AT&T to cut 12,000 jobs

Dec 04, 2008 (The Dallas Morning News - McClatchy-Tribune Information Services via COMTEX) -- T | Quote | Chart | News | PowerRating -- AT&T Inc. announced Thursday that it will cut 12,000 jobs or about 4 percent of its global workforce citing the slack economy along with corporate reorganization and declining demand for traditional landline telephone service.

Layoffs will begin this month and continue throughout 2009, but they won't affect all areas of the Dallas-based company's business. AT&T will continue adding workers to its wireless division, as well as its pay-TV and broadband Internet operations.

The majority of the cuts will likely come from groups that provide business services and landline telephone connections.

AT&T did not say how many of its more than 14,000 Dallas-area employees will lose their jobs, nor did it provide any other geographic breakdown of the coming layoffs. The company did, however, mention that union contracts would entitle some laid-off workers to jobs in other parts of the company.

"We are the nation's largest private employer of union labor, larger than the Big Three automakers put together, and we have 50 different union contracts," said Walt Sharp, a spokesman for the company. "All of those contracts have different provisions regarding layoffs and everything else."

In addition to announcing the layoffs Thursday, AT&T said it would cut capital spending, but it will not specify which divisions will take how much of a hit until it reports its fourth-quarter earnings in January.

The company expects those earnings figures to contain about $600 million in severance costs.

AT&T like all other telephone companies has been steadily losing landline customers over the past few years. The slowing housing market and the overall recession have only accelerated that trend.

Revenues from landline telephone service declined by $800 million from last year's third quarter to this year's third quarter. That decline of roughly 8 percent came on top of earlier losses.

Worse, most observers expect landline customers to keep defecting, either to telephone service from cable companies or to cellphones, and devastate a business that still generates more than a quarter of AT&T's total revenues.

"How low will landline service go? That's the $64,000 question," said William V. Power, a telecom analyst at Robert W. Baird & Co.

"About 15 percent of households are wireless only right now. If that number goes to 30 percent in the next few years, that will take a huge bite out of AT&T revenues. Fortunately for both AT&T and Verizon, they pick up a huge percentage of those customers when they go wireless, so a lot of this is moving business from one division to another."

On the bright side, AT&T's wireless division continues to grow. The company added 2 million wireless customers during the third quarter, thanks largely to strong sales of the second-generation iPhone.

AT&T has also added customers to its nascent U-verse television service. The company signed up 232,000 people during the year's third-quarter, bringing subscriber totals to 781,000. It predicts that number will top 1 million by year's end.

That's tiny compared to market leading Comcast, which has more than 24 million pay-TV customers, but AT&T sees major growth potential. What's more, the company believes that by bundling traditional phone service with its new pay-TV service, it can retain more telephone customers.

These layoffs mark the end of 16 years of spectacular growth.

When the company that was then called SBC Communications moved its headquarters to San Antonio in 1992, it had 60,000 employees and annual revenues of just $10 million. Earlier this year, when AT&T announced that it was moving its headquarters to Dallas, it had 310,000 employees and annual revenues of nearly $120 billion.

The company has laid off employees before this 4,600 layoffs were announced in April but growth in other business areas has always overwhelmed these targeted cuts and kept total headcount growing.

Thursday's layoff announcement brings AT&T in line with other telecom companies, which have also been trimming staff.

Telecom Italia SpA said Thursday it would cut 4,000 more jobs. Nortel Networks Corp. which has a major office in Richardson said last month it would cut 1,300 jobs.

AT&T shares fell 91 cents to $28.17 Thursday.

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