Qwest to restate $950 million in sales
Move over WorldCom, Qwest Communications International Inc. is joining the revenue restatement club. The communications giant said it plans to restate $950 million in revenue related to network capacity swaps.
The $950 million was booked after Qwest's merger with US West in June 2000. Revenue related to the swaps will be restated from mid-2000 to the end of 2001.
The revenue was recognized under accounting policies approved by its former auditor Arthur Andersen, Qwest said in a statement. In May, Qwest replaced Andersen with KPMG. After consultation with KPMG, Qwest said it decided not to recognize the swaps as revenue.
In April, the Securities and Exchange Commission bumped up its informal probe of how Qwest recognized revenue when it sold network capacity or equipment to companies from which it also bought capacity and services to a formal inquiry. The change in status enables the SEC to issue a subpoena to demand documents and testimony.
Tomorrow, the U.S. House Energy and Commerce Committee will kick off a series of hearings designed to examine agreements to swap network capacity. Last month the SEC ruled that the practice of booking swap revenue was improper. Under investigation is whether telecom companies effectively cooked the books by logging network capacity sales as one lump sum instead of as incremental sales collected over the life of the contract. Former Qwest executives, including Joe Nacchio, are scheduled to appear before the committee.
Qwest said it is cooperating fully with the SEC's inquiry. The company is optimistic that its decision to restate the revenue "represents a first step toward a possible resolution."
The company said it may also restate $531 million in sales of optical capacity on its networks for cash.