Write-down by Qwest grows to $40.8 billion
Copyright 2002 Gannett Company, Inc.
Local phone company Qwest Communications International Inc., attempting to cleanse its image and its books, said Monday that it will take a write-down of $40.8 billion and defer $531 million in revenue it booked prematurely in 2000 and 2001.
The charge is much larger than the $20 billion to $30 billion hit that Qwest had forecast. The total has grown in part because the telecom sector has worsened, so Qwest's fiber-optic network and other assets are worth far less. Qwest, which made the announcement after the markets closed, will take the charges in its restated 2002 results.
Qwest has warned investors of pending restatements, but the total keeps growing. It also said it would cut $120 million in wireless services revenue in 2000 and 2001 to recognize the effect of promotional campaigns that gave equipment and minutes to customers.
Qwest shares, which topped $60 a share in 2000, fell nearly 6 percent to $3.26 in after-hours trading on Island ECN. But the company has mostly soothed investor fears of a possible bankruptcy filing under new CEO Dick Notebaert. Qwest has dodged a liquidity crisis by agreeing to sell its directories unit for about $7 billion and renegotiating a line of credit.
Telecom analyst Tom Friedberg at Janco Partners says the restatements don't add any doubt about Qwest's ability to survive. "This is a cleanup of ancient history."
Qwest is one of many telecoms having to re-evaluate the value of their assets — including networks, customer lists and brand names — as reduced customer spending and intense competition mean lower profits. WorldCom, which is trying to reorganize under bankruptcy-court protection, expects to take a $50 billion write-down. New accounting rules have prompted a slew of others.
Qwest, the dominant local phone company in 14 Western and Midwestern states, hopes to regain investor confidence. Its accounting practices have spurred ongoing probes by the Securities and Exchange Commission and the Justice Department. Qwest, like WorldCom and Global Crossing, faces congressional probes, too.
Last month, Qwest said it would erase $950 million from improperly booked swaps of network capacity with other carriers.
It also said that $531 million in network sales were questionable because they were booked too soon. Qwest said Monday that the revenue would be deferred.