IP: glad to see telecom CEOs reading the history books

[David Farber <dave () farber net>]

> Date: Mon, 11 Feb 2002 13:56:25 -0500
> From: Richard Jay Solomon <rsolomon () dsl cis upenn edu>
>
> A leaf out of Jay Gould's diary. Or is this Credit Mobilier Redux?
>
> Richard
>
> > SEC to probe Qwest's links with Global Crossing
> > By Richard Waters in New York
> > Published: February 11 2002 14:23 | Last Updated: February 11 2002 14:57
> >
> > The Securities and Exchange Commission has begun a probe of Global 
> > Crossing's dealings with at least one rival telecommunications company, 
> > it emerged on Monday.
> >
> > News that the regulatory body had sought information from Qwest 
> > Communications raised the prospect of a wider review of business and 
> > accounting practices in the telecommunications industry in the wake of 
> > Global Crossing's collapse.
> >
> > Qwest said it had received a subpoena from the SEC, asking for documents 
> > concerning Global Crossing in relation to the SEC's investigation of that 
> > company. Qwest added that it "intends to co-operate fully with the SEC".
> >
> > The regulators are believed to be looking into deals under which Global 
> > Crossing and Qwest bought capacity on each others' fibre optic networks. 
> > A former Global Crossing accounting executive has claimed that the 
> > transactions were artificial, and were designed to inflate revenues.
> >
> > US accounting rules do not allow companies to book capacity sales as 
> > revenue if they involve straight swaps of capacity between two companies.
> >
> > Dan Cohrs, Global Crossing's chief financial officer, insisted in an 
> > interview last week that all of his company's capacity sales were done on 
> > genuine arms-length terms and did not involve swaps with other companies.
> >
> > Wholesale capacity deals like this became a common feature of the 
> > telecoms industry in the late-1990s as new long-haul companies like 
> > Global Crossing and Qwest tried to fill the gaps in their own networks by 
> > buying capacity from each other.
> >
> > Known as IRUs, these deals accounted for a large slice of the revenues of 
> > several of the upstart companies when they were under great pressure to 
> > begin generating revenues from their brand-new networks.
> > To counter concerns that some of these deals may have been struck to 
> > conjure up the illusion of revenues, Global Crossing last year began to 
> > volunarily disclose the value of its IRUs sales to companies from which 
> > it also bought capacity.
>
>
> http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT3XOEUDKXC&live=true&useoverridetemplate=ZZZUGORQ00C&tagid=ZZZNSJCX70C&subheading=global

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