Verizon buys out 21,600 workers
By Don Stancavish
Bloomberg News Service
Verizon Communications Inc., the largest U.S. local-telephone company, said 21,600 employees accepted a severance package, allowing the company to cut staff 9.8 percent as it battles to contain costs amid stalling growth.
A spokeswoman for Verizon Hawai'i said yesterday the company would not reveal how many employees accepted the buyout locally. Verizon Hawai'i is one of the state's largest employers with about 2,000 workers and had offered 664 managers and non-union employees the voluntary separation package.
Verizon, which had predicted more than 12,000 workers would take the early retirement offer, said its operating profit margin will improve in the fourth quarter from the third period partly because workers who accepted the buyout will leave this week.
The cuts bring to 48,600 the number of jobs Chief Executive Ivan Seidenberg has shed since 2001 in a bid to counter a decline in local-phone lines through expense reductions. Verizon said last week it expects "significant" costs this quarter from the early retirement plan, which will leave the New York-based company with about 199,400 employees.
"A lot of these managers understand that the industry is ill-structured. They see the writing on the wall," said John Krause, an analyst at Thrivent Financial for Lutherans, which owns 1.9 million Verizon shares. "Verizon needs to cut costs."
Verizon said 16,000 managers and 5,600 union-represented employees participated in the early retirement program. Workers had until yesterday to accept the buyout package, President Lawrence Babbio said at a UBS conference in New York.
Managers who accepted the buyout receive two weeks pay for each year of service, up to a maximum of 35 weeks, plus a payout of as much as $30,000. Pension benefits will increase 5 percent.
Shares of Verizon rose 13 cents to $32.74 at 4 p.m. in New York Stock Exchange composite trading. They have fallen 16 percent this year.
The fourth quarter will be "operationally better than the third, and the first quarter of 2004 will be even better," Babbio said at the conference.
Sales at Verizon have changed little or dropped for eight straight quarters as customers defect to competitors. Third-quarter revenue rose less than 1 percent to $17.2 billion. The number of local lines fell 3.9 percent to 56.2 million. Mobile-phone unit sales rose 18 percent in the quarter, bolstering revenue.
Verizon is turning to cost cuts and new services to shore up profit. In the second quarter, Babbio said, the company will introduce products using so-called Voice-over-Internet-Protocol technology, which routes calls over the Internet rather than copper wires and can be less expensive.
The company also will install fiber-optic cables to one million homes in nine states next year, he said. Verizon is expanding its fiber network to help send larger amounts of calls and information at greater speeds than the so-called digital subscriber lines that provide fast Web access over copper wires.
Verizon will also begin marketing DirecTV satellite television programming to its subscribers, the company said.
Advertiser Staff Writer Dan Nakaso contributed to this report.
