Qwest Communications Interna-tional Inc, under a US accounting investigation, will restate results for 2000 and last year because the company incorrectly booked at least US$1.16 billion in sales over three years.
Qwest also withdrew its forecasts for this year, which called for as much as US$18.4 billion in sales, because of competition and diminishing demand, Chief Executive Officer Richard Notebaert said in an interview. Qwest, which misreported sales of capacity on its fiber-optic network through last year, didn't say when it will restate.
The US Securities and Exchange Commission in March began probing transactions in which Qwest sold space on its fiber-optic network to other carriers, then agreed to buy similar amounts from them. Investors questioned whether Qwest used the swaps to improperly inflate sales as demand fell short of expectations for the network it borrowed billions of dollars to build.
"The right thing to do is share the information we have with the shareholders and the public," said Notebaert, named by the board to replace Joseph Nacchio last month. "We'd like to have resolution to the [SEC probe] so we can serve our 18 million customers." Qwest, the biggest local-phone provider in 14 western US states, said it improperly accounted for some expenses from the purchase of service from other carriers in 2000 and last year. WorldCom Inc, the nation's second-largest long-distance operator, filed the biggest bankruptcy a week ago after hiding US$3.85 billion in expenses, some from using rivals' networks.
"That they're looking at expenses is going to rear WorldCom-type fears," said Patricia Lee, an analyst with independent researcher CreditSights Inc in New York. "It's an ugly overall situation."
Notebaert said he and Chief Financial Officer Oren Shaffer will not be able to comply with an SEC order that Qwest, with 944 other public companies, verify their financial statements by Aug. 14. Qwest is one of the first to say it won't comply.
"Changes in accounting in prior periods can impact current periods and therefore we cannot sign off," Notebaert said.
Qwest, with US$26.6 billion in debt, in April forecast 2002 sales of US$18 billion to US$18.4 billion, below its previous estimate. Last year, the company reported sales of US$19.7 billion and a net loss of US$4 billion.
Qwest is in talks with bank lenders about the possibility of easing restrictions on US$3.4 billion in loans analysts say the company may default on by year's end, Shaffer said in the interview. To lower debt and avoid breaching terms of the loans, Qwest is selling assets, including a phone-book operation.
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