Bell says 5,600 to lose jobs over next 3 1/2 years

August 15, 1994|By Michael Dresser | Michael Dresser,Sun Staff Writer

Bell Atlantic Corp., accelerating its shift from the labor-intensive telephone business of old to the technology-driven industry of the future, said today that it will reduce its work force by 5,600 over 3 1/2 years.

About 1,000 of the cuts will affect Maryland employees.

The Philadelphia-based regional phone company, which includes Maryland in its service area, also announced that it will take a medicinal dose of red ink in 1994 in order to secure its competitive position in the future.

Bell Atlantic will chalk up a record $2.3 billion after-tax charge against its third-quarter earnings, $2.15 billion of it related to an accounting change that essentially declares that its existing telephone network is worth less than the figure it has been carrying on its books. The charge will also result in a loss for calendar 1994.

The company said it was setting aside $100 million to cover the cost of the work force reduction, which continues a trend of telephone industry shrinkage that has been in effect since the Bell system was broken up in 1984. The company currently has 73,000 employees but the cuts will be concentrated among the 62,000 workers in the traditional telephone network.

Dave Pacholczyk, a spokesman for Bell Atlantic, estimated that 800 to 1,100 of the company's 11,000 employees in Maryland would be affected by the cuts. He said one-quarter of the reductions will come in management, while the remaining 75 percent would come from the company's unionized work force.

No details were available on which Bell Atlantic facilities would feel the impact of the cuts, which will begin to take effect next year. But Larry Babbio, the company's chief operating officer, said in a press conference that some of the company's data centers and engineering centers would likely be consolidated.

Bell Atlantic President James Cullen said the company's cellular phone business, which has been growing at a rate of 40 percent to 50 percent a year, would not be affected by this round of cuts. He said the company's embryonic video services ventures would continue to be a growth area, possibly creating opportunities for employees in the telephone network.

The company did not immediately specify how many of the job cuts would be achieved by layoffs and how many by other means.

For managers, the prospects are grim. In the past, Bell Atlantic has thinned its managerial ranks by offering job buyouts. This time, executives might not be so lucky.

"We are probably not in the position of making new management offers," Mr. Pacholczyk said.

Mr. Pacholczyk said the means of staff reductions in the ranks of support workers would be a subject of bargaining when Bell Atlantic holds contract talks with the Communications Workers of America next year.

Charlie Gearhart, executive vice president of the CWA's Local 2100 here, said the news could have been a lot worse. "I'm a bit relieved -- particularly with the time frame. The numbers would be alarming without the three-year time frame," said Mr. Gearhart. He said the job cuts should be manageable through negotiation and attrition.

"I expected them to come out and say we're cutting heads and they're rolling today," said Mr. Gearhart.

The early indications from the market were that Bell Atlantic had failed to satisfy investors, who typically react positively when companies announce large numbers of layoffs. Just before noon, the price of Bell Atlantic stock was off 50 cents, at $57.125.

Linda B. Meltzer, a telecommunications analyst with UBS Securities in Philadelphia, praised Bell Atlantic's move as "very forward-looking and necessary for the industry."

The Bell Atlantic announcement illustrates the paradox the telephone industry has become: a huge growth business with a rapidly shrinking work force.

The primary reason is technology. Many of Bell Atlantic's more than 200 central offices in Maryland, each of which used to require baby-sitting by technicians, now operate with no daily human oversight because sophisticated equipment can diagnose any problems and summon help.

The accounting change represents an acknowledgment by Bell Atlantic that the old order in the telephone industry is changing rapidly. By shifting from an accounting scheme used by government-regulated companies to one used by firms that compete in the marketplace, Bell Atlantic is recognizing that it won't forever enjoy the comfortable rates of return it could count on under the supervision of state public service commissions.

Mr. Pacholczyk noted that, in Maryland, Bell Atlantic is operating under a rate freeze that expires at the end of next year. He did not promise a rate cut after that but added that it is "a likely scenario" once such competitors as Southwestern Bell Corp. and MFS Communications Co. are doing business in the state.

"We need to move into a new accounting regime before we can even contemplate that," he said.

Under the new system, the value of Bell Atlantic equipment will be depreciated more quickly, reflecting the increasing pace of technological change. For instance, Mr. Pacholczyk said, a telephone switch that previously would have been written off over 17-19 years will now be depreciated over 12.

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