DESPITE A FEW EXCEPTIONS, TELECOM BACKS ITS FINANCIALS

Telecom made it through the financial statement certification process relatively unscathed last week, especially for an industry that has been the source of more than its share of accounting scandals.

Of the approximately 40 companies in the sector whose chief executive and financial officers were required to certify quarterly and annual reports, almost all did, and there were few surprises among those that didn't. Qwest Communications, for example, had already said it would miss the deadline because of its internal audit. Similarly, Adelphia Communications, caught up in an accounting scandal of its own, did not certify its results. Only McLeodUSA, which certified part of its results, raised some eyebrows.

Since the certification requirement was announced, most in the investment community have judged it as a public relations ploy designed to build confidence. Everything executives must now swear to, they say, is already part of the law.

“It does provide a little extra confidence, but I don't think it's going to drive the market,” said Ken Kotylo, telecom analyst with William Blair & Co. “Ultimately it's going to be financial results that drive the market. If the financials aren't pretty, the fact they're correct doesn't make it much better.”

In fact, the new requirement has more power to hurt a company than to help it. Companies that unexpectedly fail to certify catch investors off guard and could easily face a sell-off.

But according to Tellabs CEO Mike Birck, who certified his company's results on Aug. 5, the new requirement may have a positive side effect: it could drive home the significance of financial statements to the very people who sign them.

Birck also said that the initiative has opened the eyes of many executives in the industry. “For some CEOs and CFOs, it has heightened the awareness of [the need for] accuracy and truthfulness and completeness,” he said.

STICKING TO THEIR NUMBERS

We swear: Notable telecom CEOs who did — and didn't