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AT&T Avoids Strike, Talks On With CWA Over New Contract

 April 09, 2012 01:26 PM

AT&T, Inc. (NYSE:T) has managed to avoid a strike by its 40000 plus wireline workers as negotiations continue with Communications Workers of America (CWA).

AT&T has failed to reach a settlement with the CWA prior to the expiration of the West, Midwest, East and Legacy T Core Wireline contracts. The contract by AT&T West covers 18,000 workers, while AT&T East, AT&T Midwest and AT&T Legacy contracts cover 4,000, 15,000 and 6,000 workers, respectively.

The West contract covers workers in California and Nevada and the Midwest contract represents workers from Illinois, Indiana, Ohio, Michigan and Wisconsin. Meanwhile, the East contract covers employees in Connecticut and the Legacy contract covers other employees spread across the country.

[Related -Verizon Communications Inc. (VZ): How Verizon Addresses Competition From T-Mobile US Inc]

CWA wireline members represent about 17 percent of AT&T's 256,000 workforce. The workers were negotiating for improved wages, employment security, working conditions and benefits like health care. Recently, CWA members overwhelmingly authorized union leaders to call a strike if a fair contract can't be reached by more than 90 percent vote.

If the talks fail, then AT&T could face a strike that would disrupt its wireline operations affecting about 19 million retail consumer access lines, 16 million retail business access lines and 2 million wholesale access line.

"Workers are keeping their option to strike open," CWA said in a statement.

[Related -AT&T Inc. (T) Q4 Earnings Preview: Direction of Surprise Dictates January EPS Price Response]

As of Jan. 31, 2012, about 55 percent of AT&T's employees are represented by the CWA, the International Brotherhood of Electrical Workers or other unions. Contracts covering approximately 120,000 employees will expire during 2012.

For contracts covering about 80,000 (mainly wireline) employees, the union is entitled to call a work stoppage in the absence of a new contract being reached, according to the company's annual report.

At Dec. 31, 2011, the company had approximately 335,000 retirees who, along with their dependents, are eligible to receive retiree benefits.

AT&T's wireline business provides landline voice and data communication services, AT&T U-verse TV, high-speed broadband and voice services. The segment has suffered of late as revenues from traditional voice services have been declining as customers have been switching to wireless, cable and other Internet-based providers.

In addition, the continuing weak economy has caused wireline customers to terminate their residential or business phone service as individuals have lost jobs or otherwise combined households and businesses have closed or reduced operations.

As a result, AT&T has been seeking to trim jobs in its wireline unit amid declining margins and higher costs. In 2011, the company's capital expenditure rose 3.1 percent to $20.1 billion.

The company's wireline data and voice contribution to revenues have declined and accounted for 43 percent of total revenues in 2011, compared to 45 percent in 2010 and 47 percent in 2009. In 2011, AT&T generated $126.7 billion in revenues, up from $124.3 billion in 2010.

On the other hand, AT&T's wireless business has been gaining momentum and becoming a primary contributor to revenues, thanks to Apple iPhone, Android smartphones, and strong demand for tablets such as an iPad. In 2011, wireless units account for 45 percent of total revenues, an increase from 43 percent in 2010 and 40 percent in 2009. At Dec.31, 2011, AT&T had more than 103 million wireless subscribers.

Both AT&T and Verizon Communications, Inc. (NYSE:VZ) have to deal with similar situations in the past over contract negotiations with the unions.

In 2004, SBC Communications faced a massive disruption when 100,000 of its workers walked out for four days. SBC Communication bought AT&T Corp. in 2005 and changed its name to AT&T, Inc.

AT&T's prime rival Verizon also faced a strike two times in 2000 and August 2011. In late August, 45,000 Verizon workers went on strike for up to 2 weeks over major wage and health care cuts by Verizon, a forced pay-for-performance plan, and movement-of-work job security provisions. Verizon extended their current contracts, but it is still in talks with the union over a new contract. As of Dec. 31, 2011, Verizon had about 193,900 employees and 30 percent of them were represented by Unions.



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