I can't recall the exact company name (Edit: it was TCI), but this was a smart accounting move that made one of the big US telcos frogleap the competition in the race for connectivity.
Basically, the company invested sufficient into long term assets, big infra investments like cabling, towers, etc. Because of accounting rules, they could choose to amortize all of that investment in a straight line over 30 years, OR accelerate depreciation in the short term.
I believe the company always chose the latter, and the net effect of this was that every year the company would show a loss, 100% related to said infra investments. However, when you carved out depreciation, the company was clearly making increasing amounts of money. Further, all that fiber was capturing new clients, which was free cash flow which they would turn around and capture even more customers with a new round of investments. In effect, the use of accelerated depreciation helped the company manage its tax obligations while expanding aggressively. By deferring tax liabilities and reinvesting capital, the company was able to capture market share and grow its customer base.
Eventually they had to show income and therefore pay the IRS, but by that time they were at the leading edge of the race and investors rewarded this company's CEO handsomely.
Basically, the company invested sufficient into long term assets, big infra investments like cabling, towers, etc. Because of accounting rules, they could choose to amortize all of that investment in a straight line over 30 years, OR accelerate depreciation in the short term.
I believe the company always chose the latter, and the net effect of this was that every year the company would show a loss, 100% related to said infra investments. However, when you carved out depreciation, the company was clearly making increasing amounts of money. Further, all that fiber was capturing new clients, which was free cash flow which they would turn around and capture even more customers with a new round of investments. In effect, the use of accelerated depreciation helped the company manage its tax obligations while expanding aggressively. By deferring tax liabilities and reinvesting capital, the company was able to capture market share and grow its customer base.
Eventually they had to show income and therefore pay the IRS, but by that time they were at the leading edge of the race and investors rewarded this company's CEO handsomely.