AT&T Plans More Cuts In Workforce
Friday, October 8, 2004; Page E01
AT&T Corp. said it would restructure its business, cutting 20 percent of its jobs and writing down the value of its network by $11.4 billion, as it winds down its residential telephone business.
The company previously said it would cut about 8 percent of its workforce this year but said yesterday that the restructuring would claim 7,400 additional employees by the end of the year. AT&T, based in Bedminster, N.J., started the year with 61,600 employees and will exit the year with about 49,000 workers.
For a century, AT&T was a monopoly that controlled all telephone lines into U.S. residential homes. In 1984 it was split from the regional Bell companies and became a long-distance company, and it has remained the largest provider of residential long-distance service, with 25 million subscribers. But earlier this year, AT&T said it would stop marketing to consumers. The decision resulted from a federal court decision that allowed regulators to end a system that allowed AT&T and other firms to lease local lines at deep discounts from the large regional companies and resell local service under their own brand.
"In response to recent regulatory developments and a highly competitive market, we have made some tough decisions to reduce our workforce and cut costs," said David W. Dorman, chairman and chief executive of AT&T, which is focusing on selling its telecommunication services to large corporate customers.
Privately, analysts have speculated that the AT&T was paring down costs to try to make some of its divisions more attractive to prospective buyers.
"We're making these decision to position ourselves for success as a standalone company," said Andrew Backover, a spokesman for AT&T. "Clearly consolidation would be a healthy thing for the industry, but we're doing this as a way to serve our business customers better."
AT&T's consumer business has faced a tough battle on several fronts. In recent years, regulators allowed regional phone companies to start selling long-distance service, and Verizon Communications Inc. and SBC Communications Inc. have been eroding AT&T's core long-distance customer base.
In addition, AT&T faces added competition in the form of a new technology called Voice over Internet Protocol. That technology allows calling to take place over high-speed Internet lines. Within two or three years, cable companies such as Comcast Corp. will take over 10 percent of the phone business, analysts have said.
AT&T is staking its future on business customers. It has more than 3 million business customers that buy local, long-distance, Internet and other computing services. Those customers account for about 75 percent of revenue.
The announcement came after the stock market's close. Shares of AT&T closed down 16 cents, to $15.04 yesterday, but rose 38 cents in after-hours trading, to $15.42.