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Verizon talks hit snag
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August 7, 2000: 10:25 p.m. ET
Progress remains slow between two sides as union raises wireless concerns
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NEW YORK (CNNfn) - Negotiations between Verizon Communications and unions representing some 85,000 of the phone company's workers ended for the night late Monday, with the two sides divided on issues involving the unionization of workers in the wireless division and the loss of union jobs in other areas.
"While progress was reported yesterday on many issues, bargaining hit a snag over the issue of movement of work throughout the new Verizon company," the Communications Workers of America, which represents 72,000 striking workers, said in a statement issued Monday afternoon.
Negotiators wrapped up the day's formal talks around 8 p.m. ET, and were expected to resume discussions again Tuesday morning. No major developments were expected overnight.
 Verizon telephone operators and line technicians walked off their jobs early Sunday due to disputes over job security, forced overtime and union access to wireless and other newly created jobs.
Over 14,000 union members also picketed more than 540 Verizon facilities on Monday, compared with 6,000 picketers at 300 locations on Sunday.
Investors not spooked by strike
Verizon, based in New York, was created by the merger of Bell Atlantic and GTE. It has 63 million local access lines in 31 states. Through a joint venture with Vodafone, Verizon is the largest wireless carrier in the United States, with 25 million mobile phone customers and 4 million paging customers. It has 260,000 employees and revenue of about $60 billion in 1999.
Investors were not too worried about impact of the strike in the short-run; shares of Verizon (VZ: Research, Estimates) ened Monday's trading up 15/16 at 47-7/8.
The immediate impact of these kinds of strikes, which are not uncommon in the telecom sector, are relatively minimal, said Richard Klugman, analyst with Donaldson Lufkin & Jenrette. He said there is virtually no impact on revenue from these strikes, and that the street is already expecting the range of salary increases being talked about.
"I don't think it would lead to downward revision of earnings," he said. The larger concern for investors is if unions win major advantage in their efforts to represent wireless or Internet employees.
"Wireless is an industry that has traditionally been nonunion," he said. "I'm sure they'd like to keep it that way. Unionization of these companies would be a cost disadvantage and a flexibility disadvantage to them."
Charles DiSanza, a telecommunications analyst at Gerard Klauer Mattison & Co., said that Verizon will be able to function for a long period with management doing jobs formerly performed by union workers because phone companies are less reliant on manual labor than they were in the past.
"You don't need many people to run a wireless or wireline phone company these days," DiSanza said. "Because of automation and wireless service, telephone companies are almost virtual."
DiSanza gives the CWA only a one-in-three chance of unionizing Verizon's wireless operations.
"The parent company workers are looking for job security. With the wireless industry growing at 25 percent a year, job security is not much of an issue there," DiSanza said. "Unless Verizon's management does something stupid, they probably will prevail and not end up having wireless unionized."
In fact, the prevalence of mobile phones gives the CWA less leverage than the union had in the past. Consumers who once would have been crippled if the phone company couldn't install a line in their homes now can use their mobile phones as their main means of communication.
Jeff Miller, a spokesman for the CWA, which represents some 72,000 Verizon employees, said earlier this week that differences in wages and benefits between union and nonunion workers are significant. He said the pay scale for union-covered service representatives tops out at $44,400 a year, while workers doing similar jobs in the wireless operation make only $33,000.
Competitors' operations also hit
Even if the strike isn't hurting Verizon stock, some other analysts said it could hurt some competitors who rely on Verizon employees to handle the connection of their new customers to the network. Those companies, known as competitive local exchange carriers, are valued in the market by their growth in new lines more than their bottom lines, so the disruption in adding new customers could harm them more than Verizon.
"They are a highly compelling sector, but their Achilles heal is they're largely dependent on the Bell companies," said James Henry, analyst in this sector for Bear Stearns. "Line growth is what we look at. And the strike raises another yellow flag in minds of investors."
 Providers of digital subscriber lines (DSL) and so-called "smart build" firms would face the greatest risk from a prolonged strike, said Ken Hoexter, a telecommunications analyst at Merrill Lynch. Smart build companies deploy communications switches, but rely on the local telephone company to supply the "last mile" of copper wire going to a customer's home or business. DSL is a technology than enables high-speed Internet access to be provided over standard copper telephone wires. As with smart build firms, DSL providers need to have lines installed by the local phone company.
Smart build and DSL companies that rely at least in part on Verizon include RhythmsNet Connections (RTHM: Research, Estimates), NorthPoint Communications (NPNT: Research, Estimates), Allegiance Telecom (ALGX: Research, Estimates), and Covad (COVD: Research, Estimates), Hoexter said. All of those stocks were little changed, except for Covad, which was up 2-5/16 at 18-3/16 on Monday.
"We think the strike underscores the huge advantage that facilities-based competitors building their own end-to-end network enjoy," Hoexter said in a research note issued Monday.
Some service disruptions
Most phone service was not disrupted by the strike, although customers had trouble having directory assistance, billing information or other customer service calls answered. Verizon's Rabe said Sunday he had received some reports of telephone line outages in the New York City borough of the Bronx, and along the eastern shoreline of New Jersey.
While the disruptions were not directly related to the strike action, Rabe said that Verizon's ability to respond to them was being hampered by the lack of technicians and other workers on the job.
"That's exactly the kind of problem we're facing in this kind of situation," he said. "It's going to be hard for us to maintain the kind of service levels we normally have and that our customers are used to." He declined to comment on how high the additional costs of the strike could climb.
Emergency services such as 911 are not expected to be affected by the walkout because much of Verizon's network is automated.
Forced overtime another sticking point
Verizon closed its purchase of GTE June 30. The contracts for 72,000 CWA members and 13,000 IBEW members cover employees who work for the former Bell Atlantic divisions in the New England and Mid-Atlantic regions.
CWA local president Patton said one problem in talks is a company proposal to shift some of the customer service call volume to lower labor-cost areas of the country, such as those brought into the company by its acquisition of GTE.
There were reports over the weekend that the two sides were close to an agreement on the issue of forced overtime and "stress in the workplace," where telephone operators and customer services representatives were not being provided with adequate breaks during shifts.
But Patton said she was told that union negotiators' initial satisfaction with the company's proposal evaporated when they discovered the company proposal to move work to lower-pay regions of the country. 
There also were reports that wage increases of 3 percent-to-4 percent have largely been worked out, though agreement on those issues could change in response to concessions on other concerns.
"We have seen some positive movement on some of the issues, but this is a situation with a lot of moving parts," Rabe said. "Those issues could change as we move to other issues." 
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