AT&T Cutting Deeper

AT&T (T Quote) is shedding more jobs and planning a big write-off as the telecom industry fails to pull out of its tailspin.

AT&T in the coming days is expected to announce the layoff of several thousand additional workers, as well as an asset writedown approaching $10 billion, according to people familiar with the company.

Company representatives say AT&T reached its target of cutting 8% of its staff earlier this year and likely will end up exceeding that total. They declined to comment further.

Not surprisingly, most of the cuts are expected to come from the consumer unit, where the company is beating a retreat in the wake of recent regulatory setbacks. But people familiar with the plan say AT&T's industry-leading business services division is also being scaled down, as ongoing price wars take their toll.

Evidence of a cutback push has been growing in the past weeks. AT&T's union was notified of job reductions, and employees across various lines of business received termination notices. Earlier this month, Lehman Brothers analyst Blake Bath issued a research report that pointed to a new round of layoffs that could take out an additional 7,000 people and a possible writedown of $8.5 billion in impaired assets.

Persistent cuts have become a seemingly permanent condition in telecom over the past three years, as the industry continues to suffer from an oversupply of capacity and service providers. Shifting technology trends have also undercut the old-line players as voice-over-the-Internet and wireless calling gain popularity.

All the top phone companies have seen revenue levels slide as consumers increasingly take to cell phones and as businesses jump from one cut-rate calling plan to another. But the greatest hardship has fallen on the Bell rivals like AT&T and MCI (MCIP Quote).

With sales down 15% from a year ago, No. 2 long-distance and business-services player MCI has had to fire 13,300 employees since the beginning of the year. Adding to the pain, it expects to slash another 2,700 jobs by year-end. Even Sprint (FON Quote) has taken a beating in the corporate phone wars. In June, the company said it was cutting 1,100 workers from its business services unit.