is getting a head start on its New Year's dieting resolution.
As many as 22,000 workers are expected to take buyout offers and leave the big telco's payroll by the end of the year, say people familiar with the situation. Seeking to trim its ranks, the New York phone giant has dangled some cash incentives in front of qualified managers and union workers. The departures would trim the company's workforce by some 10%.
A Verizon rep said it was too early to say what the total number of takers would be, but added that the package was "getting good interest." The exodus could be good news for Verizon investors, who have seen their shares slide throughout 2003 amid the continuing erosion of the company's big local phone business. On Monday, Verizon rose 30 cents, to $32.47.
"We're getting down to fighting weight," said Verizon spokesman Eric Rabe. "We felt it was best to get it done now and start realizing the cost savings."
Verizon's move points out how the big old-line telcos have mostly missed out on 2003's economic recovery rally. Despite a broad upswing in the stock market, the telecom sector has been stuck in the mud as its leaders
scramble to cut employment back to preboom levels. Core business revenue, especially among the local phone giants Verizon,
, continues to weaken.
Meanwhile the industry has shed about 380,000 jobs during the downturn -- a gargantuan figure until you consider that it added some 500,000 between 1996 and 2000. And without a tremendous pickup in business, more job cuts will be necessary, say analysts.
That kind of thinking is apparent elsewhere in the telecom industry. As Verizon prepares to send off a sizable number of its workers, Atlanta-based BellSouth said Monday at its analyst day presentation that it will cut $500 million in costs next year and another $600 million in 2005. Though BellSouth executives did not share specifics, they did say they would look at a range of areas, including contractors and staff, to make the necessary cuts.
With competition for its local phone customers coming from long-distance service providers, wireless telcos and even cable companies, the Bells' lucrative monopolies have withered.
Verizon hasn't exactly helped itself throughout the past three years of turmoil. The company had racked up more than $64 billion in debt around the turn of the century and has only recently reduced that mammoth total to slightly more than $45 billion. Verizon also had the
two highest-paid executives last year, with the now retired Chuck Lee raking in $15.6 million and CEO Ivan Seidenberg pulling down $9.5 million.
With 221,000 employees, Verizon is not only the largest telco -- it has also taken the proportionally smallest workforce cuts in the past three years, judging by its Baby Bell peer group.
Verizon is expected to take a hefty one-time charge for the severance payouts, but investors say the cost savings will go right to the bottom line, as older employees toward the top of their pay scales go away or get replaced by lower-paid new hires.
Verizon employees have until Friday to decide whether to take the buyout, which consists of a 5% increase to their pension total, two weeks of additional pay for every year served, a cash bonus between $15,000 and $30,000, and one year of medical coverage.
Last month, on an earnings conference call, CEO Seidenberg said 12,000 managers and union staff already had taken the offer.