October 29, 2002, 11:20 AM — Qwest Communications International Inc. will take a goodwill impairment charge of about US$24 billion and an additional $10.8 billion charge due to the reduced value of its network, customer lists and technology, the company said late Monday.
Additionally, Qwest said it would defer $531 million in revenue booked on sales of optical capacity since it took over US West Inc. in mid-2000. The review of the optical capacity sales in 2000 and 2001, which was announced earlier, has now been completed, the Denver-based telecommunications company said in a statement.
Qwest also announced it will reduce revenue recorded at its wireless division in 2000 and 2001 by about $120 million to properly account for special promotions such as free handsets and call bundles.
Qwest in April said it expected to write down between $20 billion to $30 billion on the value of its assets. The company has now completed a required goodwill impairment test and expects to take a $24 billion charge as of Jan. 1, 2002, it said in a statement. The $10.8 billion charge for the reduced value of its network and other, intangible, assets will be reflected in a company restatement of its second quarter 2002 results.
An additional write-down of up to $6 billion, the company's remaining goodwill, may be required as the result of a second goodwill impairment test that Qwest has to carry out because it is adopting new Statement of Financial Accounting Standards rules, the company said. Goodwill typically represents intangible assets such as the value of a brand name, tax credits, and good customer relations, which are expected to translate into greater-than-normal earnings power.
The slump on the telecommunications market has almost nullified the value of assets held by many in the industry. These assets, such as fiber optic networks and acquired companies, were often bought at a premium at the height of the Internet boom.
Qwest provides local and long-distance phone services in the U.S. The company, struggling under a multibillion dollar debt load earlier this year, named a new chief executive officer and a new chief financial officer, and in late May dropped Arthur Andersen LLP as its auditor.
Qwest is scheduled to present its third quarter financial results on Wednesday.