The proposed acquisition of AT & T; Corp. by SBC Communications Inc. is almost certain to result in job cuts in Southern California. The questions are when, where and how many.
SBC already has announced that it will slash 13,000 jobs over three years as a result of the planned $16 billion transaction, mostly through attrition. Analysts say they expect SBC to find it needs to cut more.
“There’s a lot of overlap between the two companies, so obviously there is going to be a lot of job cuts,” said Ivan Feinseth, an analyst for Matrix USA LLC. “That’s a big part of the cost savings.”
San Antonio-based SBC employs 10,000 people in Los Angeles out of 163,000 companywide. It has corporate offices in downtown Los Angeles at 1010 Wilshire Blvd., along with other facilities in the area, such as customer call centers and repair centers, and sites for installation, network planning, external affairs and construction operations.
“We have lots of facilities throughout the Los Angeles area, including Westlake Village and Thousand Oaks,” said Steve Smith, California spokesman for SBC.
Most of the announced cuts will come from both merger partners in the sales, administrative and engineering departments. SBC spokeswoman Denise Koenig said it was too early to tell where the cuts will hit geographically.
AT & T; has an Internet data center in Hawthorne that it opened in 2001. The company, which serves mainly business and long-distance customers, wouldn’t say how many of its 47,000 employees were in California.
Company reunion
The merger will reunite AT & T;’s remaining operations with one of its well-known offspring in Southern California. One of the companies that formed SBC, Pacific Telesis, was once a part of the AT & T; monopoly. As PacBell, it provided telephone service to many parts of Southern California.
PacBell was spun off with Ma Bell’s breakup in 1984, becoming one of the seven regional Baby Bells and competing against its former parent. It was renamed Pacific Telesis before being purchased by Southwestern Bell in 1997, with the resulting company called SBC Communications.
The reunion, however, cannot be called triumphant. AT & T;’s declining revenues have caused some SBC shareholders to pan the deal. Since March 2001, communications companies have laid off nearly 300,000 workers, according to the Labor Department.
More cuts are expected to come, as SBC struggles with rapid changes in technology that have introduced new competitors and technologies to voice and data services. “This could only be the first wave,” said Victor Schnee of New Jersey-based Probe Financial Associates, an independent telecommunications research firm.
Because of the size of the merger $16 billion, 210,000 employees and many billions of dollars in assets the companies will be under pressure to make consolidation work and avoid disappointing Wall Street. “Could it affect L.A.? Of course it could,” Schnee said. “They can’t possibly say, ‘We’re only getting rid of 13,000 jobs over the next three years.'”
Koenig said the announced cuts would be phased out over a three-year period after the close of the deal, which is anticipated for late 2006. But both companies are continuing with scheduled job cuts prior to the acquisition’s completion.
Labor support
Even so, the Communications Workers of America, which represents 15,000 AT & T; employees and 95,000 SBC employees, has called the deal “good news” for customers, shareholders and employees of both companies.
“Such a merger creates a strong U.S. competitor in the global telecom marketplace with the resources to substantially advance the rollout of high-speed broadband and other services, and drive economic growth and job expansion,” a CWA statement said.
Another apparent factor: which jobs SBC is planning to cut.
“The companies have indicated to us that the majority of the job cuts will come from the non-represented areas of the company, such as administrative positions and attorneys,” said CWA spokeswoman Candice Johnson. The union represents more than 30,000 jobs at the combined companies in California.
“This company will now have more resources to roll out broadband faster, and roll out more services to more customers,” Johnson said. “And that means more jobs for our members.”
For those who follow telecom unions, the move is not a surprise.
“They are no stranger to mergers,” said Kent Wong, director of the UCLA Labor Center. Outsourcing and job loss, particularly jobs shifting overseas, is a source of concern for the CWA.
“This is a time of tremendous insecurity for workers in these companies,” Wong said. “They’re just trying to stave off the most brutal slashes.”
Still, there are questions such as how to merge the call centers of both companies and deciding which types of services they will continue to support, said Morley Winograd, director of the Center for Telecom Management at the USC Marshall School of Business.
For example, AT & T; currently offers voice-over-Internet-protocol service to California residential customers, which allows phone calls over data lines. SBC doesn’t offer the service here yet, but plans to.
In a city of L.A.’s size, there would probably be network redundancies in terms of switching offices, Winograd said. Redundancies usually mean job cuts. “Obviously there’s going to be some savings in work force by consolidation,” he said.
*Bloomberg News contributed to this story.
