Telecom The Bells Sing The Blues, On Cue Mark Lewis, 09.27.02, 12:16 PM ET
When a firm announces bad news, generally it crafts a news release brimming with positive spin to put the best possible light on the situation. But when SBC Communications announced its latest round of job cuts, the release went out of its way to indicate that the sky is falling.
SBC’s ( nyse SBC) statement released late Thursday announced in the very first paragraph that the firm is shedding employees and cutting capital expenditures “in response to a continued weak economy and outmoded regulation that could threaten the future viability of its telecommunications networks in many of its states.”
The stock was off 7%, to $20.46, today in morning trading, but that was a fairly mild market reaction to a firm that used the words “threaten” and “viability” in the same sentence. Clearly, investors suspect that SBC Chief Executive Edward Whitacre’s remarks were intended mostly for the U.S. Congress and the Federal Communications Commission, as part of a campaign to free the Bell regional operating firms from their regulatory burden.
Either that, or it is simply a coincidence that BellSouth (nyse: BLS – news – people ) Chief Executive Duane Ackerman and Verizon Communications (nyse: VZ – news – people ) CEO Ivan Seidenberg both popped up in Washington recently to condemn the rules that hobble the Bells–especially those regulations that force the Bells to share their facilities with competitors. The House has passed a pro-Bell bill, but its Senate prospects are uncertain.
“The decisions we make this year about telecom policies will influence the flow of billions of dollars worth of capital, the security of thousands of jobs, the speed of the economic recovery and the legacy of America’s technological leadership,” Seidenberg said in a speech last week.
As if on cue, SBC’s Whitacre yesterday provided concrete evidence that Seidenberg was not just talking through his hat. SBC lost 3 million retail access lines during the 12 months ending in August, and its wire-line revenue is falling at a rate of 6% per year. In response to this deteriorating situation, SBC said it will lay off 11,000 employees, representing about 6% of its workforce. That is in addition to the 10,000 jobs already cut.
More ominously for equipment makers like Lucent Technologies (nyse: LU – news – people ), SBC will cut its 2003 capital spending to between $5 billion and $6 billion, down from about $8 billion this year.
“When unrealistic and outmoded regulation results in our having to lay off highly trained workers and constrains our investment in our networks, it is a disservice to all local-phone users in the states we serve,” Whitacre said in the statement. “After all, our competitors are relying on our network. And if there’s a weather emergency or other problem, it’s our workers who must respond.”
Naturally, the Bells’ competitors take a different view of the situation. After BellSouth’s Ackerman called for regulatory relief on Sept. 26, AT&T (nyse: T – news – people ) issued a pungent response quoted by Dow Jones Newswires: “Every time a Bell company executive speaks, consumers better grab their wallets because behind all the ‘woe is me’ oratory is a call for a massive rate increase for American consumers.”
It is difficult indeed to find a telecom firm that is not suffering these days, and they all want Congress and the FCC to feel their pain.