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AT&T Freezes Pay

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News Analysis
Light Reading
12/26/2003
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AT&T Corp. (NYSE: T) is off to a chilly start in 2004 -- it's freezing pay.

In an effort to keep a lid on costs, the company has suspended pay raises until April 2005 for roughly half its workforce, or 36,000 management employees. They had been scheduled to received raises in April 2004.

AT&T CEO Dave Dorman announced the decision in a company-wide email last week. Bonuses scheduled for "high-achievers" in March will still be awarded, the company said.

"It's no secret that the telecom industry has been going through hard times, and this is a way for us to help maintain costs," says Sue Fleming, an AT&T press officer.

Analysts say the nation's largest long-distance carrier is preparing to face MCI's (Nasdaq: WCOEQ, MCWEQ) reemergence from Chapter 11, free of debt, in February (see MCI Back In Business). The two carriers have been at each other throats since the summer when AT&T accused MCI of fraud. At the time, insiders were convinced AT&T was doing its utmost to prevent MCI's comeback (see AT&T Slaps Suit on MCI, Onvoy, Were MCI Engineers In On It Too?, AT&T Replies to MCI's Reply, MCI Hits Back at AT&T, AT&T Slaps Suit on MCI, Onvoy).

For the third quarter, AT&T's revenues dropped to $8.6 billion from $9.4 billion a year ago. Sales to residential customers fell 15.8 percent, while sales to corporate customers fell 6.2 percent (see AT&T Posts Q3 Earnings).

As part of its cost-cutting effort, AT&T announced in early December that it would be chopping 12 percent of its staff, or about 8,500 jobs -- 2 percent more than previously announced (see Company Makeover).

— Jo Maitland, Senior Editor, Boardwatch

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BobbyMax
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BobbyMax,
User Rank: Light Beer
12/4/2012 | 11:08:34 PM
re: AT&T Freezes Pay
AT&T has tried everything under theson to become profitable. Under the faulty leadership of "dr." Armstrong AT&T has become so weak that its survival with profits is not a possibility. It has allowed MCI, Sprint and other carriers to take away its business. There is no way that AT&T will regain profitability.

AT&T is so overstaffed at the management level who are eating away the profits of AT&T. They are unproductive and at least 25% of total management employees should be laid off. These management employees have no job responsibilities and they are just on internet for at least 7 hours a day.

AT&T also does not need AT&T-Labs. It is tremendous waste of money. I also believe Mr. Dornan cannot do much to uplift AT&T. AT&T is so fragmented that anyone can take it on.
dljvjbsl
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dljvjbsl,
User Rank: Light Beer
12/4/2012 | 11:08:33 PM
re: AT&T Freezes Pay
My own experience of pay freezes is that they are evidence that senior management has run out of ideas on how to run the company. Things are bad and they have no idea how to fix them. Rather than do soemthing real they impose travel, hiring, and finally salary freezes. In desparation, I have even seen them cut back on the amount of soap supplied to the washrooms.

If AT&T is resorting to salary freezes then the business is in very very bad shape and management lacks any strategic vision to save it. VoIP is coming anbd AT&T seems to be going.

If anyone owns AT&T shares, my advice for what it is worth is SELL!!
materialgirl
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materialgirl,
User Rank: Light Beer
12/4/2012 | 11:08:18 PM
re: AT&T Freezes Pay
ATT may be in trouble, but it does not help that the Government allowed MCI to walk away as a surviving corporate entity while cheating their bond holders from some $9B. With reduced debt, WCOM can and will undercut ATT, who at least is trying to pay their debts back.

However, they will probably fail. The WCOM bail-out will cascade through the markets, with their competitors falling line dominoes. This is yet another big transfer of wealth from bond holders (which are usually pension mangers representing widows, orphans or working stiffs) to wealthy management. When will it end?
technonerd
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technonerd,
User Rank: Light Beer
12/4/2012 | 11:08:09 PM
re: AT&T Freezes Pay
MCI grew its business using falsely/fraudently generated numbers. With those numbers, they were able to create a pricing model which was unrealistic. AT&T, Sprint, and other carriers then had to compete with these unrealistic numbers and the whole market suffered.
I am told that AT&T actually ran a pretty honest ship during the bubble, but was whacked by the falling prices of LD service especially on the international routes. MCI was dirty of course, while Sprint was merely stupid.

Inspires confidence, eh?
Digit Al
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Digit Al,
User Rank: Light Beer
12/4/2012 | 11:08:09 PM
re: AT&T Freezes Pay
The only thing worse than the MCI scandal has the government's handling of it. Really can't believe the fat contracts which were handed to MCI in the middle of the proceedings. Okay, I've harped on that before.

MCI grew its business using falsely/fraudently generated numbers. With those numbers, they were able to create a pricing model which was unrealistic. AT&T, Sprint, and other carriers then had to compete with these unrealistic numbers and the whole market suffered. The customers were the winners. The MCI execs were the winners. The competitors and your average Joe Stockholder lost. Thank Mr. Bush's buddy Mr. Ashcroft for a total lack of diligence in doing his job.

- Digit Al
firstmile
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firstmile,
User Rank: Light Sabre
12/4/2012 | 11:07:57 PM
re: AT&T Freezes Pay
Pay freezes in Telecom????
Welcome to the real world AT&T employees.
The next thing you know, their execs won't be able to retire with full pay...
...first
flam
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flam,
User Rank: Light Beer
12/4/2012 | 11:07:56 PM
re: AT&T Freezes Pay
AT&T freezes pay? Shock! Horror!

What next, Lucent's Russo will work for $1 a year?!?!
dsb
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dsb,
User Rank: Light Beer
12/4/2012 | 11:07:47 PM
re: AT&T Freezes Pay
And how is this different from what AT&T's been doing the last 20 years? If you want growth or dividend oportunities, put your money somewhere else. This company has been going nowhere for 20 years! (since the breakup in 1983)
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