AT&T Slashing 20% of Jobs

The cutback strategy at AT&T is far from unprecedented. In 1998, AT&T's cost-cutting strategy began in earnest, as 15,300 workers were lured off the payroll with generous early retirement packages. In 2001, the company cut another 10,000 workers, bringing its total staff count below 120,000.

Since then the cuts have only accelerated, though the company has grown less apt to advertise its decisions. The company has also sold off various units, as with its disastrous foray into cable, which AT&T washed its hands of with a late-2002 sale to Comcast (CMCSA Quote).

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.

But by far the biggest victims have been AT&T and MCI (MCIP Quote), which were hit earlier this year by unfavorable federal network pricing rules. That decision hurt the companies at the expense of their rivals, the Baby Bells -- Verizon (VZ Quote), SBC (SBC Quote) and BellSouth (BLS Quote).

AT&T indicated Thursday that its slimming push is helping its bottom line. AT&T said it expects "a significant improvement in consumer operating margin, excluding restructuring charges, in the third quarter of 2004 when compared with the second quarter of 2004." The company also said it expects to generate cash flow in line with 2004 guidance, adding that it is "evaluating further uses of surplus cash flow as it nears the completion of its 2004 debt-buyback program."