Verizon and its labor unions met yesterday with a top federal mediator in an effort to avoid a strike this weekend that could affect local and long-distance telephone service in 13 New England and Middle Atlantic States and the District of Columbia.þþThe meeting, which was held in Washington at the mediator's request, came hours after Verizon announced its second-quarter earnings, getting mixed reviews from Wall Street. Verizon, the country's largest local telephone company, reported continued erosion of its core local phone service, but surprised investors by delivering unexpectedly strong growth in the brutally competitive wireless business, which is not unionized.þþThe meeting with the mediator, Peter Hurtgen, the head of the Federal Mediation and Conciliation Service, lasted throughout the day. But both sides said there was much work to be done, with the negotiations more divisive than in past contract talks. If the talks fail, a strike will begin at midnight on Saturday.þþMembers of the same two unions — the Communications Workers of America and the International Brotherhood of Electrical Workers — went on strike against Verizon for 18 days in the summer of 2000 in the same region.þþThis time, ÿfrom what I've heard from people in the union, a strike is a foregone conclusion; it's a matter of how long,ÿ said Patrick J. Comack, an analyst with Guzman & Company, a market research firm.þþNegotiators from both sides will perhaps try to find support for their positions in the quarterly financial results Verizon reported yesterday. The company said it had quarterly earnings of 12 cents a share. But that figure reflected a number of one-time charges, including an expense for the sale of a wireless carrier in Mexico. Without those charges, Verizon earned 69 cents a share, a penny better than an average forecast of Wall Street analysts. þþBuoyed by growth in wireless business, the company reported sales of $16.83 billion. That compared with $16.75 billion in sales in last year's second quarter. The company also said it generated $3.6 billion in cash during the first half of its fiscal year, a sign of health, industry analysts said. þþVerizon shares closed at $35.40, down 58 cents, or 1.6 percent. Verizon's chief executive, Ivan Seidenberg, said in a conference call with analysts that he could not predict the cost to the company if 78,000 of its operators, phone installers and repair workers go on strike. But the company might have to risk a strike, he said, because it cannot compete in the tumultuous telecommunications market unless a new contract gives Verizon more flexibility in relocating or laying off employees.þþÿOur real goal is to achieve directional change,ÿ he said.þþThe labor talks come at a time of transition in the telephone industry as the traditional players continue their evolution beyond local monopoly services to compete in wireless, long-distance and Internet services — businesses that put them in direct competition with upstart local service providers, as well as traditional long-distance giants and cable companies.þþVerizon, which provides local telephone service in 29 states and long- distance and wireless service nationwide, has a total work force of 224,000 — down from 237,000 a year ago.þþThe company said that it needed to make additional cuts in expenses, which it said could mean cutting another 4,000 to 5,000 jobs by the end of the year.þþThe contract talks involve about 60,000 C.W.A. members and 15,000 I.B.E.W. members in the New England and Middle Atlantic states that were served by the Bell companies Nynex and Bell Atlantic, which merged in 1997.þþVerizon is the name the company adopted after its subsequent merger with G.T.E. in 2000.þþThe company's wireless workers are not union members. Verizon's labor leaders have accused the company of making it too difficult to unionize the wireless employees.þþMr. Comack, the analyst, said he thought that Verizon might be willing to endure a long strike as a way of gauging how dependent it is on the union work force. ÿVerizon is going to send white-collar guys into sewers and foreman into sewers,ÿ he said. ÿThey've got to do the work.ÿþþDuring the 2000 strike, Verizon managers filled in on union jobs, working on repair crews and serving as telephone operators. þþThe unions assert that Verizon is using industry upheaval as an excuse to demand undue flexibility in moving or removing workers. While acknowledging the industry's transition, the unions say that change is nothing new to the company and that Verizon is coping relatively well compared with its competitors.þþÿThe figures announced today bear that out,ÿ said Jeff Miller, a spokesman for the C.W.A., whose contracts expire on Saturday. ÿRevenues are up. Profits are up. They're doing well in new businesses.ÿþþIn Verizon's earnings announcement — a multilayered and complex report reflecting the company's many businesses — the clear highlight was its increasingly successful foray into wireless. The company reported that it added 1.2 million retail wireless customers.þþIt also reported that its churn rate — the rate at which it loses customers — declined to 1.7 percent from 2.3 percent a year earlier. The current wireless industry average for churn is 2.8 percent.þþOver all, the company reported revenue of $5.5 billion, an increase of 14.3 percent over the period last year.þþThat revenue figure is the total for Verizon Wireless. However, Verizon owns only 55 percent of Verizon Wireless. The British company Vodafone owns the other 45 percent.þþÿWireless was a clear standout,ÿ said Jeffrey Halpern, an analyst with Sanford Bernstein & Company. ÿThey delivered fabulous subscriber growth.ÿ þþThe company also reported that it added 1.4 million long-distance lines, raising the total to 14.6 million, and 101,000 high-speed Internet lines, for a total of 1.9 million. Wall Street analysts said that while both figures were good signs, they were not overly impressed, saying that because long distance and Internet access were relatively new businesses for Verizon, growth was to be expected. þþPartly offsetting those gains was the continued erosion of the local wired telephone business. Verizon reported that revenue from local telephone service business was $9.9 billion, down from $10.25 billion in the second quarter last year. The number of telephone access lines, 56.8 million, was down 3.7 percent from the period a year earlier. þþThat erosion is characteristic of industry trends. Consumers are spending more time on wireless phones and less on wired ones, and the per-minute revenue from wireline calls is plummeting. And new competitors, including cable companies and traditional long-distance companies, are offering services to compete with the local phone giants. þþMr. Halpern said that similar forces were taking a toll on the other big local phone companies. For their most recent quarters, SBC reported a 4.2 percent decrease in access lines, while BellSouth reported a 3.9 percent decline, Mr. Halpern said.þþMr. Halpern said that while Verizon's performance in the local market fell short of his expectations, ÿagainst their peers they look pretty good.ÿ þþAnother area of mixed returns for Verizon is its operating margins, a measure of the company's sales minus its expenses. In the second quarter, the figure was 42.8 percent, down from 45.9 percent a year ago. Industry analysts said the decline was a result of the company's loss of customers in local phone service — a traditional high-margin business — while gaining business in lower-margin businesses, like wireless and long-distance. þþEileen O'Neill Odum, the president of network operations for Verizon, said that the eroding margins would become worse if the company did not obtain more flexibility in managing the size and location of its work force.þþOne issue in the labor dispute is the percentage of employees covered by the union contract that Verizon should be permitted to move to other states. The figure is now 0.7 percent of the work force in a given state, but Mr. Miller, the C.W.A. spokesman, said that Verizon would like that figure to be 8 percent. þþÿThe company is really attacking job security,ÿ he said. ÿThat is the gut issue.ÿþþþ
Source: NY Times
