Qwest reveals scale of accounting errors
David Teather in New York Wednesday October 30, 2002 The Guardian
Qwest Communications, the US telecoms firm, yesterday announced plans for a write down of up to $40.8bn (Â£27bn), reflecting the steep decline of valuations
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The company, one of many big US names bruised by corporate scandals this year, also said it would restate revenues from 2000 and 2001 after admitting that it booked $531m in revenues prematurely.
Shares in the company, worth $65 during the boom of the late 1990s, yesterday fell another 7% to $3.25.
Qwest, the dominant phone company in 14 US states, is struggling to restore some confidence among shareholders. The company’s former chief executive, Joe Nacchio, was ousted over the summer.
In an attempt to clean up its books and its image, the company said it would cut $120m from mobile revenues over the two years in question to better account for the costs of promotions that gave customers equipment and free minutes.
The firm’s previous auditor was the now defunct Arthur Andersen. Reviews of its books by KPMG last month caused the company to wipe out $950m in improperly booked revenues from capacity swaps. Swaps – where firms fill in gaps on their networks by flowing traffic over each other’s wires – have been at the centre of federal and congressional investigations.
Qwest had warned that it would need to make a restatement but the magnitude surprised investors. It is reducing the goodwill on its books, the difference between the amount it paid for acquisitions and their asset value, by $24bn and cutting the carrying value of its networks by $10.8bn. Qwest warned it was likely to write down a further $6bn once KPMG finish the review.
The securities and exchange commission and the US justice department are investigating whether Qwest deliberately mislead investors.
Richard Notebaert, Mr Nacchio’s successor, sold Qwest’s directories arm for $7bn, to avoid bankruptcy, in August.