PacTel Takes $3.3 Billion Charge for Accounting Changes
SAN FRANCISCO (AP) _ Pacific Telesis Group on Thursday said it would take a $3.3 billion charge in the third quarter as it begins to use the accounting methods of a competitive business rather than a monopoly.
PacTel is the sixth of the seven regional Bell operating companies to make the change. SBC Communications Inc., the only one that hasn’t, will likely change soon, a spokesman said.
For PacTel, the noncash charge in the third quarter amounts to $7.70 per share. The action has no practical effect on the company’s customers, its debts, contracts or ability to pay dividends.
``After assessing recent and proposed orders by the California Public Utilities Commission and the Federal Communications Commission, we recognize that as the company changes to meet competition our accounting processes must change, too,″ Bill Downing, PacTel’s chief financial officer, said in a statement.
The company will move away from accounting under Statement of Financial Accounting Standards 71, which sets out criteria regulated companies must meet for accounting purposes.
The big change is reducing the time it takes to depreciate assets.
For example, the depreciating the value of copper now ranges from 19 years to 26 years. Under new accounting standards, that will decrease to 14 years. For fiber, the depreciation rate, which ranges from 28 years to 30 years, will decrease to 20 years.
U.S. West Inc. in the fall of 1993 became the first local phone company to make the accounting change.
The companies are preparing for the time when competition for in their core business will become common. PacTel serves Nevada and California, where regulators have decided to open local phone competition on Jan. 1.
PacTel has plans to eventually enter the long-distance, Internet access and video distribution businesses.