December 5, 2008

AT&T Eliminates 12,000 Jobs

Weighed down by the economic havoc and the increased loss of traditional phone customers, AT&T Inc. (ATT) is eliminating 12,000 jobs, or about 4 percent of its employees.

The telecommunications corporation, the nation's biggest, announced that the job eliminations will start this month and continue into 2009. The company also stated that it plans to decrease its capital expenses next year, and an analyst approximated that the decrease might be about $2 billion.

The 300,000-person company has broadcasted layoffs several times in the past, including in April, when it laid off 4,600 employees, but was hiring simultaneously. However, this is the very first incident of firings without rehiring since the company bought BellSouth Corp. in 2006.

Theses cuts are a drop in the bucket of job layoffs being made since the start of the recession. In addition to AT&T, the chemical company DuPont made known plans to drop 2,500 jobs, Credit Suisse Group (CS) cut 5,300 and media conglomerate Viacom Inc. (VIAB) abandoned 850.

Until now AT&T, which offered local phone coverage in California, Texas and 20 additional states, is also being affected by another situation: the popular trend of people ridding themselves of landlines and only using wireless services or getting phone services from their local cable company.

During the last quarter, AT&T's central voice lines in service decreased 11 percent. On the other hand, its wireless customer base rose 14 percent.

Noting that "changing business mix," the company stated that it is planning to go ahead and hire in 2009 in areas of the business that sell cell phone service and broadband Internet access.

The discarding of landlines has grown due to the economic uproar, said Christopher King, an analyst with Stifel Nicolaus. With a decline in home purchases, there are fewer landlines being installed or moved. Even more people are being disconnected as people try and save money and only use their cell phones.

AT&T spokesman Walt Sharp noted that the layoffs will be "across the company and across the country," but would not announce what areas and cities would be the most affected.

King anticipates that the majority of the lost jobs will emerge from the company's landline area. However, he also said some might also emerge from the unit of the company that provides service to large businesses and makes up about 30 percent of AT&T's sales. Companies have been reducing their spending due to the recession, and this, King said, will "certainly pinch" AT&T's revenue enlargement.

AT&T is planning to take a charge of approximately $600 million in the fourth quarter to reimburse for the severance costs. The company is working on its capital spending strategies for the following year, and said it will provide further details on the reductions when it announces fourth-quarter earnings in January.

UBS analyst John Hodulik guesses the firings will allow the company to keep about $720 million, or 8 cents per share, yearly. He also anticipates that AT&T's diminution in capital spending will amount to 10 percent of the $20 billion spent this year.

AT&T indicated that several of its non-management employees have definite jobs because of their union contracts. All workers affected by the layoffs will obtain severance "in accordance with management policies or union agreements," the company said.


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