KPNQwest to $4.8 billion because that's what an independent appraiser said it was worth. However, in July,
it decided to write down its stake to $1.3 billion. It later explained it
wanted a "very conservative treatment" of the holding.Conclusion: Morgan Stanley got it right.PENSION ASSUMPTIONSMorgan Stanley Claims: Qwest made more optimistic assumptions about its pension plan. For example, it boosted the return on plan assets to 9.4%, from 8.8%. The result: Qwest could report credits in its pension plans as income.Qwest's Response: It was only changing pension assumptions to get them in line with other companies. It hammers Morgan Stanley for not detailing the assumed rates of return at other telecom companies.Conclusion: Morgan Stanley concedes that Qwest's assumed rate of return is in line with other telecoms. But the firm says it is concerned that Qwest moved from conservative accounting to a riskier approach.SELLING OFF CAPACITYMorgan Stanley Claims: Qwest was boosting revenue growth through unsustainable means. It cited Qwest's selling of pieces of its network, something called indefeasible rights of use (IRUs). Qwest's revenue growth in the second quarter was 12.2% with the capacity sales, but 7.5% without them.Qwest's Response: The IRU sales are part of its normal business. It says it has so much capacity that there is no chance it will run out in the foreseeable future.Conclusion: On Sept. 10, less than a month after Morgan Stanley's claims, Qwest conceded it won't make its financial targets this year because demand--for IRUs, among other things--dropped.