Verizon Strike Averted (for Now)Verizon Strike Averted (for Now)

Threat of a strike by more than 70,000 workers at Verizon Communications Inc. (NYSE: VZ) has been put on hold temporarily, according to a union announcement this weekend (see Verizon Strike on Hold).

The work stoppage has been anticipated for weeks (see Verizon Hits Rocky Road). About 57,100 members of the Communications Workers of America and roughly 22,100 from the International Brotherhood of Electrical Workers voted in July to strike if their three-year contracts with Verizon weren't successfully negotiated by midnight August 2.

Now, the unions say talks have progressed sufficiently to extend that deadline. Workers will remain on the job until further notice, the unions say. "Union leaders determined that enough progress had been made at thebargaining table to continue working toward a contract settlement. However,they reported that key issues remained unresolved," the two unions reported in their statement.

The talks, ongoing since June 16, involve a raft of issues, including employee contributions to health insurance, mandatory overtime, and job mobility across company subsidiaries, to name just a few. The scope and seriousness of the items on the table have caused many to worry that a strike of major proportions is inevitable.

Verizon spokesman Daniel Zapata said Friday the company continues to hope for resolution without a strike. But he conceded the carrier has more managers trained to take over installation and service calls than it did back in 2000, when the workers struck for over two weeks.

At that time, about 30,000 managers had been trained to carry on what Verizon sees as its "fiduciary" duty to support customers. Now, the number of trained managers is higher, and it's possible Verizon will turn to contractors to help out if necessary.

And it looks as if it may be. Both unions rallied last week, armed with picket signs. Some IBEW sayings: "Ma Bell is a Cheap Mother" and "Cutting Our Health Benefits Is a Sick Idea!" Union Websites refer to Verizon's recent profitable earnings report (see Carrier Revenues Keep Sliding and Verizon Posts Q2 Profit) and rich executive compensation as evidence of its ability to meet union demands.

In 2002, for instance, SEC records show that Verizon's top seven executives made $7.5 million in base salary and $9.3 million in bonuses. This doesn't count stock awards and numerous perks, such as payments for executive life insurance, consultants' fees for retired execs, use of company aircraft, and apartments.

At the same time, analysts are clear that Verizon is at a crucial juncture, pinched by competitors and still in need of cost-cutting roughly equivalent to 5,000 jobs. That makes it tough to avoid clashing with union demands for job security.

"Verizon's challenge is that they're facing fierce local and cable competition, particularly in high-speed Internet," says F. Drake Johnstone of Davenport & Co. LLC. "It's a pretty tough time to deal with a strike. If it happens, results will likely be worse than expected for the third quarter."

Some have speculated that a Verizon strike could also affect suppliers negatively, since new services requiring fiber and equipment will stall. Advanced Fibre Communications Inc. (AFC) (Nasdaq: AFCI) has been cited as one vulnerable vendor, for example, because it furnishes digital loop carrier gear to Verizon for DSL services. Getting new installations of DSL is key to Verizon's battle for access dollars.

— Mary Jander, Senior Editor, Light Reading