Investment Group Asks SEC To Investigate T-Mobile's Questionable Accounting Practices

A formal letter of complaint from CtW Investment Group has been sent to the SEC on Wednesday, asking regulators to investigate further into the company’s accounting practices.

CtW maintains that T-Mobile US Inc TMUS overstated GAAP earnings by around $122 million from the fourth quarter of 2014 through the first three quarters in 2015. During this time, T-Mobile shares increased 38 percent.

The investment group works with pension funds that own approximately 600,000 shares of T-Mobile, amounting to roughly 0.1 percent of the shares outstanding.

“TMUS appears to have adopted a significant change to its accounting estimates during these four quarters, without providing shareholders with a clear or convincing explanation for so doing,” said Dieter Waizenegger, executive director of CtW Investment Group.

The misleading numbers are in connection to T-Mobile’s Equipment Installment Plans (EIPs), a product introduced in 2013 by CEO John Legere in an effort to expand the company’s customer base by paying for phones in installments. Earlier in the month, the company settled a $48 million dispute with the FCC over providing misleading information about its unlimited plans.

Ripple Down Effect On Parent Company?

T-Mobile’s accounting practices could lead to a ripple down effect on the telecom providers parent company Deutsche Telekom AG (ADR) DTEGY earning, who saw an operating earnings increase of 2percent in 2016 due to T-Mobile’s “aggressive revenue recognition,” according to a MarketWatch report. Deutsche Telekom owns a 65 percent stake in T-Mobile.

It remains to be seen whether the SEC will investigate further into T-Mobile’s questionable accounting practices.

Benzinga has reached out to the SEC on the story, but the SEC declined to comment.

At last check, T-Mobile shares were down 0.22 percent at $54.12.