AT&T to cut 12,000 jobs, 4 percent of staff

In this Sept. 30, 2008 file photo provided by AT&T Inc., Randall Stephenson, president, ch...

Thu Dec 4, 2:18 PM EST

Pressured by the economic turmoil and the mounting loss of traditional phone customers, AT&T Inc. is cutting 12,000 jobs, about 4 percent of its work force.

The Dallas-based telecommunications company, the nation's largest, said the job cuts will begin this month and run throughout 2009. The company also plans to lower its capital spending next year, and one analyst estimates that reduction could be as much as $2 billion.

The 300,000-person company has announced layoffs several times over the past few years, including in April, when it said it would eliminate 4,600 jobs, but it has been hiring at the same time. This is the first time since the company bought BellSouth Corp. in 2006 that it said overall staffing would decline.

The new cuts were part of a parade of layoffs tied to the recession. In addition Thursday, chemicals company DuPont announced plans to lose 2,500 jobs, Credit Suisse Group slashed 5,300 and media conglomerate Viacom Inc. jettisoned 850. Yet AT&T, which provides local phone coverage in California, Texas and 20 other states, is also being pulled by another current: the long-term trend of people defecting from landline phones to wireless services or phone service from the cable company.

In the last quarter, AT&T's basic voice lines in service dropped 11 percent. Its wireless customer base, meanwhile, grew 14 percent.

Reflecting that "changing business mix," the company said it still plans some hiring in 2009 in parts of the business that offer cell phone service and broadband Internet access.

The shift away from landlines has accelerated because of the economic turmoil, said Christopher King, an analyst with Stifel Nicolaus. Fewer homes bought means fewer landlines getting installed or transferred. And more are getting disconnected as people look to save money and rely only on their cell phones.

AT&T spokesman Walt Sharp said the layoffs will be "across the company and across the country," but would not specify what departments and cities would be most affected.

King expects most of the lost jobs to come from the company's landline business. But he said some might also come from the unit of the company that serves large businesses and accounts for about 30 percent of AT&T's sales. Companies have been cutting back spending because of the recession, and this, King said, will "certainly pinch" AT&T's revenue growth.

AT&T, whose shares are down about 30 percent this year — while the Dow Jones industrial average is off 35 percent — remains profitable, and benefits from being the sole U.S. wireless carrier for Apple Inc.'s popular iPhone. This is in sharp contrast to rival Sprint Nextel Corp., which has been hemorrhaging wireless subscribers and has seen its shares lose 80 percent of their value this year. Last month, Sprint said it is offering voluntary buyout packages to an unspecified number of its 57,000 workers.

Verizon Communications Inc., the nation's second-largest phone company, has fared better than AT&T so far. Its landline business is concentrated in the Northeast, which hasn't been as battered by the housing crisis as some of the markets AT&T serves, like Florida and California. However, Verizon figures to be more affected by a slowdown in business spending and the fallout from the financial sector's crisis.

AT&T plans to take a charge of about $600 million in the fourth quarter to pay for severance costs. The company is still finishing its capital spending plans for next year, and said it will give more specifics on the planned reductions when it posts fourth-quarter earnings in January.

UBS analyst John Hodulik estimates the layoffs will save the company about $720 million, or 8 cents per share, annually. He also expects AT&T's reduction in capital spending to amount to about 10 percent of the $20 billion being spent in 2008.

AT&T noted that many of its non-management employees have guaranteed jobs because of union contracts. All affected workers will receive severance "in accordance with management policies or union agreements," the company said.

AT&T's shares fell 67 cents, or 2.3 percent, to $28.41 in afternoon trading.