US telcos are coming under increased financial scrutiny following yesterday's confirmation that Qwest Communications is the subject of a Securities and Exchange Commission (SEC) probe into its accounting practices.
News of the investigation came a just a day before Qwest planned to close a $1.5bn debt offering.
According to the company it received an "informal inquiry" from the SEC asking it to turn over financial documents from 2000 and 2001.
The probe is the second against the company by the SEC this year. Qwest was subpoenaed to turn over documents relating to the purchase of some assets of Global Crossing, a fellow telco that filed for bankruptcy protection earlier in the year.
That bankruptcy filing, as well as the post-Enron paranoia, looks to have placed US communications companies in the spotlight.
Three areas of Qwest's accounting policies and practices are under investigation, one of which relates to how it recognised revenues and accounted for sales of optical capacity. Last year, that business represented about $1bn of the company's $20bn revenues.
A second area relates to its sale of telecoms equipment to customers which either purchased internet services from Qwest or received financing from the company.
The third relates to changes in production schedules of some publishing directories.
Qwest defended its accounting practices on Monday saying that it will "comply with all applicable requirements". But the company added that "there can be no assurance that the SEC will agree".
The telco's planned debt offering is likely to have prompted its statements about the informal inquiry. Qwest said that it was made aware of the investigation by letter on Friday.
The preliminary, informal inquiry will not involve the power of subpoena.
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