Mar 7, 2002 : Qwest-Enron Deal Under Further Scrutiny
📅 - This week investors and analysts filed the results of their examination of a deal between Qwest and Enron, made last September, to buy $112 million worth of communications network capacity from each other. Discussions in a federal bankruptcy court in Manhattan were meant to determine the nature of the swap and its timing suggested a last-minute act of desperation to patch up Qwest's particularly weak quarter.
At the time of the Qwest?Enron deal, the already debt-burdened Qwest had a massive, new fiber-optic network in place. Industry also noted Qwest's October report of a sharp third-quarter earning and revenue shortfall. Analysts say the deal the deal is indicative of a company's eagerness to meet investors? expectations.
According to the court documents, Enron paid Qwest $112 million in their $195 million agreement to buy live optical network capacity. In exchange, Qwest paid Enron $112 million of a $308 million contract for a stretch of idle unequipped cable, known as dark fiber, between Salt Lake City and New Orleans. Qwest confirms cash changed hands.
Investors are critical of some swappers because, an IRU is typically a long-term lease of capacity, spreading revenue over the length of the contract. But many companies booked the leases as a one-time deal, and wrote purchases off as an investment in property and assets, not as traditional expenses. Therefore, the IRUs enhanced both the top line and the bottom line of the financial statements.
The Justice Department and the Securities and Exchange Commission are investigating the capacity sales of failed broadband network operator Global Crossing and of a number of telecommunication companies, including Qwest, which played a role in the deals, to determine whether or not the sales are illegal.
The Denver-based telco is already under scrutiny for its heavy reliance on nonrecurring network-capacity sales, attributed the shortfall to a sudden drop in demand for these wholesale bandwidth deals.
In defense, Qwest said that many large deals typically aren?t completed until the last day of the quarter, and that the Enron deal gave it key backup network routes. Qwest, which has dropped 75% over the past year as investors worry about growth and financial issues, jumped $1.23 Wednesday to $10.08.
At the time of the Qwest?Enron deal, the already debt-burdened Qwest had a massive, new fiber-optic network in place. Industry also noted Qwest's October report of a sharp third-quarter earning and revenue shortfall. Analysts say the deal the deal is indicative of a company's eagerness to meet investors? expectations.
According to the court documents, Enron paid Qwest $112 million in their $195 million agreement to buy live optical network capacity. In exchange, Qwest paid Enron $112 million of a $308 million contract for a stretch of idle unequipped cable, known as dark fiber, between Salt Lake City and New Orleans. Qwest confirms cash changed hands.
Investors are critical of some swappers because, an IRU is typically a long-term lease of capacity, spreading revenue over the length of the contract. But many companies booked the leases as a one-time deal, and wrote purchases off as an investment in property and assets, not as traditional expenses. Therefore, the IRUs enhanced both the top line and the bottom line of the financial statements.
The Justice Department and the Securities and Exchange Commission are investigating the capacity sales of failed broadband network operator Global Crossing and of a number of telecommunication companies, including Qwest, which played a role in the deals, to determine whether or not the sales are illegal.
The Denver-based telco is already under scrutiny for its heavy reliance on nonrecurring network-capacity sales, attributed the shortfall to a sudden drop in demand for these wholesale bandwidth deals.
In defense, Qwest said that many large deals typically aren?t completed until the last day of the quarter, and that the Enron deal gave it key backup network routes. Qwest, which has dropped 75% over the past year as investors worry about growth and financial issues, jumped $1.23 Wednesday to $10.08.
Reads: 1611 | Category: General | Source: TheWHIR : Web Host Industry Reviews
URL source: http://www.thewhir.com/marketwatch/qwe030702.cfm
Want to add a website news or press release ? Just do it, it's free! Use add web hosting news!