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Up to 10,000 jobs to be cut:

AT&T, making a $67-billion bid for BellSouth, already planned 26,000 unrelated cuts.

Associated Press
Published March 7, 2006

NEW YORK - AT&T Inc. plans to cut up to 10,000 jobs, mostly through normal turnover, if its $67-billion purchase of BellSouth Corp. is approved by shareholders and regulators, AT&T's chief financial officer said Monday.

The work force reduction would take place over three years, AT&T's Rick Lindner said. Before the cuts, the combined company would have about 317,000 employees, including Cingular Wireless LLC, which is now an AT&T-BellSouth joint venture.

The new company would be the country's largest phone company, with nearly half of all lines. It also would be the largest cell phone carrier and the largest provider of broadband Internet service.

Still, investors and analysts expect it to pass regulatory muster due to the fact that phone companies are facing increasing competition, especially from cable operators.

Meanwhile, several of the nation's largest consumer groups said Monday they would oppose the deal, arguing that it will reduce competition and drive up prices in the telecommunications industry.

Consumers Union and the Consumer Federation of America said they would urge the Justice Department to block the offer. The consumer groups also asked their members to contact the Federal Communications Commission, which must approve the acquisition, and to petition their congressional representatives to try to prevent the deal from going through.

The acquisition, which was announced Sunday, is expected to close next year.

The 10,000 planned job cuts are in addition to the 26,000 cuts AT&T has already announced: 13,000 because of SBC's acquisition of AT&T Corp., which closed in November, and 13,000 because of shifting priorities in the business. The combined SBC-AT&T took the name AT&T Inc.

At the Communications Workers of America, which would have about 200,000 workers at the combined company, spokeswoman Candice Johnson said the merger would be a "good opportunity for job growth" as the company expands into new technologies.

"We're not looking for job losses at all," she said. The union has not yet endorsed the merger.

AT&T of San Antonio, Texas, expects the acquisition to save it $2-billion annually at first, increasing to $3-billion a year by 2010.

Slightly more than one third of the savings would come from reduced labor costs and consolidation of support functions and corporate staff, Lindner said.

The combined company would be based in San Antonio, depriving Atlanta of one of its largest corporate headquarters.

Georgia Gov. Sonny Perdue and Atlanta Mayor Shirley Franklin said Monday they both will fly to Texas soon to try to persuade AT&T's executives to move their headquarters to Atlanta.

"It's hard to replace BellSouth," Franklin said. "They've contributed so much over the last decade. We're anxious for their national headquarters to move here."

Cingular's headquarters would remain in Atlanta.

More savings from the acquisition would come from reduced advertising expenses and combining the backbone network and information-technology operations of the companies.

"Over the last couple of years as we have operated Cingular and our Yellow Pages venture, it became clear that there was a lot of duplication that could be eliminated," said Duane Ackerman, chief executive of BellSouth.

"This merger will allow us to move to a single brand for wireline, for wireless, for business and consumer, and that's AT&T," said Randall Stephenson, AT&T's chief operating officer.

Under the terms of the deal, AT&T is paying 1.325 of its own shares for each BellSouth share. AT&T shares closed Monday down 97 cents, or 3.5 percent, at $27.02 on the New York Stock Exchange. That put the value of the offer at $35.80 per BellSouth share. Those shares rose $3.04, or 9.7 percent, to close at $34.50.

The narrow difference between AT&T's offer and the market price for BellSouth shares indicated that investors think the merger is almost certain to get through regulators.

AT&T plans to buy back stock worth at least $10-billion in the next two years, effectively paying for the premium given to BellSouth shareholders in cash, executives said.

David Kaut, a telecom regulatory analyst at the financial services firm Stifel Nicolaus & Co., said the merger would likely gain approval with modest conditions, such as the selloff of business lines in overlapping territories.

One wild card, he said, may be the Federal Communications Commission's Robert McDowell, a Republican, who would take the open seat at the commission if approved by the Senate. McDowell is a lobbyist on behalf of the carriers that compete with the Bells and could be more open to their concerns.

[Last modified March 7, 2006, 01:14:20]

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