Troubled US telecoms carrier WorldCom has announced that it is writing down US$79.9bn of its goodwill and other assets.
The move is being seen as an acknowledgment that much of the company’s network is basically worthless after dwindling demand.
WorldCom filed the US’s biggest ever bankruptcy petition last year following a US$9bn accounting scandal.
The writedowns include US$45bn of goodwill, which is the difference between the price they bought at and what is considered a fair price on the market.
In a statement, the company said it was also reducing the value of its property, land and equipment and other assets to US$10bn from US$44.8bn.
The company had been the US’s second biggest long-distance carrier after AT&T. Its former chief executive Bernard Ebber resigned last April, three months before WorldCom became enmired in one of the US’s biggest accounting scandals following the debacle at Enron.
After the AOL Time Warner disaster, yesterday’s announcement is the second biggest writedown in US history. The assets of AOL Time Warner were reduced by US$99.7bn last year.
Although Worldcom’s writedowns were expected, the scale has come as something of a surprise to analysts.
In addition, WorldCom, in spite of the writedowns, still posted a loss for the month on sales of US$2.2bn and a month earlier it had a net loss of US$194m for the same amount of revenue.
The company said it increased its cash by US$200m in December finishing up the month with US$2.5bn.
Since the rapid expansion of rival networks in the late Nineties, the value of a lot of the fibre optic equipment installed by carriers has nosedived because of an oversupply of communications capacity.
Analysts believe that because Worldcom’s network is so extensive, the write-downs at the company could influence similar decisions at other big carriers.
By Suzanne Byrne