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AT&T Targets Labor, Wireline Footprint in New Cost-Cutting Effort

AT&T is embarking on a major new cost-cutting initiative, and operator executives are looking at everything from shrinking AT&T's workforce to a "rationalization" of the operator's wireline footprint.

"Everything is on the table," AT&T COO John Stankey said Tuesday at the UBS Global TMT Conference in New York. "It's a target-rich environment."

AT&T CEO Randall Stephenson first disclosed the operator's new cost-cutting plan in October. He said AT&T hired Bill Morrow as its new "special adviser and managing director of process service and cost optimization," reporting to Stankey, Stephenson and AT&T's corporate development and finance committees.

Morrow most recently was CEO of Australia's National Broadband Network (NBN), which he left in 2018 amid ongoing network-buildout troubles. Before that, he worked as head of Vodafone Australia, and he was CEO of Clearwire, the failed US WiMAX operator that Sprint bought in 2013.

AT&T isn't the only major telco looking to reduce costs. Verizon announced a $10 billion, four-year cost-cutting plan in 2017, and in 2018 the operator said it would offer 44,000 of its management employees a buyout deal under that program.

The cost-cutting announcement by AT&T also follows on the heels of its fight with Elliott Management, an activist investment firm that argued for changes in AT&T's business until the operator reached a détente with the firm.

Labor on the chopping block
AT&T's cost-reduction program initially will include a 4% cut in the operator's labor expenses -- representing roughly $1.5 billion of the operator's finances -- next year. During an investor event last week, AT&T CFO John Stephens explained that the initiative would target employees, contractors, benefits "and so forth."

Today, AT&T's John Stankey -- the executive in line to take over leadership from Randall Stephenson -- offered a few additional details. He said the operator aims to reduce labor costs by looking into the "effectiveness" of its call centers, management structures and distribution strategy.

And though he didn't specifically mention the word "layoffs," that's a distinct possibility.

AT&T employed roughly 252,000 people at the end of September. However, about 40% of those employees were represented by the Communications Workers of America (CWA) union, a situation that could complicate any planned layoffs by AT&T.

Wireline reductions
As for other cost-cutting efforts, Stankey said AT&T would also look into its wireline operations with an eye toward "product rationalization" and "geographic and footprint rationalization."

"There's a huge opportunity for us to look at our wireline business and how our customers are laid out, and start thinking about what we do to take out layers of cost -- based on the geography we serve and the products that we support -- that maybe have run their course in a fairly mature business," he said, but didn't elaborate further.

Again, AT&T could follow Verizon's lead in this area, considering Verizon sold off a large chunk of its wireline operations to Frontier Communications in 2016.

Employee benefits could also come under scrutiny, Stankey said, though he noted that AT&T wouldn't necessarily look at reducing employee benefits.

Finally, Stankey said AT&T would look at how to reduce "corporate overheads," particularly in light of the operator's acquisition of Time Warner. He said AT&T has managed to "rationalize" some aspects of its business following the close of its acquisition of Time Warner, but that there were "a few more layers to go." And he said that AT&T would work on improving its capital expenses and supply chain operations spending.

Although Stankey peppered his comments with typically oblique corporate and financial jargon, the clear conclusion is that AT&T is keen to smooth out its entire operation following the close of its massive Time Warner merger, especially in light of its need to reduce the enormous debt load it incurred via the transaction.

And though AT&T continues to sell off unwanted assets -- for example the operator recently announced it would sell 1,000 cell towers for $680 million -- in order to reduce that debt, areas ranging from supply chain operations to retail outlets to customer call centers could well fall under Morrow's knife.

Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano

brooks7 12/11/2019 | 12:35:38 PM
Re: Selloff of lines  

You are pointing at the announced $1B selloff that Frontier had...note we have not heard a lot about that lately.

 

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Mike Dano 12/11/2019 | 9:32:37 AM
Re: Selloff of lines Maybe? There has been a lot of consolidation in the wireline space recently, with some bigger private equity deals in the space.
brooks7 12/10/2019 | 6:55:42 PM
Selloff of lines  

Given the massive success that Frontier has had lately, do you think anyone would buy AT&Ts lines?

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