QWEST FACES SEC ACTION, IS STILL ON TARGET ON 271 PROCESS
Qwest revealed more bad news late Mon. but effect on its overall financial situation wasn’t clear. It said SEC’s staff had recommended action against company related to accounting procedures it used in reporting 2000 earnings results. It also announced it planned to take $20-$30 billion write-down of its goodwill balance as result of accounting rule changes. News added to other Qwest woes, including declining stock price and recent cash crisis.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
On first issue, SEC has indicated concern about company’s use of pro forma accounting in reporting acquisition of U S West. Such accounting practices exclude certain costs related to mergers or other unusual events and Qwest officials argued in conference call that pro forma accounting offered better year-to-year comparison. SEC action would be “without merit,” Qwest said. Agency hasn’t said what action it might take against company. Morningstar analysts called that “a minor issue” because it wasn’t related to SEC’s larger, Enron-type investigation into Qwest’s accounting of network capacity sales and swaps. Morningstar also downplayed importance of announced write- down, calling it “a noncash charge that does little to affect the value of the company.” However, Bear, Stearns said write-down could have negative impact of $12-$18 on earnings per share. New rules require companies to review goodwill and provide assessment of its value by end of 2002. Goodwill reflects value of intangible assets, such as of brand name. For example, Qwest gained goodwill when it acquired U S West.
On brighter note, Qwest still is on schedule to start filing Sec. 271 applications later this spring, leading to long distance entry starting in late summer or early fall, spokesman said Tues. Qwest said in 10-K filed with SEC Mon. that it expected to file applications for all states by midyear. CEO Joseph Nacchio said in audio conference late Mon. that he expected FCC to approve those filings in fall- winter. FCC must act on Sec. 271 petitions within 90 days. Spokesman said Qwest was poised to file first wave of applications as early as end of April -- probably for several states in first wave, either all at once or over week or 2. - - Edie Herman