Covad shares resumed trading on Nasdaq Tues. and promptly plunged on disclosure of additional financial information, including expected $52 million dive in 2000 revenue. Covad delayed financial announcement last week (CD Feb 20 p4), saying it needed more time to review new SEC-required accounting changes that could materially reduce revenue for last year. Earnings before interest, taxes, depreciation and amortization losses also may increase $17 million, Covad said. DSL provider said “further analysis is required to confirm these estimates.” Covad also said it had: (1) Recorded goodwill and other intangible assets of $120 million linked to acquisition of BlueStar Communications. “The company is currently evaluating whether any portion of goodwill or intangible assets are impaired,” Covad said. It hasn’t yet assessed magnitude of any write-down. (2) Listed $50-$200 million in restructured charges and tangible asset impairment charges for 2000 and 2001 in previously announced cost-cutting efforts. Timing and magnitude of charges still was being gauged. (3) Marketing development funds provided to help customers with marketing efforts and recorded as 2000 expenses are estimated to be $38 million. Covad was reviewing quarter-to-quarter timing of classification of those payments as expenses or revenue offsets “and any additional commitments made but yet to be recorded.” Covad said it had begun to review of internal procedures used to implement service contracts and bill customers. In last few months, several CLECs and IXCs have noted in financial disclosures that their revenue reports were being affected by cash-strapped ISPs that couldn’t pay their bills. To ensure correct recognition of revenue, Covad is reviewing ISP contracts, billings, marketing development funds. Efforts to prepare financial statements in line with SEC-required accounting rule change are expected to take several weeks. Until then, company said it couldn’t provide guidance on expected impact of statements. Nasdaq had halted trading of Covad shares Fri., saying they wouldn’t resume until “additional information” was received from the company. Covad shares closed down 43.4% on Nasdaq to $1.62.
FCC denied petition for reconsideration by FocuSystems on wireless Enhanced 911 order. FocuSystems had argued that interim benchmarks for activating automatic location identification- capable handsets were “overly burdensome” and shouldn’t apply to carriers that didn’t yet have to meet public safety answering point (PSAP) request for E911 Phase 2 service. Commission said petition didn’t offer basis for reopening issues in E911 proceeding. FocuSystems said interim benchmarks for activating handsets would force carriers relying on handset-based approach for meeting E911 Phase 2 requirements to make sizeable investments before any PSAP in their operating territory could use specific location data. It also asked agency to reconsider part of order that required carriers to reveal technology choice for meeting Phase 2 requirements. Assn. of Public-Safety Communications Officials had opposed petition, saying E911 deployment schedules shouldn’t be pushed back because some technology improvements still were in offing. Agency said it denied petition as “untimely, directed to the wrong decision and without merit.”
European Commission (EC) approved British Telecom (BT) acquisition of 45% of Germany’s Viag Interkom in deal that gives BT full ownership. EC said transaction wouldn’t increase BT’s market share in U.K. or Germany “and will not result in any foreclosure effects.” Viag provides fixed and wireless services and is 4th largest mobile operator in Germany. BT in Dec. bought 10% stake in company from Telenor with plans to acquire 45% it didn’t already own from E.on.
Bad financial news abounded in telecom industry Fri. as companies announced layoffs, stock prices dropped and financial reports were delayed. Downturn came in wake of announcements Thurs. that Nortel and several other high-tech companies were laying off large numbers of employees (CD Feb 16 p5). Nortel closed down 33% to $19.89 Fri. after it cut its profit outlook late Thurs. and said it would increase job cuts to 10,000.
As expected, Cablevision Systems’ shareholders approved creation and distribution of separate Rainbow Media Group (RMG) tracking stock Fri. New RMG tracking stock, which will be distributed to holders of Cablevision common, will cover such MSO programming interests as American Movie Classics, Bravo, The Independent Film Channel, WE: Women’s Entertainment, MuchMusic USA, Rainbow Sports. But stock won’t cover MGM’s pending purchase of 20% stake in 4 of RMG’s networks, which is expected to close by mid-April.
Nev. state Sen. Terry Care (D-Las Vegas) said he was preparing to introduce legislation that would place “presumption of negligence” on drivers involved in accident while talking on mobile phone. His bill wouldn’t prohibit or restrict car phone use, but in effect would presume driver using mobile phone to be party who caused auto accident. Mobile phone industry is expected to oppose legislation on ground that it unfairly singles out mobile phones from all other driver-distracting devices. Care said success for his bill would depend on backing from state transportation and law enforcement officials, but they weren’t taking any position on proposal.
New bill in Mich. House (HB-4219) would give Mich. PSC authority to regulate mobile phone towers. Measure would prohibit providers from building new towers if existing telecom towers in service area had attachment space available. Parties wanting to construct new towers would have to get prior approval from PSC. Tower owners would be required to lease unused space to competitors. Rates, terms and conditions would be set by negotiations, with resulting contracts subject to PSC approval. Impasses and any disputes over contracts or suitability of tower space would be settled by PSC. PSC could fine violators up to $500 per day. Bill wouldn’t preempt municipal zoning regulations on mobile phone towers. Bill is in House Energy & Technology Committee.
First month of Congress yielded little progress on what’s seen as biggest telecom task for both Commerce Committees this year -- finding way to increase broadband deployment. “It’s been a very slow month, and a lot of it was scripted during the last session,” said Cato Institute telecom analyst Adam Thierer. “There’s no surprises [so far].” Broadband deployment is to get immediate attention when Congress returns Feb. 26. “We're hearing from our constituents how important this is,” said Hill staffer. But so far lawmakers have continued to push disparate ideas on subject with little progress made on reconciling various bills. In particular, most onlookers are waiting to see new bill expected from House Commerce Committee Chmn. Tauzin (R-La.) and ranking Democrat Dingell (Mich.).
U.K. Office of Telecommunications (Oftel) is augmenting Internet interconnection requirements under which British Telecom (BT) must offer access to its rivals. Starting Feb. 26, BT will have to offer competitors new wholesale unmetered Internet access product called Single Tandem Flat Rate Internet Access Call Origination -- called ST FRIACO. Earlier version mandated by Oftel conveyed Internet calls to BT’s local exchanges. Updated version conveys them across BT network to operator’s own phone network, Oftel said. Oftel said change would broaden inexpensive, unmetered Internet access in U.K. Last year, Oftel studied interconnection issue in context of arguments raised by BT that it couldn’t supply unmetered wholesale service to tandem switches because increased traffic would overload its network. Recognizing that capacity at main exchanges could be limited at outset, Oftel said it included measures to ensure BT’s network could handle expected influx in Internet traffic. It said new arrangements would allow competitors to BT to offer unmetered Internet access by connecting with BT’s network at its main regional exchanges for flat rate annual fee. Oftel said BT would be required “to take steps to ensure that all reasonable demand for ST FRIACO can be met without limitation” starting in Feb. 2003. Oftel said it would work with industry to create “new interconnection regime” for Internet traffic carried over dedicated IP networks. Oftel Dir. David Edmonds said as recently as year ago that unmetered Internet access wasn’t available in U.K. Last year, regulators required BT to provide necessary services for unmetered Internet access over local loop in response to interconnection dispute between BT and WorldCom.
Spain’s Airtel Movil completed first voice and data test calls using Universal Mobile Telecommunications System (UMTS) equipment from Nortel. Airtel plans to begin commercial UMTS service in Aug. in 23 cities covering 25% of Spain’s population.