Comes as SEC Continues Probe of Corporate Accounting Practices

By Published on .

CHICAGO (AdAge.com) -- In a move expected to save it $9 million in annual fees, Qwest Communications International has consolidated its $100 million advertising account with DDB Chicago, according to the agency.

The win comes amid a formal investigation by the Securitites and Exchange Commission of the company's accounting practices.

DDB, which is part of the Omnicom Group, was Qwest's incumbent agency. In winning the work, it beat out Interpublic Group of Cos.' Foote, Cone & Belding Worldwide, New York. DDB handled retail and local market advertising and QwestDex yellow pages for the Englewood, Colo.-based voice and data services company.

Last month, the account's second incumbent, WPP Group's J. Walter Thompson, New York, which handled the corporate and business advertising account, withdrew its bid.

New shop to handle account
As part of the decision, DDB will

Related Stories:
DDB Faces Off Against FCB for $100 Million Account
Incumbents JWT, DDB to Participate
create a Chicago-based virtual ad unit, DDBQ, that will have field support in Denver and Phoenix. Tom Cotton, currently president of DDB Ventures, New York, will head the new entity as general manager. He said the new unit will save Qwest $9 million in agency fees annually. DDBQ will report up through DDB Worldwide, and executives from five Omnicom business units will serve on the DDBQ board.

Mr. Cotton said the agency created the unit to provide seamless communications for everything from the brand to the call centers, including digital and direct services, employee communications and media planning and buying.

He said "dozens and dozens" of people will staff DDBQ, with general advertising and brand stewardship teams to be culled from DDB, Chicago, while media buying and planning teams from incumbent OMD, New York, will continue under the new unit. Other Omnicom units that will work on the Qwest account include I2I Communications, New York, to handle direct marketing; and Integer Group, Denver and Phoenix, which currently supplies sales channel support and digital communications from Tribal DDB, Chicago.

Formal investigation
Today's win comes as shares of Qwest slumped to $6.26, its lowest stock price since going public in 1997. The shares 52-week high was $41.83.

The SEC had been looking into the

company's accounting practices, launching a formal investigation April 4 into how Qwest accounted for equipment and network capacity sales, as well as production scheduling shifts for its QwestDex telephone directory services.

Revised financial results
Qwest then revised its 2001 results in an SEC filing April 9 SEC reflecting a slightly wider loss than originally reported. The company also said it may have to restate its financial results for the past three years and possibly report an additional $20 billion to $30 billion goodwill writedown in the second quarter related to its 2000 U.S. West acquisition.

In its April 1 annual filing with the SEC, Qwest reported a net loss of $4 billion, or $2.42 per diluted share on $19.6 billion in revenue, for the year ended Dec. 31, 2001. The year before, the company reported a net loss of $81 million, or 6 cents per share on $16.6 billion in revenue. More than $3 billion of the 2001 loss covered a writedown of Qwest's investment in a European Internet sewrvice provider, KPNQwest, in addition to another $1 billion in restructuring, merger and other charges.

Most Popular