Qwest Communications'
The humbled telecom titan, which has been conducting a review of its accounting practices in the midst of an SEC and Justice Department investigation, announced an additional $284 million in accounting fiction today.
That brings the total dollar amount of accounting misclassifications to about $1.8 billion and actual reductions in revenue or EBITDA to just over $1 billion. That's not exactly chump change, though that term may describe what shareholders are feeling like.
The phone company claims that its restatement of year 2000 and 2001 earnings are "essentially complete" -- whatever that means -- but, of course, it went on to say that the "company can give no assurance that the adjustments are final," or that "all adjustments necessary to present its financial statements [accurately] have been identified." In other words, just like the one announced this past May, this restatement may not be the last.
Qwest is seeing some strength in its long-distance business, signing up over 1 million new lines so far this year, but it's losing local access lines like they're going out of style -- and in some ways, they just might be. That's particularly bad news, as many of the best opportunities for growth lie in bundling services for local customers.
The company did make some progress shoring up its balance sheet in the quarter, managing to increase its cash and equivalents by $200 million to $2.8 billion.
Still, the bottom line is that the folks who purchase this company in the short term are taking a real leap of faith. If the firm has demonstrated anything in the past 18 months, it's that one should have little confidence in 2003 earnings and revenue estimates. And that makes it a bit of a challenge to assign an appropriate value to its shares.
If you're looking for more terra firma in your telecom company, avoid this one and consider BellSouth
Mathew Emmert owns shares in BellSouth. He's the author of the Fool's latest investment newsletter, Motley Fool Income Investor. If you're interested in more investments that pay substantial dividends and you don't have the risk profile of swallowing drain cleaner, consider a free trial.
