Verizon strike, day three
Progress remains slow as unions raise wireless, contractor concerns
NEW YORK (CNNfn) - Negotiations between some 85,000 striking workers and Verizon Communications deteriorated as the strike extended through a third day, officials for both sides said Tuesday.
Verizon spokesman Eric Rabe said progress is slow and frustrating, and he now anticipates negotiations will drag on longer than expected.
"The status of the bargaining is that we are continuing to talk. We continue to frankly plug through some of the more difficult issues that confront us," Rabe said during a daily briefing with reporters. "It's become sort of an intense, exhausting sort of a process. We're working through the issues one at a time."
Rabe said Verizon had hoped to reach a tentative settlement with the unions by Tuesday.
Union officials are also becoming frustrated that a deal has not yet been reached.
"I think there is a certain amount of frustration that's set in because it's dragged on into today," said Jim Spellane, a spokesman for the International Brotherhood of Electrical Workers, which represents 13,000 striking workers. "I think it's fair to say there is a frustration level that's setting in. The issues still on the board are the thorniest ones."
In a statement issued late Tuesday, the Communications Workers of America said the negotiations had progressed, but said key issues remain unresolved such as limitations on the movement of work across the country.
One area in which negotiators did make some headway was in securing the return of some work from the company's subsidiary, Bell Atlantic Communications Construction Services Inc. (BACCSI) to the core company, saving several jobs, the company said.
Managers being harassed
Rabe said the company has logged 455 acts of vandalism, violence and harassment of Verizon managers since Aug. 2. Employees have had stones, eggs and bottles thrown at them while crossing picket lines to work, Rabe said, adding that cables and wires have been cut, disrupting service in some areas. The company on Tuesday offered a $25,000 reward for information leading to the prosecution of the alleged vandals.
Rabe believes individual union members are responsible for the acts and not union management.
Spellane declined to comment on the reward, other than to say Rabe was trying to imply that the unions were somehow behind the acts, which is "ridiculous," he said.
Unionization of workers main issue
The two sides remain divided on the unionization of workers in the wireless division and the loss of union jobs in other areas.
Candice Johnson, a spokeswoman for the CWA, which represents 72,000 of the striking workers, said the negotiations are making slow progress, and promised an update later in the day.
Johnson said the union is concerned about jobs being moved to nonunion areas related to the merger of Bell Atlantic and GTE, which created Verizon one month ago.
"When companies merge, sometimes they look to consolidate operations. That means people face the risk of facilities shutting down, or work being shifted hundreds of miles away, and that means shifting families," Johnson said.
Johnson said Verizon, which has operations in nonunionized areas of the country, has members worried about losing their jobs. She said the union is asking for an agreement similar to one reached when NYNEX and Bell Atlantic merged in 1997.
"Verizon does have some nonunion locations so that's a real fear for people. Our members have a real attachment to their jobs, to their communities, and they want some sense that they won't be shipped hundreds of miles from home," Johnson said.
Forced overtime and job security issues are also concerns, she added.
Verizon telephone operators and line technicians walked off their jobs at midnight Sunday. The CWA and the IBEW are also upset by the company's use of outside contractors for some work.
More than 8,000 union members picketed 555 Verizon facilities Tuesday, a little more than half the 14,000 workers who picketed Monday, Rabe said.
Spellane said that picketing will continue as long as the strike continues.
Investors spooked by earnings, not strike
Verizon, based in New York, 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 so far haven't been too worried about the impact of the strike. Shares of Verizon (VZ: Research, Estimates) tumbled 5-5/8 to close at 42-1/4 Tuesday, but the decline was more related to the company's lower-than-expected second-quarter profit than to the strike action, according to analysts.
Also Tuesday, the company said it purchased a 55 percent stake in high-speed Internet provider NorthPoint Communications Group Inc. (NPNT: Research, Estimates) for $800 million in cash. The deal will pay NorthPoint shareholders $2.50 a share, in addition to letting them retain those shares.
Rabe said the acquisition will not affect union employees of Northpoint.
"The union workers who are union workers today will be union workers under the deal with Northpoint," Rabe said. "That's one of the issues being discussed at the negotiating table. Northpoint does expect to have union and nonunion workers at points across the country."
The immediate impact of these kinds of strikes, which are not uncommon in the telecom sector, is relatively minimal, Richard Klugman, analyst with Donaldson Lufkin & Jenrette, said Monday. 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.
James Henry, an analyst with Bear Stearns, said the strike could actually benefit Verizon provided it doesn't last too long. Henry said being able to maintain service absent 85,000 employees would be a strong marketing tool.
But if the strike lasts beyond a week, he said the company runs the risk of orders going unfulfilled, which could ultimately hurt earnings.
"The fact that you have a strike in an increasingly competitive market where there are a growing number of choices for consumers and businesses alike ultimately damages your franchise value," Henry said. "I think everyone involved is going to have to deal with that. It's only going to get more competitive and they're going to have to adjust themselves to accommodate that. It's definitely not getting any easier."
Unionizing the wireless ranks?
Another key objective for the unions is to unionize workers in the company's wireless division. The CWA said Tuesday that Verizon management in Woburn, Mass. had distributed an anti-union memo to wireless workers there.
Rabe said he had not seen the memo, but added that wireless workers have every right to organize as long as they follow prescribed procedures set by the National Labor Relations Board.
The CWA also said serious differences remain in separate negotiations to organize 45 wireless workers in New York City.
Charles DiSanza, a telecommunications analyst at Gerard Klauer Mattison & Co., said Monday that Verizon will be able to function for a long period with management personnel 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, 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, 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.
Providers of digital subscriber lines (DSL) and so-called "smart build" firms would face the greatest risk from a prolonged strike, Ken Hoexter, a telecommunications analyst at Merrill Lynch, said. 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. Shares of all those companies, except those of RhythmsNet, were lower at the close of trading Tuesday.
"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.
Some service disruptions
Most phone service was not disrupted by the strike, although customers had trouble obtaining directory assistance, billing information or other customer service. Verizon's Rabe said Tuesday most of the disruptions occurred within the New York City metropolitan area.
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.
Emergency services such as 911 are not expected to be affected by the walkout because much of Verizon's network is automated.
Bell Atlantic 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.