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AT&T to Cut 12,000 Jobs This Year

The long-distance carrier also is writing down the value of its assets by $11.4 billion.

October 08, 2004|James S. Granelli | Times Staff Writer

AT&T Corp. is cutting more than 12,000 jobs this year and slashing the book value of its assets by $11.4 billion, drastic moves prompted by the failure of federal telephone competition rules and the company's decision to retreat from the traditional consumer market.

The nation's largest long-distance carrier said 75% of affected employees already had left or had been notified of their dismissals. The total includes 4,900 employees who were let go by July as part of an earlier workforce reduction.

Of the total, about 11,200 employees were fired, and about 60% of those were managers. The rest of the job cuts came from normal attrition and retirements.

Though the reduction hits all segments, the consumer services division was hit hardest. The company refused to disclose further details Thursday. Severance costs and other expenses related to the job cuts will reduce third-quarter earnings by $1.1 billion, the company said.

AT&T Chairman David W. Dorman said the company made "some tough decisions" on the firings "in response to recent regulatory developments and a highly competitive market."

The asset write-down of $11.4 billion reflects the reduced value of AT&T's network now that it will be carrying less consumer voice traffic. The amount will be charged against earnings in the third and fourth quarters.

The job cuts and asset write-downs had been expected.

"AT&T is preparing the company for the new telecom environment," said Jeff Kagan, an independent telecom analyst in Atlanta.

He noted that the company was aggressively marketing its CallVantage consumer phone service, which relies on a high-speed Internet connection and voice over Internet protocol, a technology that sends sound in packets like e-mail.

In July, AT&T said it would halt the marketing of conventional phone service to consumers. The retreat stemmed from its frustration with federal regulators and a Bush administration unwilling to appeal a court decision that had thrown out competition rules.

In August, the company warned that the value of its national phone network would need to be recalculated because it could no longer be relied upon to generate as much revenue.

At the end of June, AT&T's assets totaled $43.8 billion.

Without the competition rules, AT&T, MCI Inc. and most other competitors of regional Bell giants like SBC Communications Inc. could not reach agreements to lease Bell lines and gear to deliver service to their customers. MCI also has cut its marketing efforts and has put itself up for sale.

Meanwhile, the Bells are luring away their long-distance customers and, with a chokehold on the last mile of copper wire to households and on high- speed Internet service, are reemerging as regional land-line monopolies.


Associated Press was used in compiling this report.

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