Qwest Pulls Market Re-Entry Bids

Qwest Communications withdrew applications Tuesday to provide long-distance service in nine states after questions arose about its accounting practices.

By ROBERT GEHRKE, Associated Press Writer

The Denver-based telephone company had been seeking permission from the Federal Communications Commission ( news – web sites) to re-enter the long-distance market in the nine states. It had been forced to stop offering services in those states when it acquired US West in 2000.

In July, Qwest announced plans to restate its earnings from the two previous years because of accounting practices that are being investigated by the Securities and Exchange Commission ( news – web sites).

The FCC ( news – web sites) requires that long-distance companies comply with generally accepted accounting principles.

Steve Davis, Qwest’s senior vice president of policy and law, said he believes the company meets the accounting standards. But with a Sept. 11 deadline looming for the FCC to rule on its first application, Davis said, the uncertainty prompted Qwest to withdraw.

He said the company would refile an application for all nine states before the end of the month, restarting the 90 days the FCC has to rule on the company’s request, although Davis said he anticipates the new application will be expedited.

"In my view, Qwest’s applications were razor-close to approval. Ultimately, the outstanding issues were very narrow, but nonetheless important," FCC Chairman Michael Powell said in a statement. "I am confident that Qwest, in consultation with the states, Department of Justice ( news – web sites) and this commission, will expeditiously resolve the outstanding issues that prevented approval."

Other phone companies, including Verizon, SBC and BellSouth, have refiled applications to restart the FCC review clock.

Qwest is restating its earnings to correct the misreporting of "capacity swaps" in 2000 and 2001 that overstated revenue and understated expenses. The accounting practice is under investigation by the SEC. The U.S. Attorney in Colorado has also said he is conducting a criminal investigation of the company.

Qwest has said it spent more than $3 billion making the markets competitive. The company applied in June to re-enter the long-distance market in Colorado, Idaho, Iowa, Nebraska and North Dakota. In July, Qwest asked the FCC to approve long-distance operations in Utah, Montana, Wyoming and Washington.

Utility commissioners in all nine states had given their approval to the efforts. In July, the Justice Department ( news – web sites) gave Qwest its conditional approval to provide long-distance in the first five states.

Qwest shares were down 13 cents, or 4.1 percent, to close at $3.04 in trading Tuesday on the New York Stock Exchange ( news – web sites).

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On the Net:

Qwest Communications: http://www.qwest.com

Federal Communications Commission: http://www.fcc.gov

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