"Qwest announced yesterday that the SEC upgraded its informal inquiry to an investigation, giving it the power to subpoena documents and testimony. ...

The SEC is investigating changes that Qwest made to its phone-directory publishing schedule that may have artificially increased its stated revenue in 2000 and 2001. ... [From Reuters: Qwest stock has plunged about 44% in 2002 as the company struggled to relieve a cash crunch, revive investor confidence, and boost revenue growth.] ...

Qwest was a fledgling company when it purchased US West ... Joe Nacchio won over Wall Street ... but [didn't] anticipate the network capacity glut or the slowing of the global economy.

AOLTW sold $6B of bonds on Wednesday, 50% more than planned, to refinance short-term debt and position itself for possible further acquisitions. ... drew more than $10B of bids after offering yields of 7.753% ... Proceeds will pay down $4B in bank loans, $3B in commercial paper ... may make more cable TV acquisitions ...

AOL said last week it would take a $54B quarterly charge, likely the largest ever by a company, to reflect a steep decline in the value of its 2000 purchase of Time Warner. ...

AOL follows GE Capital and Verizon in scurrying to pare commercial paper as Moody's Investors Service and Standard & Poor's closely examine companies' ability to raise cash fast. ...

AOL may buy AT&T's 25% stake in TW Entertainment, which analysts said may be worth up to $10B. ...

Will AT&T stand alone as a telecommunications company? Many industry executives say they believe that by the middle of next year, a big local phone company like SBC or BellSouth will try to acquire what remains of AT&T.

If AT&T's stock price remains [low], such a deal appears almost inevitable.

If the AT&T-Comcast deal has, say, an 85% chance of going through, what message is the investment community sending about the rest of AT&T?

It appears that investors are valuing the rest of AT&T at just $4.78 a share, or $16.94 billion in all.

The implied value of AT&T's core units - (wireline voice and commercial datacom) - is $14B-$22B ... a remarkable figure for assets generating $37B in revenue and $10B in EBITDA this year. ... a strong case can be made that these valuations ... are quite low. Obviously, investors are choosing to disagree with the analysts.

[We must wait on the 1Q02 financial report.] AT&T's FY01 10-K will be out today.

The Kirch Group, the big German media company, teetered on the edge of bankruptcy today after rescue talks with bankers and investors, including Rupert Murdoch, broke down Tuesday night.

... the company might be forced to file for bankruptcy protection this week.

At stake is KirchMedia, a Kirch unit in television broadcasting. If KirchMedia collapses, the rest of the empire will follow in short order.

A bankruptcy filing would shake up Germany's media industry and would have important political implications.

Kirch would be the third major German bankruptcy in less than a month ... Banks are under pressure ... reluctant to [offer a bailout] ...

... Many politicians on the German left consider Mr. Murdoch an anathema. ... Without a deal, KirchMedia will be required by law to declare insolvency ...

... KirchMedia already technically insolvent ... Kirch's banks would have to write off all or most of their loans. ...

Kirch's aging founder ... will give up control ... but has insisted on retaining control over rights to the 2002 and 2006 World Cup games ...

Upstart firms saw riches in circling the globe with high-capacity optic cable. Instead, they were laying the foundation for their own downfall. They spent $50B+ to wire the planet, but they are not celebrating. Many are in financial ruin. The recent collapses of Global Crossing Ltd. and other communications firms have roiled financial markets and cost investors and employees tens of billions of dollars.

How did such a triumph of engineering leave so much corporate wreckage?

What actually drove the company and others like it into the ground was an epic miscalculation. ...

"People thought it could double every quarter forever." ...

"In some bizarre movie about the telecom industry, you would have guys from the carriers going out and killing guys in the labs to prevent them from coming up with new technologies." ...

WorldCom ... laid off 3,700 employees yesterday, or 6% of workers in its data, Internet and international business unit ... as the company struggles with dramatically slowing sales growth in its primary business. ... [From Reuters: also halted salary increases, halted stock option grants, and eliminated free coffee!]

WorldCom carries a hefty debt load, faces a federal inquiry -- two common problems in the industry ...

MCI is run as a separate division ... no layoffs [yet] there ... [From Reuters: WorldCom recently got $800 million in cash by selling its stake in News Corp.]

The growth rate of WorldCom's sales of data services has slowed to 16.7 percent last year from 26.7 percent in 2000, and the layoffs were a necessary adjustment to that, a WorldCom spokeswoman said.

WorldCom [tried to focus on] Internet and data services to large businesses, [a sector which] took a dive [recently]

"The revenue for what WorldCom provides is dismal, and it has been for several quarters." The company made its foray into the Internet business "at exactly the wrong time." [Any eventual] rebound is likely to be very gradual.

By the end of the week, a group of major shareholders (representing more than 50% of equity) [will] demand that the Rigas family step down.

... investors are worried Adelphia will be unable to pay debts, unable to borrow more ... still unclear whether the group could unseat the family, which controls the voting stock ...

Adelphia has $14.7 billion in consolidated debt. ... Investors are frustrated by the company's refusal to disclose partnerships ...

S&P analyst: "The SEC inquiry ... is a red flag." Adelphia's auditor, Deloitte & Touche, may force the debt onto the company ... which could put Adelphia into default.

Adelphia needs $3B within two years ... But now is not the best time to sell cable assets; Comcast AT&T are in mid-merger, and AOLTW is restructuring ...

Shares of Adelphia, the US's 6th-largest cable TV company, fell another 7% Wednesday, down 45% in the last week.

... the Rigas family borrowed at least $2.3B from banks in which Adelphia guaranteed the loans without recording that fact on the books ...

The Rigases ... have a long history of "being extremely aggressive in pursuing their own interests." ... family investment partnerships had accumulated their own set of cable companies totaling 300,000 subscribers, separate from Adelphia's 5.8 million subscribers in 32 states.

... Investors and analysts, reluctant to ask hard questions, did not see trouble. ... What a skeptic might call nepotism, an optimist might term generational continuity. ...

... hefty off-the-book loans leave Adelphia holding the bag ...

"The scope of the problem is surprising. But I was skeptical of them, because there was always a lot of off-balance-sheet items. You never felt confident that you knew all the facts about what was going on."

The sudden decline in value of the family's holdings has implications for the company ...

... hard to gauge the financial impact ... Adelphia debt could increase to $16B ... which may exceed Adelphia's debt-to-cash-flow limits ... lenders could call the loans, forcing Adelphia into bankruptcy ...

"The question is whether the additional debt is treated as part of the overall debt, for ratio purposes, and will it put the company in technical default. ... I kept asking them where they had gotten the money."

"It was fishy to some investors. Whenever you have a managerial family running assets that are not part of the publicly traded cable assets, especially if they are comparable assets, the question is why they are not in the public company."

"You could argue that the private company was warehousing systems that the public company would someday buy, and in the meantime the public company was getting better volume discounts for programming and equipment. It also meant the private company could buy systems without overleveraging the public company's balance sheet."

... recent disclosures raise new questions ... difficult to answer as long as the Rigases remain incommunicado in Coudersport.

Leonard Tow, who sold Adelphia his cable company (for a 10% stake in Adelphia) several years ago, said he finds it difficult to get Rigas family members on the phone ...

Unlike other areas of the U.S. economy, the telecommunications sector continues to drag. More telecom jobs were cut in March than in any other sector except retail ...

... the telecom sector lost 21,831 jobs last month ... in 2001: 317.777 jobs, the highest one-year total by any industry [ever recorded]; In 2002: 85,522 layoffs in three months.

"With the turmoil in the telecommunications industry, ... it would not be surprising to see monthly figures spike again in the coming months."