Collapsed telco faces SEC accounts probe

The investigation is the latest in a long line of SEC and other regulatory investigations into the accounting of some of America's largest telecom operators. Metromedia resells its network capacity to a host of other service providers including long-distance, wireless and ethernet networking companies.

According to the carrier, which has fibre optic networks across the US and Europe, the investigation is looking into what led the company to recently restate its 2001 operating results. The firm said it is co-operating fully with the investigation.

In April, Metromedia announced its intention to restate its financial results for 2001 at the same time as revealing it had defaulted on nearly $675m of debt.

The restatement involved revenue/sales credit recognition, timing of expense issues and non-cash lease accounting and purchase accounting issues.

At the time that Metromedia announced its plans to restate figures, the company's auditor, KPMG, said it was unable to review the carrier's financial data because of the way the company prepared its financial information.

News of the investigation comes less than a month after Metromedia's move to file for Chapter 11 protection. At that time Metromedia said it would dispose of non-productive properties and cut jobs.

Analysts expect that to lead the operator into seeking a buyer for its European operations, fibre-optic metropolitan networks in 11 European cities. The firm also had plans for similar networks in four more European cities.