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Qwest Communications: SEC Probe


Qwest Receives Informal Inquiry From SEC


DENVER (Reuters) - Telecommunications services provider Qwest Communications International Inc. (Q.N) said on Monday securities regulators have asked for documents related to its accounting practices as part of an informal probe.

The informal inquiry by the Securities and Exchange Commission relates to three areas of Qwest's accounting of sales in 2000 and 2001 -- information that the company said has been previously disclosed.

Qwest said the SEC's inquiry was not an indication that regulators believe any laws have been violated, and said it will respond fully with the request, which it received in a letter on Friday.

The request, made by the SEC's Denver office, is the second the agency has made to the company in as many months. In February, it demanded documents from Denver-based Qwest about its purchase of assets from Global Crossing (GBLXQ.PK), now in bankruptcy protection, as part of the agency's investigation into that company.

Shares of Qwest, a local telephone carrier that serves much of the western United States, initially fell as much as 10 percent in early Monday trading on Nasdaq. Shares closed down 25 cents, or 2.57 percent, to $9.46.

Qwest said it believed the SEC inquiry could be about the statement of a material amount of net income or loss, or earnings or loss per share, on an actual or adjusted basis.

In this latest query, the SEC sought information about Qwest's accounting of sales of optical capacity, particularly to customers from which the company had also agreed to buy optical capacity.

Its revenues from sales of optical capacity in 2000 and 2001 were about 2.8 percent and 5.1 percent of total reported revenues, and these figures included sales to customers from which Qwest also bought capacity. The sales totaled 4.7 percent of all pro forma, or adjusted, revenues in 2000.

A second area is the sale of equipment to customers from which Qwest bought Internet services, or to which Qwest contributed equity financing.

Revenues from the sale of Internet equipment to customers from which Qwest bought Internet services were about 0.1 percent and 0.9 percent of total reported revenues in 2000 and 2001. It totaled 1.7 percent of overall pro forma revenues in 2000, Qwest said.

The third area is Qwest Dex, the company's telephone directory business. The revenues from changes in the production schedules and existence of Dex directories were about 0.2 percent of total reported revenues in each of 2000 and 2001, and 0.2 percent of total pro forma revenues in 2000.

The company said sales or conduct in those three areas were unlikely to have an impact on its financial statements for this year and beyond.

Qwest has said it does not expect to make any optical capacity asset sales this year because of market demand for optical capacity. Neither does it plan to sell any equipment this year in an exchange transaction or otherwise beyond routine sales of customer premises equipment that is done in the normal course of business.

Separately, Qwest said the $1.5 billion senior note offering announced March 7 by Qwest Corp., a wholly owned subsidiary, is expected to be completed on Tuesday, March 12.

16:35 03-11-02

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