attestation services relating to employee benefit trust funds where the fees are paid by the trust instead of by us); and audits of the financial statements of certain of our subsidiaries required in connection with acquisitions or dispositions of those subsidiaries. Audit-related fees for each year shown include amounts that have been billed to us through the date of this filing.

The Audit Committee approved in advance all of the services performed by KPMG described above.

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.⁽¹⁾

	Description

2.1	Agreement and Plan of Merger, dated as of April 21, 2010, by and among Qwest Communications International Inc., CenturyLink, Inc. and SB44 Acquisition Company (incorporated by reference to Exhibit 2.1 of Qwest Communications International Inc.'s Current Report on Form 8-K (File No. 001-15577) filed with the Securities and Exchange Commission on April 22, 2010).
3.1	Amended and Restated Certificate of Incorporation of Qwest Communications International Inc. (incorporated by reference to Exhibit 3.1 of Qwest Communications International Inc.'s Current Report on Form 8-K (File No. 001-15577) filed with the Securities and Exchange Commission on April 5, 2011).
3.2	Bylaws of Qwest Communications International Inc. (incorporated by reference to Exhibit 3.2 of Qwest Communications International Inc.'s Current Report on Form 8-K (File No. 001-15577) filed with the Securities and Exchange Commission on April 5, 2011).
4.1	Indenture, dated as of April 15, 1990, by and between The Mountain States Telephone and Telegraph Company (currently named Qwest Corporation) and The First National Bank of Chicago (incorporated by reference to Exhibit 4.2 of Qwest Corporation's Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 001-03040) filed with the Securities and Exchange Commission on January 13, 2004).
	a.	First Supplemental Indenture, dated as of April 16, 1991, by and between U S WEST Communications, Inc. (currently named Qwest Corporation) and The First National Bank of Chicago (incorporated by reference to Exhibit 4.3 of Qwest Corporation's Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 001-03040) filed with the Securities and Exchange Commission on January 13, 2004).
4.2	Indenture, dated as of April 15, 1990, by and between Northwestern Bell Telephone Company (predecessor to Qwest Corporation) and The First National Bank of Chicago (incorporated by reference to Exhibit 4.5(b) of CenturyLink, Inc.'s Quarterly Report on Form 10-Q for the period ended March 31, 2012 (File No. 001-07784) filed with the Securities and Exchange Commission on May 10, 2012).
	a.	First Supplemental Indenture, dated as of April 16, 1991, by and between U S WEST Communications, Inc. (currently named Qwest Corporation) and The First National Bank of Chicago (incorporated by reference to Exhibit 4.3 of Qwest Corporation's Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 001-03040) filed with the Securities and Exchange Commission on January 13, 2004).
4.3	Indenture, dated as of June 29, 1998, by and among U S WEST Capital Funding, Inc. (currently named Qwest Capital Funding, Inc.), U S WEST, Inc. (predecessor to Qwest Communications International Inc.) and The First National Bank of Chicago, as trustee (incorporated by reference to Exhibit 4(a) of U S WEST, Inc.'s Current Report on Form 8-K (File No. 001-14087) filed with the Securities and Exchange Commission on November 18, 1998).
	a.	First Supplemental Indenture, dated as of June 30, 2000, by and among U S WEST Capital Funding, Inc. (currently named Qwest Capital Funding, Inc.), U S WEST, Inc. (predecessor to Qwest Communications International Inc.) and Bank One Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.10 of Qwest Communications International Inc.'s Quarterly Report on Form 10-Q for the period ended June 30, 2000 (File No. 001-15577) filed with the Securities and Exchange Commission on August 11, 2000).


4.4	Indenture, dated as of November 4, 1998, by and between Qwest Communications International Inc. and Bankers Trust Company (incorporated by reference to Exhibit 4.1(e) of Qwest Communications International Inc.'s Registration Statement on Form S-4 (File No. 333-71603) filed with the Securities and Exchange Commission on February 2, 1999).
4.5	Indenture, dated as of November 27, 1998, by and between Qwest Communications International Inc. and Bankers Trust Company (incorporated by reference to Exhibit 4.1(d) of Qwest Communications International Inc.'s Registration Statement on Form S-4 (File No. 333-71603) filed with the Securities and Exchange Commission on February 2, 1999).
4.6	Indenture, dated as of October 15, 1999, by and between U S West Communications, Inc. (currently named Qwest Corporation) and Bank One Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4(b) of Qwest Corporation's Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 001-03040) filed with the Securities and Exchange Commission on March 3, 2000).
	a.	First Supplemental Indenture, dated as of August 19, 2004, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Exhibit 4.22 of Qwest Communications International Inc.'s Quarterly Report on Form 10-Q for the period ended September 30, 2004 (File No. 001-15577) filed with the Securities and Exchange Commission on November 5, 2004).
	b.	Third Supplemental Indenture, dated as of June 17, 2005, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Exhibit 4.2 of Qwest Communications International Inc.'s Current Report on Form 8-K (File No. 001-15577) filed with the Securities and Exchange Commission on June 23, 2005).
	c.	Fourth Supplemental Indenture, dated as of August 8, 2006, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 of Qwest Communications International Inc.'s Current Report on Form 8-K (File No. 001-15577) filed with the Securities and Exchange Commission on August 8, 2006).
	d.	Fifth Supplemental Indenture, dated as of May 16, 2007, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 of Qwest Communications International Inc.'s Current Report on Form 8-K (File No. 001-15577) filed with the Securities and Exchange Commission on May 18, 2007).
	e.	Sixth Supplemental Indenture, dated as of April 13, 2009, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 of Qwest Communications International Inc.'s Current Report on Form 8-K (File No. 001-15577) filed with the Securities and Exchange Commission on April 13, 2009).
	f.	Seventh Supplemental Indenture, dated as of June 8, 2011, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Exhibit 4.8 of Qwest Corporation's Form 8-A (File No. 001-03040) filed with the Securities and Exchange Commission on June 7, 2011).
	g.	Eighth Supplemental Indenture, dated as of September 21, 2011, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Exhibit 4.9 of Qwest Corporation's Form 8-A (File No. 001-03040) filed with the Securities and Exchange Commission on September 20, 2011).
	h.	Ninth Supplemental Indenture, dated as of October 4, 2011, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 of Qwest Corporation's Current Report on Form 8-K (File No. 001-03040) filed with the Securities and Exchange Commission on October 4, 2011).
	i.	Tenth Supplemental Indenture, dated as of April 2, 2012, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Qwest Corporation's Form 8-A (File No. 001-03040) filed with the Securities and Exchange Commission on March 30, 2012).
	j.	Eleventh Supplemental Indenture, dated as of June 25, 2012, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Qwest Corporation's Form 8-A (File No. 001-03040) filed with the Securities and Exchange Commission on June 22, 2012).


4.7	Indenture, dated as of February 5, 2004, by and among Qwest Communications International Inc., Qwest Services Corporation, Qwest Capital Funding, Inc. and J.P. Morgan Trust Company, National Association (incorporated by reference to 4.17 of Qwest Communications International Inc.'s Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 001-15577) filed with the Securities and Exchange Commission on March 11, 2004).
	a.	First Supplemental Indenture, dated as of June 17, 2005, by and among Qwest Communications International Inc., Qwest Services Corporation, Qwest Capital Funding, Inc. and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 of Qwest Communications International Inc.'s Current Report on Form 8-K (File No. 001-15577) filed with the Securities and Exchange Commission on June 23, 2005).
	b.	Third Supplemental Indenture, dated as of September 17, 2009, by and among Qwest Communications International Inc., Qwest Services Corporation, Qwest Capital Funding, Inc. and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 of Qwest Communications International Inc.'s Current Report on Form 8-K (File No. 001-15577) filed with the Securities and Exchange Commission on September 21, 2009).
	c.	Fourth Supplemental Indenture, dated as of January 12, 2010, by and among Qwest Communications International Inc., Qwest Services Corporation, Qwest Capital Funding, Inc. and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 of Qwest Communications International Inc.'s Current Report on Form 8-K (File No. 001-15577) filed with the Securities and Exchange Commission on January 13, 2010).
4.8	Intercompany debt instruments.
	a.	Revolving Promissory Note, dated as of April 18, 2012, pursuant to which Qwest Corporation may borrow from an affiliate of CenturyLink, Inc. up to $1.0 billion on a revolving basis (incorporated by reference to Exhibit 4.7(b) of CenturyLink, Inc.'s Quarterly Report on Form 10-Q for the period ended June 30, 2012 (File No 001- 07784) filed with the Securities and Exchange Commission on August 9, 2012).
	b.*	Revolving Promissory Note, dated as of September 27, 2012, pursuant to which Qwest Communications International Inc. may borrow from an affiliate of CenturyLink, Inc. up to $3.0 billion on a revolving basis.
10.1	Registration Rights Agreement, dated as of September 17, 2009, by and among Qwest Communications International Inc. and the initial purchasers listed therein (incorporated by reference to Exhibit 10.1 of Qwest Communications International Inc.'s Current Report on Form 8-K (File No. 001-15577) filed on September 21, 2009).
10.2	Registration Rights Agreement, dated as of January 12, 2010, among Qwest Communications International Inc. and the initial purchasers listed therein (incorporated by reference to Exhibit 10.1 of Qwest Communications International Inc.'s Current Report on Form 8-K (File No. 001-15577) filed with the Securities and Exchange Commission on January 13, 2010).
31.1*	Certification of the Chief Executive Officer of CenturyLink, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of the Chief Financial Officer of CenturyLink, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32*	Certification of the Chief Executive Officer and Chief Financial Officer of CenturyLink, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*	Financial statements from the Annual Report on Form 10-K of Qwest Communications International Inc. for the period ended December 31, 2012, formatted in XBRL: (i) the Consolidated Statements of Operations, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Stockholder's Equity (Deficit) and (vi) the Notes to the Consolidated Financial Statements.

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 on March 12, 2013.

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 and on the date indicated.


ý		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2012
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to


Delaware		84-1339282
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
100 CenturyLink Drive, Monroe, Louisiana		71203
(Address of principal executive offices)		(Zip Code)


Large accelerated filer o		Accelerated filer o		Non-accelerated filer ý (Do not check if a smaller reporting company)		Smaller reporting company o


PART I
Item 1. Business		3
Item 1A. Risk Factors		18
Item 1B. Unresolved Staff Comments		31
Item 2. Properties		32
Item 3. Legal Proceedings		33
Item 4. Mine Safety Disclosures		34
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		35
Item 6. Selected Financial Data		35
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations		37
Item 7A. Quantitative and Qualitative Disclosures About Market Risk		61
Item 8. Consolidated Financial Statements and Supplementary Data		62
Consolidated Statements of Operations		63
Consolidated Statements of Comprehensive (Loss) Income		64
Consolidated Balance Sheets		65
Consolidated Statements of Cash Flows		66
Consolidated Statements of Stockholder's Equity (Deficit)		67
Notes to Consolidated Financial Statements		68
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		136
Item 9A. Controls and Procedures		136
Item 9B. Other Information		136
PART III
Item 10. Directors, Executive Officers and Corporate Governance		137
Item 11. Executive Compensation		137
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		137
Item 13. Certain Relationships and Related Transactions and Director Independence		137
Item 14. Principal Accountant Fees and Services		137
PART IV
Item 15. Exhibits and Financial Statement Schedules		139
Signatures		142



	Successor				Predecessor
	December 31, 2012		December 31, 2011⁽¹⁾		December 31, 2010
	(in thousands)
Operational metrics:
Total broadband subscribers⁽²⁾		3,318		3,185		3,060
Total access lines⁽³⁾		8,055		8,533		9,193



	Successor⁽¹⁾				Predecessor⁽¹⁾
	Year Ended December 31, 2012		Nine Months Ended December 31, 2011		Three Months Ended March 31, 2011		Year Ended December 31, 2010			Year Ended December 31, 2009		Year Ended December 31, 2008
	(Dollars in millions)
Operating revenues	$	11,356		8,327		2,846		11,730			12,311		13,475
Operating expenses		10,078		7,784		2,267		9,729			10,336		11,378

Operating income	$	1,278		543		579		2,001			1,975		2,097

Income before income tax expense	$	504		51		357		450			903		1,051
Net income (loss)		308		19		211		(55	)		662		652

Agency	QCII	QC

Standard & Poor's	BB	BBB-
Moody's Investors Service, Inc.	Baa3 (under review for downgrade)	Baa3 (under review for downgrade)
Fitch Ratings	BB+	BBB-

	Successor

	Twelve Months Ended December 31, 2012		Nine Months Ended December 31, 2011		Total Since Acquisition
	(Dollars in millions)
Amortized	$	86		154		240
Extinguished⁽¹⁾		177		58		235

Total premiums recognized	$	263		212		475

	Successor

	Weighted Average of Remaining Lives		December 31, 2012		December 31, 2011
			(Dollars in millions)
Goodwill		N/A	$	10,123		10,123

Customer relationships, less accumulated amortization of $1,736 and $770		8.3 years	$	5,822		6,788

Other intangible assets subject to amortization
Capitalized software, less accumulated amortization of $704 and $354		3.1 years		1,212		1,460
Trade names and patents, less accumulated amortization of $123 and $61		2.3 years and 5.8 years, respectively		65		127

Total other intangible assets, net			$	1,277		1,587

Successor	(Dollars in millions)

Year ending December 31,
2013	$	1,248
2014		1,143
2015		1,025
2016		921
2017		824
2018 and thereafter		1,938

	Successor

	December 31, 2012			December 31, 2011⁽¹⁾
	(Dollars in millions)
Trade and purchased receivables	$	1,028			1,015
Earned and unbilled receivables		208			217
Other		17			31

Total accounts receivable		1,253			1,263
Less: allowance for doubtful accounts		(76	)		(62	)

Accounts receivable, less allowance	$	1,177			1,201

	100 Basis Points Change

	Increase		Decrease
	(Dollars in millions)
Effect on the aggregate of the service and interest cost components of net periodic post-retirement benefit expense (statements of operations)	$	3		(3	)
Effect on benefit obligation (balance sheets)		74		(66	)

	Pension Plan

	(Dollars in millions)
Estimated future benefit payments:
2013	$	753	2	335	(25	)
2014		701	2	329	(26	)
2015		684	2	321	(28	)
2016		666	2	311	(29	)
2017		648	2	300	(31	)
2018 - 2022		2,946	7	1,318	(173	)

	December 31,

	Pension Plan		Non-Qualified Pension Plan		Post-Retirement Benefit Plans
	Successor		Successor		Successor
	2012	2011	2012	2011	2012		2011
Actuarial assumptions at end of year:
Discount rate	3.70%	4.70%	3.50%	4.40%		3.60%		4.60%
Rate of compensation increase	3.25%	3.25%	N/A	N/A		N/A		N/A
Initial health care cost trend rate	N/A	N/A	N/A	N/A		6.75% / 7.50%		7.25% / 8.00%
Ultimate health care cost trend rate	N/A	N/A	N/A	N/A		4.50%		5.00%
Year ultimate trend rate is reached	N/A	N/A	N/A	N/A		2022 / 2024		2018

	Pension Plan

	(Dollars in millions)
Estimated recognition of net periodic benefit expense in 2013:
Net actuarial loss	$	(7	)	—	(3	)
Prior service cost		—		—	(1	)
Deferred income tax benefit		3		—	2

Estimated net periodic benefit expense to be recorded in 2013 as a component of other comprehensive income (loss)	$	(4	)	—	(2	)

Title of Each Class		Name of Each Exchange on Which Registered

Input Level		Description of Input

Level 1		Observable inputs such as quoted market prices in active markets.
Level 2		Inputs other than quoted prices in active markets that are either directly or indirectly observable.
Level 3		Unobservable inputs in which little or no market data exists.

			Successor

			December 31, 2012				December 31, 2011
	Input Level		Carrying Amount		Fair Value		Carrying Amount		Fair Value
			(Dollars in millions)
Liabilities—Long-term debt excluding capital lease obligations		2		9,370		9,909		11,925		12,052

	Quarterly Financial Data

	Successor
2012	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Twelve Months Total
	(Dollars in millions)
Operating revenues	$	2,840		2,835		2,825		2,856		11,356
Operating income		290		291		322		375		1,278
Income tax expense (benefit)		48		27		54		67		196
Net income (loss)		77		37		83		111		308

	Successor

	December 31, 2012		December 31, 2011
Assets included in property, plant and equipment	$	399		401
Accumulated depreciation		156		75

	Future Minimum Payments

	(Dollars in millions)
Capital lease obligations:
2013	$	88
2014		73
2015		43
2016		10
2017		6
2018 and thereafter		24

Total minimum payments		244
Less: amount representing interest and executory costs		(39	)

Present value of minimum payments		205
Less: current portion		(75	)

Long-term portion	$	130

	Future Minimum Payments

	(Dollars in millions)
Operating leases:
2013	$	177
2014		149
2015		124
2016		102
2017		94
2018 and thereafter		575

Total future minimum payments⁽¹⁾	$	1,221

Date Declared	Record Date		Total Amount		Payment Date

			(in millions)
June 2012⁽²⁾	June 2012	—	$	550	September 2012
January 2012⁽¹⁾	January 2012	—	$	38	January 2012
September 2011⁽²⁾	September 2011	—	$	500	$300 paid September 2011 $200 paid September 2012
July 2011⁽¹⁾	July 2011	—	$	42	July and December 2011
June 2011	June 2011	—	$	28	June 2011

Date Declared	Record Date	Dividend Per Share		Total Amount		Payment Date

				(in millions)
January 24, 2011	February 18, 2011	$	0.08	$	141	February 25, 2011
October 20, 2010	December 3, 2010	$	0.08	$	139	December 17, 2010
August 18, 2010	September 10, 2010	$	0.08	$	139	September 24, 2010
April 14, 2010	May 21, 2010	$	0.08	$	139	June 11, 2010
December 16, 2009	February 19, 2010	$	0.08	$	138	March 12, 2010

	Year Ended December 31, 2012

	(Dollars in thousands)
Audit fees	$	3,120	4,500
Audit-related fees		131	204
Tax fees		25	46

Total fees	$	3,276	4,750


				QWEST COMMUNICATIONS INTERNATIONAL INC.
		By:		/s/ David D. Cole
				David D. Cole
				Senior Vice President—Controller and Operations Support (Chief Accounting Officer and Duly Authorized Officer)

Signature		Title


/s/ Glen F. Post, III Glen F. Post, III		Chief Executive Officer and President (Principal Executive Officer)
/s/ R. Stewart Ewing, Jr. R. Stewart Ewing, Jr.		Executive Vice President, Chief Financial Officer and Assistant Secretary (Principal Financial Officer)
/s/ Stacey W. Goff Stacey W. Goff		Director